Friday, December 10, 2010

HC dismisses Vodafone Essar Gujarat Ltd (VEGL) demerger scheme

Ahmedabad: In a major setback for telecom giant Vodafone Essar Gujarat Ltd (VEGL), the Gujarat High Court has disallowed the company to go ahead with its demerger scheme by gifting its ‘passive infrastructure assets’ to group company Vodafone Essar Infrastructure Ltd (VEIL).

Acting on an objection filed by the income tax department through advocate Nitin Mehta, Justice KA Puj has dismissed the scheme of demerger by transferring its communication towers to another group company. The I-T department had taken objection to the sanctioning of the scheme on various grounds including that such a transaction of gift is beyond the scope of provision of section 391 of Companies Act, 1956 and says that it was just a device to evade taxes. It was argued on behalf of the I-T department that Vodafone was seeking court’s approval for the tax evasion in the garb of a demerger scheme, said a note from advocate Mehta.
This demerger scheme is a consolidated scheme by seven Vodafone companies transferring their ‘passive infrastructure assets’ to VEIL out of which only one transferor company is situated in Gujarat. The approximate market value of the cumulative assets of all the seven transferor companies sought to be transferred under the scheme, would entail a stamp duty evasion of approximately Rs 900 crore (assuming 6% stamp duty rate), the I-T department claimed.
Justice Puj has suspended the order for two weeks on request by the company so as to enable it to approach the higher forum.

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