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Business Times - 07 Oct 2010
A taxing tale of India and China
Capital gains tax imposed by the two nations meets contrasting responses from investors
By Rohan Solapurkar, Head of Tax, BDO Tax Advisory
Tax professionals around the world have been keenly following the Vodafone case in India. Vodafone International Holdings BV (Netherlands), a Dutch entity, acquired 100 per cent of the share capital of CGP (Holdings) Limited, a Cayman Islands company, from Hutchinson Telecommunications International Limited (HTIL).
CGP, through various intermediary companies and arrangements, controlled approximately 67 per cent of Hutchinson Essar Limited (HEL), an Indian company. HEL was engaged in providing cellular services in India. As a result of the acquisition of CGP, Vodafone indirectly acquired control of HEL.
As per the provisions of the Indian Income Tax Act, any income from a transfer of a capital asset situated in India gives rise to a capital gain which is taxable in India. Further, the provisions of the Indian Income Tax Act also provide that where payments are made by a non-resident to another non-resident and such payments are taxable in India, the payer is responsible to withhold taxes at the appropriate rates.
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