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INDIA: Vodafone gets a reprieve in ₹8,500-cr transfer pricing case

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The Hindu Business Line

The Bombay High Court on Thursday gave a favorable ruling to Vodafone in the transfer pricing case related to the sale of the company’s call-centre business to Hutchison and assignment of call options to Vodafone International.

The tax dispute, which dates back to 2007-08, arose after the tax authorities added ₹8,500 crore to the taxable income of the call center unit. It had initially received a tax claim of about ₹3,600 crore.

While the Income-Tax Appellate Tribunal had upheld the I-T department’s claim, the High Court has accepted Vodafone’s position that the Department had no jurisdiction.

The court was of the view that there is no transfer of the ‘call options’ and, hence, the transaction does not fall within the purview of transfer pricing.

The I-T Department can challenge this order in the Supreme Court.

“We will study the order of the Bombay High Court on the Vodafone transfer pricing issue and then take a call,” Revenue Secretary Hasmukh Adhia said.

The I-T Department had issued its draft transfer-pricing order in December 2011. In 2012, Vodafone India Services moved the High Court challenging the Department’s jurisdiction.

This is the second major victory for Vodafone in tax-related cases in India. In October, the Bombay High Court had ruled that Vodafone is not liable to pay ₹3,200 crore in taxes in a 2009-10 transfer pricing case.

However, a verdict is still awaited in the $2.5 billion capital gains tax case, where the Department had asked Vodafone to pay tax for acquiring Hutchison’s telecom operations in India.

(This article was published on October 8, 2015)