A division bench of chief justice Mohit Shah and justice MS Sanklecha held that as there was no taxable income arising out of the transaction so there should be no transfer pricing provisions applicable to it
The Bombay High Court on Friday ruled in favour of telecom major Vodafone in the transfer pricing dispute pertaining to sale of shares of its Indian unit to a Mauritius-based group company. The HC said that the telecom operator need not pay tax in a transfer pricing case.
The court said that there was no taxable income arising out of the transaction. A division bench of chief justice Mohit Shah and justice MS Sanklecha held that as there was no taxable income arising out of the transaction so there should be no transfer pricing provisions applicable to it.
The order went against the two-year-old tax demand from the Income Tax (I-T) authorities, who were hoping to collect as much as Rs3,200 crore in tax from Vodafone’s outsourcing unit in Pune. The amount included tax as well as interest for the IT demand for the year 2008-09.
Vodafone is locked in twin tax disputes with the government. One pertains to its 2007 acquisition of Hutchison Whampoa’s stake in Hutchison Essar, and the other is the transfer pricing case involving Vodafone India Services. This accounts to as much as Rs4,200 crore for the financial year 2010-11. It is also mired in a much larger tax controversy for the purchase of 67% stake in Hutchinson Essar in 2007. The claim for this is as large as Rs11,200 crore.
Vodafone is among 20 MNCs involved in transfer pricing disputes with Indian tax authorities. It is expected that the income tax department may appeal to the Supreme Court against the order.
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