The tax dispute, which dates back to 2007-08, involves the sale of the company’s call centre operations to Hutchison and assignment of call options to Vodafone worldwide.
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Vodafone had appealed against the order of the Tribunal which was admitted by High Court division bench of Justices S C Dharmadhikari and Anil Menon.
It may be noted that many multinationals, including Shell India and Leighton India Contractors, are also fighting transfer pricing cases in various courts.
According to industry experts, now it awaits to be seen whether I-T Department will challenge this order in the Supreme Court.
“The court upheld Vodafone’s contention on the stand because the Supreme Court has ruled on the option pricing case, and said there is no case for tax on the sale of call centre business”, Fereshte Sethna, partner at DMD Associates and counsel for Vodafone, said. The Department slapped a tax demand on the company on October 31, 2012 under various sections of the I-T Act.
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.
Vodafone welcomes Bombay High Court’s decision, the company said in a statement. The revenue authorities claimed that the deal was an “undisclosed, worldwide transaction” and therefore transfer pricing norms applied to the case.
Vodafone has maintained that the transaction is not an global transaction and so it should not attract tax.
The tribunal, however, did not accept the valuation arrived at by the tax department and asked the authority to arrive at a correct valuation.
The ITAT referred the matter back to the IT Department asking it to revise the amount of tax to be recovered from Vodafone.
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Subsequently, Vodafone had challenged that order in the Bombay High Court.
