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Supreme Court of India · Civil Appeal No. 733 of 2012

Vodafone International Holdings B.V. v. Union of India

[2012] 341 ITR 1 (SC)(2012) 6 SCC 613
Date of order: 20 January 2012
Appellant: Vodafone International Holdings B.V.
Respondent: Union of India
In favour of: Assessee
Legislation referred / considered
Section 9 (income deemed to accrue in India) Section 195 (TDS to non-residents)
Headnote — editorial summary
Catchwords: Offshore transfer; indirect transfer of Indian assets; source rule; withholding under Section 195
The Supreme Court held that the offshore sale of shares of a foreign company, which indirectly held an Indian telecom business, was not taxable in India, and Vodafone had no obligation to withhold tax.
Judgment

What it decided

The transfer of a single share of a Cayman Islands company (CGP) between two non-residents — which indirectly carried an Indian telecom interest — was a bona fide offshore transaction. The charge under Section 9 (income deemed to accrue in India, as it then stood) did not extend to indirect transfers of Indian assets, so no capital gains arose in India and Vodafone had no duty to deduct TDS under Section 195.

Why it matters

A foundational ruling on the source rule and extraterritoriality — you look at the legal form of a genuine transaction, not a 'look-through' unless the law provides one.

Current status

Parliament responded with a retrospective 'indirect transfer' amendment to Section 9; that retrospective levy was itself withdrawn in 2021. Indirect transfers of substantial Indian assets are now taxable prospectively under the codified rule (carried into the Income-tax Act, 2025).

Status
✔ Good law — followed, not overruled
Verified against later citations. citator soon
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