Vodafone Essar faces government opposition to tower demerger proposals

23 Dec 2009

The Indian government will look to oppose the proposed demerger of mobile network operator Vodafone Essar, claiming such a move could allow the company to avoid tax payments. According to the Economic Times, Vodafone Essar had announced plans to transfer its passive infrastructure to Vodafone Essar Infrastructure, but in the case, being heard by the Delhi High Court, the state has argued that the move is designed to evade capital gains tax. Vodafone Essar has contended that its seven units are passing their tower operations to Vodafone Essar Infrastructure as a gift, but the additional solicitor general appearing for the Income Tax Department said of the matter: ‘They [Vodafone] are trying to evade taxable revenue and taxable profit. How can seven companies give their assets as a gift to one company? They cannot gift each other. Companies can do only transactions.’ Vodafone Essar has filed the petition seeking court approval for the reconstruction and amalgamation of the companies; the court will hear the matter for 18 January 2010.

India, Vodafone India