In 2013, the IT Department made a tax demand of Rs.3,700 crore on Vodafone India which was stayed by the ITAT, but directed the company to deposit Rs. 200 crore by Feb 15, 2014, which it complied with. It also told the court that the call centre sale was not subject to transfer pricing regulations meant to prevent profit shifting by MNCs.
Advertisement
Vodafone had challenged the ITAT order in Bombay High Court, which was admitted by a division bench comprising Justice S.C. Dharmadhikari and Justice A. Menon. “Appealing against high court decisions in the Supreme Court by the government is best done after due diligence and in cases where there is potential for substantial tax base increase, not in a routine manner in every case”, said SP Singh, senior director, Deloitte in India.
The department’s view was that the deal to sell the call centre business was between two overseas entities even though the operations were in India and were sold by an Indian unit of Vodafone to Indian subsidiary of Hutchison. The department slapped a tax demand on the company on October 31, 2012 under various sections of the Income Tax Act.
Vodafone said in a statement that it welcomed the latest court ruling.
Vodafone pleaded in High Court that IT department had no jurisdiction in the transfer pricing case because the said transaction was not global and did not attract tax.
The case had to do with transfer pricing in worldwide transactions, which often prompt questions about how to value the deals for tax purposes.
The tribunal, however, did not accept the valuation arrived at by the tax department and asked the authority to arrive at a correct valuation.
Advertisement
NEW DELHI-Vodafone Group PLC won another big tax battle in India as a local court ruled Thursday that it didn’t owe potentially hundreds of millions of dollars in back taxes.
