Vodafone case: SC accepts plea against HC verdict

The Dollar Business Bureau
The Supreme Court, on Friday, agreed to hear the Income Tax department’s plea challenging Bombay HC’s verdict, which was in favour of Vodafone India Services Pvt Ltd. The Indian arm of Vodafone Group was embroiled in a Rs.8,500-crore transfer pricing tax dispute.
The bench, headed by Justice AR Dave, “granted leave,” calling for a detailed hearing of the matter.

Earlier in 2015, the HC had quashed an order issued by the Income Tax Appellate Tribunal allowing the tax department to control the matters of the transfer pricing tax case.  Besides assignment of call options to Vodafone International Holdings BV, the case involved the sale of Vodafone’s call centre to Hutchison Whampoa Properties.

Vodafone’s Indian arm challenged the order issued by the tax department, which sought an addition of Rs.8,500 crore to its taxable income in FY08. Later in 2013, the tax department collected Rs.3,700 crore from Vodafone.

Transfer price is the value at which different units of same firm take part in cross-border trade of products, assets or services.
Maintaining that the transaction was not international and hence did not attract tax, Vodafone moved the International Court of Justice demanding an intervention in the matter. Days after that the government decided to file a plea against the Bombay HC’s ruling.

While the tax department is questioning the issue of tax on capital gains arising after surrender of call option rights, the revenue authorities justified the decision to challenge the ruling and stated that the ruling of HC will adversely affect many other domestic cases.