Relationship Between Holding Companies and Subsidiaries and the Concept of Piercing the Corporate Veil in the Light of Recent Vodafone's Decision and Finance Act 2012

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Project-Corporate Law-I Relationship Between holding Companies and subsidiaries and the concept of piercing the corporate veil in the light of recent Vodafone 's decision and Finance Act 2012 Submitted to- Dr Kiran Kori Faculty-Corporate Law Submitted by-Prarthna Baranwal Semester-V Section-A Roll No.-92 HIDAYATULLAH NATIONAL LAW UNIVERSITY, RAIPUR CHHATTISGARH 1 ACKNOWLEDGEMENTS I would like to express my heartfelt gratitude to our respected faculty Kiran Kori Ma’am for giving me such a relevant and informative topic for the project and for her continuous guidance and support. My sincere thanks to my parents for their immense help and cooperation. Last but not the least my humble thanks to Almighty who continues to…show more content…
The concurring judgment of 2:1 was pronounced by the SC on 20th January, 2012. The decision has been widely discussed because of interesting point of law and huge revenue involved of Rs. 11,000 ( plus ) Crores for the Government of India. The loss of revenue is not limited only to Government 's losing the Vodafone 's case, the stand of the Govt. has weakened in other similar cases. The legal issue related to the interpretation of provisions of section 9 of the Income-tax Act, 1961 (Act), read with section 5 of the Act. In the first round of litigation, the matter primarily related to the issue whether any income accrued or arose to Vodafone in India on entering into agreements between two companies for acquiring controlling interest, which one foreign company held in an Indian company, by another foreign company and, hence, Vodafone was obliged to deduct tax at source on such acquisition. The basic question involved was whether Indian tax authorities had a right to impose tax in respect of a transaction where both the transacting companies were based outside India, but the subjectmatter of transfer was in India. Hence, the notice issued was challenged.2 DECISION AGAINST THE IT DEPARTMENT The Supreme Court has decided the case against the IT Department holding that no tax is leviable in the situation when the transaction of 'outright ' sale happened between two nonresidents of a capital asset outside India, though the capital asset (share) was

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