High Court directs Tax Department to Refund Rs 788.39 crore to Vodafone-Idea

The Bombay HC has directed the income tax department to refund Rs 788.39 crore to Vodafone Idea Ltd. (VIL) within three weeks, bringing some relief to the loss-making telecom operator which has also sought the govt’s help to ease its financial stress.

The refund order – more than Rs 630 crore due to Vodafone India and over Rs 150 crore to Idea Cellular – was issued by the court last week.

The tussle between the telco – formed following the Aug 2018 merger of Vodafone Idea and Idea Cellular – and the income tax department erupted from the assessment order for 2017-2018 financial year, when the 2 companies together suffered losses of more than Rs 6,600 crore.

The income tax department had held back the refund on the grounds that they had declared income of nearly Rs 287 crore during the assessment year 2016-2017 but incurred a big loss the next year, and therefore their returns for 2017-2018 should be investigated.

The merged company reported its 1^st combined financial results for the July-September quarter of 2018-19.

The investigating officer had highlighted other issues including revenue share, licence fees and non-deduction of tax at source on discount to prepaid distributors pending with the Income Tax Appellate Tribunal. The officer wanted to investigate the possibility of enhancement of the tax demand.

The HC bench rejected the argument that just because the telco had declared profit in one year and loss right after that, the claims needed to be relooked at.

Vodafone Idea Ltd. (VIL) declined to comment. On Friday, the telco’s shares ended 1.1% higher at Rs 6.39 on the Bombay Stock Exchange (BSE).

This is the 2^nd instance that a tax refund case has gone in Vodafone Idea Ltd. (VIL)’s favour. Earlier this month, the HC had ordered the income tax department to process refund of Rs 374.26 crore due to Vodafone India.

The refunds come as a major relief to the telco, which has been struggling financially in a brutally competitive market. In the latest results for the quarter to June, the telco’s revenue declined 4.3% from the previous quarter to Rs 11,269.9 crore, with losses of nearly Rs 5,000 crore, amid dwindling cash flows.

The operator has also yet to pay spectrum dues worth Rs 24,400 crore to the telecom department for 2019-20 and 2020-21. Besides, it needs to continuously invest in expanding its 4G network to remain competitive against aggressive rivals Reliance Jio Infocomm and Bharti Airtel.

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