Vodafone Victory Benefits GE, Kraft, AT&T
Vodafone (NASDAQ:VOD) won its case against India’s revenue authorities in the Supreme Court and will not be required to pay up to $4.4 billion in tax arrears and penalties. The claims against Vodafone arose from its $11 billion purchase in May 2007 of the Indian telecom assets of Hong Kong’s Hutchison Whampoa. The tax authorities, and later the Mumbai High Court, felt the transaction was taxable because it involved the transfer of Indian assets.
Vodafone had been slapped with a bill for 112.2 billion rupees plus applicable penalties of up to 100 percent. Vodafone’s plea was the transfer took place outside India between two foreign entities.
The Supreme Court’s ruling in favor of Vodafone is also likely to benefit similar disputes faced by General Electric (NYSE:GE), Kraft (NYSE:KFT), SAB Miller, AT&T (NYSE:T), and Sanofi-Aventis (NYSE:SNY). “We welcome the Supreme Court’s decision, which underpins our confidence in India,” Vodafone chief executive Vittorio Colao said in a statement. “We will continue to grow our Indian business — including making significant investments in rural areas and in 3G network coverage — for the benefit of Indian consumers.”
Though the ruling is adverse for the government — which is facing fiscal deficits and needs to raise revenues for various infrastructure and social projects — Mumbai lawyer Nishith Desai said, “This will improve investor sentiment tremendously.”