Vodafone Essar Gujarat has approached the Supreme Court opposing the Income Tax (I-T) Department’s petition, which challenged Gujarat High Court’s (HC) August 2012 order that approved the demerger scheme regarding its passive infrastructure. As per the scheme, the company and its six associate transferred its passive infrastructure worth Rs 150 billion to the group firm, Vodafone Infrastructure and subsequently amalgamated it with Indus Tower. 

The I-T department had challenged this scheme with the view that through the scheme Vodafone intended to avoid capital gains tax of Rs 35 billion and stamp duty of Rs 6 billion. It further asserted that the move was the first step in an alleged tax avoidance arrangement prior to this entity’s amalgamation with Indus Towers.

In this regard, Vodafone replied that the demerger scheme sanctioned by the high court is over and the completion of transfer of assets has been filed with the Registrar of Companies and therefore, the department’s appeal has become infructuous.

Vodafone has also argued that the scheme was an attempt to consolidate assets to utilise them better. The company has contended to the Supreme Court that the high court has specifically protected the interests of the I-T department to initiate any proceedings regarding recovery of the tax from the companies and has also held that such right of the revenue shall not be affected in view of the sanction of the scheme.