Bombay HC rules in favour of Vodafone

With the high court here ruling in favour of Vodafone in a transfer pricing case, the Indian arm of the British telecom company has scored another victory against tax authorities. The case pertains to the sale of its call centre business to Hutchison’s India entity and assignment of call options to Vodafone International BV in 2007- 08.

The authorities pursued with their tax demands under transfer pricing rules, despite the Supreme Court having ruled against similar cases earlier this year. In fact, Vodafone approached the high court after a fresh demand was made by the authorities this July.

Fereshte D Sethna, senior partner at DMD, legal advisor to Vodafone, said: “ The verdict has reaffirmed justice for Vodafone and is an excellent signal for foreign investors. The high court has struck down the stand of the tax authorities premised inter alia on the fundamental position that tax exigibility of the transaction was already considered by the Supreme Court back in 2012. The tax office stance to bring an Indian subsidiary to tax on the very same transaction was rightly not countenanced by the court.” The ruling has come as a rap on the knuckles of tax authorities for pursuing the case even after the government decided not to pursue similar transfer pricing cases earlier this year.

Following the Supreme Court ruling in 2012 in favour of Vodafone in a $ 2- billion tax case, tax authorities adjusted the valuation of assignment of call options under the transfer pricing rules by Rs.8,500 crore and slapped a fresh tax demand of Rs.3,100 crore on the Indian arm of Vodafone.

CASE HISTORY RESOLVED CASES STILL WAITING

Vodafone: Bombay HCruled in favour of Vodafone, saying itwas not liable to pay ~ 3,100 crore in additional tax in a transfer pricing case Castleton: Got relief on minimum alternate tax ( MAT) after theAP Shah committee in its report said foreign companies withouta permanent establishment or place of business in India should not be liable to pay MAT Cairn: Regarding a tax demand of ~20,495 cr for failing to deduct withholding tax on alleged capital gains.

Matter in international arbitration; government to appoint its arbitrator Nokia: Relates to a tax demand of Rs.21,153 cr over non- deduction of tax at source concerning royalty payments to its then parent, Nokia Oyj Shell: In November 2014, the Indian unit of Royal Dutch Shell Plc won Rs.18,000- cr transfer pricing cases against I- T department. Final call on the matter yet to be taken by the government Sept 2007: Income tax (I- T) department slaps Vodafone International BV with a tax demand of $2 billion Jan 2012: Supreme Court sets aside I- T departments claim, saying transaction carried out of India cannot be taxed Feb 2012: I- T department slaps Rs.3,100- crore tax notice on Vodafone India Sept 2013: Bombay HC dismisses Vodafones petition and refers it back to tax tribunal Dec 2013: Income Tax Appellate Tribunal asks Vodafone to deposit ~200 crore Dec 2014: Tribunal says Vodafone liable for tax payments Sep 2015: High Court sets aside Tribunal order on Vodafone tax notice.

Business Standard, New Delhi, 9th Oct. 2015