In tax case, HC rules in favour of Vodafone

Vodafone India on Thursday won major relief after the Bombay high court set aside an order of the Income- Tax Appellate Tribunal ( ITAT), which had ruled that the I- T Department had powers to raise tax demands on the company in a ` 8,500- crore transfer pricing case. The company, in a statement, welcomed the verdict. However, it made no further comment on the issue.

The transfer pricing dispute arose after the I- T Dept issued a draft transfer pricing order in December 2011 and added ` 8,500 crore to Vodafone’s taxable income from the sale of an Ahmedabad- based call centre business ( Vodafone India Services, formerly known as 3 Global Services) in 2007. Transfer pricing involves related entities dealing at arm’s length to ensure fair pricing of the asset transferred.

In February 2012, Vodafone challenged the jurisdiction of the I- T Department before the ITAT and also approached the Bombay HC. In 2013, the I- T Dept had issued a tax demand of ` 3,700 crore to Vodafone India. However, the tribunal stayed the demand during the pendency of the plea and directed Vodafone to deposit ` 200 crore by February 15, 2014, which it had done.

The tribunal had on December 10 last year held that the company had structured the deal with Hutchison Whampoa Properties with the intention of circumventing transfer pricing norms, even though it was an international transaction wherein there was no arm’s- length deal.