Govt to Ap­peal HC Rul­ing in Voda Trans­fer Pric­ing Case

De­ci­sion comes af­ter co moved ICJ in .₹ 20,000-crore ret­ro­spec­tive tax dis­pute

The Economic Times - - Companies - Our Bureau

New Delhi: Days af­ter Voda­fone ap­proached the In­ter­na­tional Court of Jus­tice seek­ing in­ter­ven­tion in its .₹ 20,000 crore ret­ro­spec­tive tax case, the gov­ern­ment has de­cided to ap­peal against the de­ci­sion of the Bom­bay High Court in a sep­a­rate case that went in favour of the com­pany.

The gov­ern­ment filed a spe­cial leave pe­ti­tion in the Supreme Court chal­leng­ing the Bom­bay High court ver­dict that said sur­ren­der of op­tion rights is not a trans­fer un­der the pro­vi­sions of In­come Tax law in a trans­fer pric­ing case.

“A sub­stan­tial ques­tion of law has arisen on the is­sue of tax­a­bil­ity of cap­i­tal gains aris­ing on the sur­ren­der of call op­tion rights,” the in­come tax depart­ment tweeted late Wed­nes­day night.

“This rul­ing will have ad­verse ef­fect in many other do­mes­tic cases also. As such it has been de­cided to chal­lenge the said rul­ing,” the depart­ment said jus­ti­fy­ing its de­ci­sion.

In a sep­a­rate trans­fer pric­ing case in­volv­ing ad­just­ment of .₹ 3,200 crore, the gov­ern­ment had de­cided not to ap­peal a Bom­bay High Court de­ci­sion find­ing merit in the rul­ing. The tax depart­ment had rea­soned that the com­pany of un­der­val­ued its shares in sub­sidiary, Voda­fone In­dia Ser­vices while trans­fer­ring them to the par­ent com­pany in Bri­tain.

This trans­fer pric­ing tax case had two parts — sale of Voda­fone’s call cen­tre busi­ness to Hutchi­son Wham­poa Prop­er­ties and as­sign­ment of call op­tions to Voda­fone In­ter­na­tional Hold­ings BV in 2007-08. Tax au­thor­i­ties had made a .₹ 8,500 crore trans­fer pric­ing ad­just­ment in the case that was up­held by the In­come Tax Ap­pel­late Tri­bunal. Voda­fone had ar­gued that there was no as­sign­ment of call op­tions dur­ing the tran­si­tion and that meant it wasn’t an in­ter­na­tional trans­ac­tion and there­fore trans­fer pric­ing pro­vi­sions did not ap­ply.

The court had ruled that there was no trans­fer of call op­tion in this case.

This es­ca­lates the fight be­tween Voda­fone and tax of­fi­cials. In the bud­get the gov­ern­ment had of­fered to set­tle past cases aris­ing out of the in­fa­mous ret­ro­spec­tive amend­ment of in­come tax law with­out nam­ing Voda­fone.

“I pro­pose a one-time scheme of Dis­pute Res­o­lu­tion for them, in which, sub­ject to their agree­ing to with­draw any pend­ing case ly­ing in any Court or Tri­bunal or any pro­ceed­ing for ar­bi­tra­tion, me­di­a­tion etc. un­der BIPA, they can set­tle the case by pay­ing only the tax ar­rears in which case li­a­bil­ity of the in­ter­est and penalty shall be waived,” finance min­is­ter Arun Jait­ley had of­fered.

Voda­fone did not ac­cept the of­fer. Last month it moved the In­ter­na­tional Court of jus­tice seek­ing ap­point­ment of a third ar­bi­tra­tor in its .₹ 20,000 crore tax dis­pute.


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