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RESEARCH PAPER ON –

TAX-AVOIDANCE WITH SPECIAL EMPHASIS ON THE


VODAFONE RULING.

In compliance to partial fulfilment of the marking scheme, for

Semester 5 of 2017-2022, in the subject of

FINANCE III (SEMINAR PAPER)

Submitted to faculty:

Professor Ekta Saini

Submitted by:

Prakshit S. Baid

TY BBA LLB
A022

LITERATURE REVIEW
Research Papers

1. T.P. Ostwal; Vikram Vijayaraghavan, Anti-Avoidance Measures, NATIONAL LAW


SCHOOL OF INDIA REVIEW Vol. 22, No. 2 59-103 (2010).

The authors, through this paper, delve into the details of how tax avoidance is different
from tax evasion. The paper also takes into consideration the various international taxation
treaties and in-depth concepts and doctrines of taxation laws in India and across the world.
The paper stresses on how tax avoidance is creating big trouble for the taxation authorities
as they confuse it for tax evasion.

2. Prashant Bhushan, Legitimising Tax Avoidance, ECONOMIC AND POLITICAL


WEEKLY, Vol. 47, No. 9, 37-40 (Mar. 3, 2012).

The author expresses how the Vodafone tax case in which the Supreme Court overturned a
Bombay High Court ruling on the validity of the income tax department claim on capital
gains incurred in the sale transaction between Hutch and Vodafone has been hailed as a
boost for corporate investment. However, what the ruling does is favour tax avoidance
strategies. Indeed, it goes against the Supreme Court's own ruling in 1986 in opposition to
such strategies.

3. N.C. Hegde; Heta Mathruia, The Vodafone Case - Looking Back, Looking Ahead, 13
CORP. BUS. TAX'N MONTHLY 15, 44 (2012).

The authors provide an overview of India's controversial Vodafone case, in which the
Supreme Court of India held that Indian Revenue Authorities did not have jurisdiction to
tax Vodafone in connection with its acquisition of the Indian telecom business operations
of Hutchison International. There have been various instances in the past where the Indian
government has overridden certain Court rulings by way of retroactive amendments. Given
the overall prevailing investment sentiment and the fact that the government is trying its
best to bolster the rupee, which has depreciated sharply in the recent months, it is highly
unlikely that a retroactive Amendment will be considered.

4. Geoffrey T. Loomer, The Vodafone Essar Dispute: Inadequate Tax Principles Create
Difficult Choices for India, NATIONAL LAW SCHOOL OF INDIA REVIEW, Vol.
21, No. 1 89-116 (2009).

This article takes a specific example in the case of the Vodafone Essar tax dispute regarding
the payment of capital gains tax on the transfer of a controlling interest in an Indian entity
from one foreign company to another, in order to illustrate the loopholes in Indian tax law,
the choice that is present before Indian courts - a choice between abiding by the principles
of international taxation or changing Indian tax policy altogether, and a view on the way
international taxation agreements are to be read in light of the norms of international
taxation.

5. G. Mahadevan, Vodafone International Holdings BV (Vodafone NL) - A Critical


Review of Pre- and Post-Ruling Impact and Future Course of Action, 13 BUS. L. INT'L
223, 234 (2012).

The author traces the judicial journey and justification of the Vodafone ruling and brings
out the points of view of both the interested parties namely, the Income Tax Authority and
Vodafone’s parent company. The author believes that the softer line of negotiations would
always bring a win-win situation for both sides with a better mutual understanding and an
appreciation of their relative positions.

6. Joe Stanley-Smith, India Advised Not to Appeal Vodafone Ruling, 25 INT'L TAX REV.
7, 7 (2015).

The author stresses on how the reported decision of the Indian Government not to appeal
against the Bombay High Court ruling in the Vodafone case indicates that the tax
administration will not relentlessly pursue every last tax dollar where that would clearly be
uneconomical or where the prospects of success are not high. This move is significant from
a tax administration reform perspective, which is high on the agenda of the new
government. This would ensure that the affairs of the tax administration are managed in a
way that promotes efficient and effective use of government resources.

7. Anisha Keyal; Pritika Rai Advani, The Vodafone Judgment-Wider Concerns of


Withholding Tax under the Income Tax Act, 3 NUJS L. REV. 511, 528 (2010).

It is the aim of this paper to analyse the ruling of the Court with regard to § 195 in the
Vodafone Ruling. The article seeks to prove, firstly, how the Vodafone transaction did not
have any nexus with India enough in the eyes of law to tax it under the Act. Subsequently,
the authors have attempted to draw attention towards the much ignored test of nationality
which should be utilized in interpreting § 195 and its provisions dealing with withholding
tax on payments made to non-residents.

8. Joe Dalton, Why India's Renewed Vodafone Tax Claim Is Worrying Multinationals, 24
INT'L TAX REV. 7, 7 (2013).

The author believes that if the Indian government can settle the dispute with Vodafone, it
may consider toning down the effect of the retrospective amendments and might consider
issuing a circular stating that no cases will be opened based upon the retrospective
amendments. "I think the government is willing to compromise on the retrospective
amendments to gain investor confidence but it does not want to make a mockery out of the
Vodafone case."

Books

1. Mergers and Acquisitions: A Global Tax Guide, PriceWaterhouseCoopersLLP, 2nd Ed.


(2014).

This book by PwC offers tax planners a foundation of information that they need when
involved in international mergers and acquisitions. It also covers many of the finer points
of the broader tax issues that arise during planning and negotiation, which have proved
directly resourceful for this research paper.
2. Peter H. Blessing, Tax Planning for International Mergers, Acquisitions, Joint Ventures
and Restructurings, KLUWER LAW INTERNATIONAL, Vol. I (2014).

This book is comprised of two complementary parts: first, a practical overview of certain
key tax aspects of international transactions that have general application, followed by
twenty-one detailed country profiles, pinpointing each jurisdiction's handling of such areas
of concern as entity classification, taxable transactions, tax-free transactions (both
domestically and cross-border), loss planning, IP planning, compensation arrangements,
acquisition financing, JV planning, VAT issues, tax treaty usage, and much more. The
experts in each country suggest solutions designed to maximize effective tax planning and
satisfy compliance obligations.