(Yicai Global) Aug. 29 -- Hutchison Asia Telecommunications Ltd., which is wholly owned by Hong Kong magnate Sir Li Ka-shing's CK Hutchison Holdings Ltd. [HKG:0001], has been hit with a tax assessment order and penalty order totaling INR322 billion (USD5 billion) from Indian authorities, the parent company said on Aug. 28.
Hutchison Telecoms received the tax order in February and the penalty in August, CK Hutchison Holdings said, adding that it also received a drafted tax assessment order over a sale of equity made by Hutchison Telecoms in November 2016.
The dispute goes back to 2007, when Vodafone International Holdings BV bought equity in Indian telecoms operator Hutchison Essar Ltd. While Vodafone said it doesn't owe the Indian government money as the transaction was conducted offshore, authorities have sought to collect tax on the deal because it involved assets in the country.
The tax assessment order demands tax on the capital gains from the transaction of about INR79 billion, plus interest on that tax totaling INR164.3 billion. The penalty order demands tax fines of INR79 billion.
The Supreme Court of India ruled against the tax authorities in 2012, but the Indian Parliament since passed a supplementary bill in a bid to overturn the ruling and obtain tax on the transaction.
Hutchison Asia believes that Indian authorities violated international law by setting up the bill to overturn the Supreme Court's decision, and doesn't expect the officials will be able to levy taxes.
CK Hutchison Holdings said the matter won't affect its financial standing or performance.