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1. By Harshit Bansal at www.slideshare.net

2. Corporate Structure
 Hutchison Essar Ltd (HEL)
 Indian Company
 Providing Telecom Services
 Hutchison Telecom International Ltd (HTIL)
 Foreign Company (Situated at Hong Kong)
 Holding 100% shares in CGP Investments Holdings Ltd
 CGP Investments Holdings Ltd (CGP)
 Foreign Company (Situated at Cayman Island, Mauritius)
 Holding 67% share in HEL
 Dummy Company only formed to have benefit of Mauritius
Route, as it’s a Tax Heaven means no tax on any transaction
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3. Diagrammatic View
CGP
Investments
Hutchison Telecom Holdings
International Ltd. Ltd.
(Hong Kong) (Mauritius)
Holding 67%
share in HEL
Hutchison
Essar Ltd.
(Indian
Company)
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4. Facts of the Case
 Hutchison Telecom International Ltd. (HTIL) had
transferred 100% shares of CGP investments for Rs. 560
billion to Vodafone International Holdings BV
 Indirect transfer of rights in HEL, by HTIL to Vodafone
International Holdings BV
 Vodafone International Holdings BV
 Foreign Company (Situated at Netherlands)
 Subsidiary of Vodafone Group plc (Situated at London)
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5. Understanding of Facts of the Case
Diagrammatically
Vodafone HTIL (Hong Kong)
Group plc 100% Holding in
(London) CGP(Mauritius)
CGP Investments
Vodafone (Mauritius) 67% Holding in
International Hutchison Essar
Holdings BV Ltd.(India)
(Netherlands)
Vodafone Hutchison
Essar Ltd. Essar Ltd
(Indian Co.) (Indian Co.)
Turned
to
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6. Assessing Officer’s Appeal
 Transfer of rights in HEL(India) via CGP Investment
Holdings Ltd.
 CGP Investment Holdings Ltd. is merely created to
take benefits of Tax Heavens in Cayman Island,
Mauritius
 As Capital gains arise on transfer of shares are
exempt in Mauritius
 But if we consider a concept of Substance over
Form, which clearly depicts that substance of a
transaction is to transfer the rights in HEL(India)
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7. Diagrammatic Understanding
HTIL (Hong
Kong) 100%
Vodafone Holding in
Group plc CGP(Mauritius)
(London)
CGP Investments
(Mauritius) 67% Holding
in Hutchison Essar
Vodafone Ltd.(India)
International
Holdings BV
(Netherlands)
Vodafone Hutchison
Essar Ltd. Essar Ltd
(Indian Co.) (Indian Co.)
Turned to
(Transferred the controlling interest of HTIL in HEL to
Vodafone)

8. Bombay High Court Decision
 It was held that appeal done by CIT is up to the mark
because of the following reasons:
 As the purpose of entering into agreement is to acquire
the controlling interest, which HTIL(Foreign Co.) had in
HEL(Indian Co.) and as acquired(controlling interest by
Vodafone International
 Income Tax Reference: Income shall be deemed to be
accrued or arise in India U/s 9(1)(i)
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9. Assessee’s Explanation
 If today you buy 10% of the shares of a particular
company, let us say Jet Airways, does this mean that you
automatically own 10% of all of Jet Airways’ assets?
 Does this mean that 10% of the entire fleet of aircraft now
belongs to you? By buying out a company that holds 67%
of HEL, it doesn’t mean that Vodafone now owns 67% of
the assets of HEL.
 Those assets continue to belong to HEL, which is a
separate legal entity based in India. Read the Company
law, Dam nit.
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10. Assessee’s Defend Diagrammatically
Explained
Vodafone
International
Holdings BV
(Netherlands) 100%
Holding in CGP
Vodafone’s Defend
By becoming
holding co. of CGP,
it doesn’t means
CGP Investments that I(Vodafone)
(Mauritius) 67% Holding holds 67% of all
in Hutchison Essar assets in
Ltd.(India) HEL(Indian Co.)
Hutchison
Essar Ltd.
(Indian Co.) By Harshit Bansal at www.slideshare.net

