savramesh 37 Report post Posted June 9, 2009 Economic Times 9 Jun 2009, 0019 hrs IST NEW DELHI: Vodafone Essar’s plan to hive off its signal towers and telecom network-related infrastructure arm to companies in Mauritius has run in to rough weather for the second time after a government agency flagged the vexed issue of using a tax haven for such deals. The Department of International Taxation (DIT) in Mumbai, the government agency that examines cross-border deals, has said in its interim report that the Vodafone Essar plan seeks to route funds in a way to take advantage of the India–Mauritius Double Taxation Avoidance Agreement (DTAA). According to the provisions of DTAA, Mauritius-based entities are exempt from paying capital gains tax in both countries. After DIT’s interim report, the Foreign Investment Promotion Board (FIPB) has yet again deferred Vodafone Essar’s proposal on Ortus Infratel and Holdings. This is the second time a government agency has opposed Vodafone Essar’s plan. In April, the revenue department under the finance ministry had said the proposed investment in the new company through Mauritius would result in ‘round tripping’. The revenue department had referred the matter to DIT, which has again stated in its interim report that ‘the possibility of round tripping cannot be eliminated’. In response to a detailed query sent by ET, Vodafone said the company cannot comment on the observations of either DIT or the revenue department. In its interim report to FIPB, DIT has said the two Mauritius entities were mere holding companies with a share capital of just $100. It added that the telco has not furnished the source of funds for both Vodafone Tower and Essar Infratel despite repeated reminders. But a person close to Vodafone Essar, who wished to remain anonymous, said the source of funds for both these companies have been provided to DIT. Share this post Link to post Share on other sites
