New Delhi, Dec. 6 -- Mining and metals conglomerate Vedanta Ltd, through its promoter entity Vedanta Holdings Mauritius II Ltd (VHML), has moved the Delhi high court challenging the income tax department's claim that the group gained undue tax advantage of about Rs.1,308 crore through the misuse of the India-Mauritius tax treaty. The tax department's general anti-avoidance rules (GAAR) approving panel had, on 28 November, also allowed imposing a tax liability of Rs.138 crore on the group. The writ petition was heard on 4 December by a division bench led by Justice Prathiba M. Singh, which restrained the tax department from taking coercive action or issuing an assessment order until the next hearing on 18 December. According to court filings reviewed by Mint, Vedanta challenged the order of the GAAR panel that classified its Mauritius-based holding structure as an "impermissible avoidance arrangement." The panel concluded that the group secured treaty benefits by routing promoter shareholding through Mauritius to access the 5% dividend withholding tax rate under the India-Mauritius double taxation avoidance agreement (DTAA), instead of the applicable 10-15%. It held that the structure lacked commercial substance and was engineered primarily for tax savings. Mint's emails to Vedanta seeking comments remained unanswered until press time. The dispute centres on whether Vedanta created and used VHML for a concessional treaty tax rate after its 2020 delisting attempt. The department argues that VHML was incorporated soon after India abolished dividend distribution tax in April 2020, and that intra-group share transfers were arranged to push VHML's stake above 10%, the threshold required to qualify for a 5% treaty rate under the India-Mauritius DTAA. The department alleges VHML had no real commercial purpose and was used merely to route promoter share ownership through Mauritius. It says promoter shareholding in Vedanta never changed in substance and the arrangement enabled an unjustified tax benefit of about Rs.1,308 crore, making it an impermissible avoidance arrangement under GAAR. The order states that VHML reported tax of Rs.116.12 crore for assessment year FY23 whereas applying GAAR would have a liability of Rs.337.15 crore, implying a Rs.221-crore benefit. Benefits of Rs.672 crore (AY FY24) and Rs.415 crore (AY FY25) were also cited. Vedanta denied tax-avoidance motives and said VHML was created as a financing vehicle to support the company's delisting plan during the covid-19 crisis. GAAR, implemented from 1 April 2017, empowers tax authorities to disregard or recharacterise transactions designed mainly to avoid tax, even if compliant in legal form....