Offshore transactions should not be a device to evade tax

January 20, 2012 can without a doubt be said to be the day when Vodafone Group emerged vindicated by the Supreme Court’s (SC) decision that to tax Vodafone in India would amount to imposing capital punishment for capital investment. During the proceedings, which lasted 28 days through the months of August to October 2011, the issue debated before the SC was whether the tax authority had jurisdiction under the Indian Tax laws to tax the gains arising to a foreign company from transfer of shares of a foreign holding company, which indirectly held underlying Indian Assets. The SC pronounced that by applying the “look at” test to ascertain the true nature and character of the transaction, we hold that the offshore transaction herein is a bonafide structured FDI investment into India which fell outside India’s territorial tax jurisdiction, hence, not taxable.

Source: Financial Express