The tribunal stated that the identity, creditworthiness and genuineness of the transaction was validated by the Supreme Court and therefore, the assessing officer cannot question them.
“It is abundantly clear that the assessee has not only furnished irrefutable documentary evidence to establish identity and genuineness of shareholders, but has also established the source of funds of such shareholders,” judicial members RL Negi and RC Sharma said in their order dated August 28, which was released on Monday.
Since the assessee had fully discharged its onus in this regard, there is clearly no case of unexplained credit, they said in the order.
The move will come as a relief for Vodafone Idea, formed by the merger of Vodafone India and Idea Cellular, which has been ordered by the Supreme Court in a separate case to pay pending adjusted gross revenue dues to the government. Tax authorities can still challenge the order in the High Court.
The company’s shareholding structure, including entities that were allotted rights shares, was examined by the Supreme Court in the case of Vodafone International Holding BV, where the court not only validated such investments in the company but also the shareholding structure for such investments, the tribunal noted.
Therefore, the “observation of the assessing officer is totally unjustified,” the tribunal said, noting that allegations that a tax haven route was taken for the issue of share capital in Vodafone India was not substantiated.
The tribunal also said the Bombay High Court had settled that the SC’s judgement had to be taken into cognizance or else it would amount to ‘judicial indiscipline.’
The income tax authorities had added Rs 795 crore under Section 68 of the Income Tax Act, which enables authorities to examine the genuineness of the ‘source of source’ or the ultimate source of the investor - as income of Vodafone India which it had got from Mauritius-based companies via a rights issue.
Vodafone India had argued that the tax authorities’ case did not hold water due to two reasons.
One, the details of the companies namely, Al-Amin Investments, Asian Telecommunication Investments India, CCII, Euro Pacific Securities, Hutchison Telecommunications India, Mobilvest, Prime Metals, Trans Crystal and Essar Com, and transactions alongside the shareholding structure of Vodafone India were shared with tax authorities during the due diligence.
Two, the shareholders were not residents of India and therefore the provisions of the act did not apply in the case. The tribunal upheld this argument in its order.
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