11. Supreme Court Decision
 Vodafone filed a review petition in supreme Court in
January, 2012.
 Supreme Court reversed the decision of Bombay High
court because:
 Assessing officer had no jurisdiction to tax the foreign transaction,
as sale of shares in Cayman Island
 Transfer of shares in CGP doesn’t amount to transfer of Capital
asset situated in India, as per section 9(1)(i) under the 4th Limb
 Bombay High Court Judgement held that transfer of controlling
interest, which is not an identifiable or distinct capital asset,
independent of holding of shares and also not covers in Definition
of Capital Assets U/s 2(14)
 As Capital Asset is not taxable in India ,so there is no question of
Deducting Tax at Source U/s 195(1)
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12. Supreme Court’s Decision
These are the important three points on the basis of which
Supreme Court has given the decision in Favor of the
Vodafone:
Section: 9(1)(i) Section: 2(14) Section: 195(1)
• Transfer of Shares • As per Bom. H.C. • As capital asset not
• Not amounts to controlling interest taxable in India,
transfer of • Which not covered • No question Tax
• Capital Asset under definition of Deducted at Source
situated in India Capital Asset • U/s 195(1)
• U/s 2(14)
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13. Transaction & its Consequences
Transactions &
Previous Scenario Consequences Current Scenario
HTIL (Hong •Transfer of shares of Vodafone
CGP, from HTIL to
Kong) 100% Vodafone.
International
Holding in •For Consideration of Holdings BV
CGP(Mauritius) Rs. 560 billion. (Netherlands) 100%
•Which leads to Capital Holding in CGP
Gain Tax on HTIL for Rs.
125 billion
CGP Investments •The shares of this
company(CGP) are sold CGP Investments
(Mauritius) 67% Holding
in Mauritius, which is a (Mauritius) 67% Holding
in Hutchison Essar
tax heaven. in Hutchison Essar
Ltd.(India)
Ltd.(India)
•After the change of
holding co.
•Name changed to
Hutchison Vodafone.
•This depicts that shares Vodafone
Essar Ltd Essar Ltd.
transferred to gain the
(Indian Co.) rights in HEL(Indian Co.) (Indian Co.)

14. Retrospective Amendments
(Done by Finance Act 2012)
Sections Amendment Done Co relate with Case
Amended
•Section 9(1)(i): •All incomes accrued or arise, •Explanation on “capital
Income Deemed whether directly or indirectly: assets” provides that:
to Accrued or  through transfer of a shares of CGP
Arise in India “capital asset” situated in Investments
India. (Registered Outside
•Explanation for Capital Assets: India),
Any Entity( Whether registered but value of shares
Outside India) deemed to be situated are derived from the
in India, value of asset located
if the share of that Entity derived in India.
from the value of asset located in
India.
•Section 2(14): Explanation added regarding •Hutchison Hong Kong
Definition of meaning of property: having rights in Indian Co.
Capital Assets •“property” includes: •Examples: Right to
•Any rights in an Indian company appoint directors, Right to
•Any rights Harshit Bansal anwww.slideshare.net hutch brand etc.
By
in relation to at Indian use
Co.

15. Retrospective Amendments
(by Finance Act 2012)
•Section Explanation Added regarding Hutchison Hong Kong
2(47): meaning of Transfer: transferred Rights in
Definition of •“transfer” includes: Indian Co.(CGP) to
Transfer •Creation of any interest in any Vodafone
asset in any manner whether •Created interest of
indirectly or otherwise Vodafone in an Indian
•by way of an agreement(whether Co. by Indirect means
entered inside or outside India) •by way of an agreement
or otherwise entered outside India
•through Transfer of shares •through transfer of
Outside India shares in Cayman
•Which effects the transfer of Island, Mauritius
rights in an Indian Company •Which effects the
transfer of rights from
HTIL to Vodafone
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16. Supreme Court V/s Amendments
Supreme Court Judgments Nullified by the Amendments (by FA
2012)
Section: 9(1)(i) Explanation for Capital Assets U/s 9(1)(i):
Transfer of Shares Any Entity( Whether registered Outside
Not amounts to transfer of India) deemed to be situated in India,
Capital Asset situated in if the share of that Entity derived from the
India value of asset(HEL) located in India.
Section: 2(14) Explanation added regarding meaning of
As per Bom. H.C. controlling property:
interest of HTIL in HEL “property” includes:
Which not covered under Any rights in an Indian company
definition of Capital Asset Any rights in relation to an Indian Co.
U/s 2(14) Rights includes Rights in
Management, Controlling interests
etc.
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17. Supreme Court V/s Amendments
Section: 195(1) Section: 195(1) for the removal of doubts to
As capital asset not clarify that obligation to deduct tax at source
shall be deemed to have always extended
taxable in India,
to all persons, whether resident or non-
No question to deduct
resident has:-
Tax at Source a residence or place of business or
U/s 195(1) business connection in India; or
any other presence in any manner
whatsoever in India.
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