MUMBAI: The Aditya Birla Group—which controls cellphone major Idea Cellular has moved the Bombay high court (HC) against the income tax
department’s notice regarding capital gains tax on a share purchase deal. The division bench of justices F I Rebello and D G Karnik on Monday reserved orders as to whether the Birla group’s petition is admissible or not. The order will be passed on Tuesday.

In the present case, the issue is whether the Birla group is liable to pay capital gains tax on the share-purchase transaction worth $150 million with AT&T Mauritius (subsidiary of AT&T ). The Mauritius-based company sold its stake in idea to the Birla group in 2005.

According to the Birlas, since the double-taxation avoidance treaty exists between Mauritius and India, AT&T was not liable to pay tax in India, and so the Indian entity did not deduct tax. The company’s lawyer, Soli Dastoor, said the Birla Group was permitted to remit the whole purchase amount to AT&T by the I-T authorities in September 2005. Dastoor argued that after permission had been given and money remitted to the foreign company, the I-T department cannot ask the Birlas to pay the tax that AT&T might have been liable to pay.

The income tax department last year issued a notice to the Birlas, asking why the group should not be considered an agent, for the tax purposes , of US-based New Cingular Wireless Cellular (NCWC), the holding company of AT&T Mauritius.

Additional solicitor-general Mohan Parasaran argued that permission granted to the Birlas (for remitting the sale amount to the Mauritius company without deducting tax) was “tentative’’ , and it was merely a “license to remit’’.

Subsequently, he argued, the I-T department learnt that it was the parent company in the US—NCWC , which received the proceeds of sale. Parasaran made it clear that no tax demand has been made yet.