HC rules in favour of Vodafone in Rs. 8500-crore case

The Bombay High Court today ruled in favour of British telecoms firm Vodafone in the contentious Rs 8,500 crore transfer pricing case.

Transfer pricing is the practice of arm’s length pricing for transactions between Group companies based in different countries to ensure a fair price – one that would have been charged to an unrelated party – is levied. Vodafone had earlier received a tax claim of about Rs 3,900 crore.

Vodafone India Services was originally incorporated in March 1999 in the name of 3 Global Services as a wholly-owned arm of Hutchison Teleservices India Holdings, a company incorporated in Mauritius.

The company approached the Income Tax Appellate Tribunal against the tax demand, saying it was not an worldwide transaction and did not attract transfer pricing rules.

Vodafone India Services suffered a setback in December previous year when the ITAT held that the I-T department had jurisdiction in the transfer pricing dispute. “Vodafone welcomes the decision by the Bombay High Court”, spokesman Suresh Rangarajan said, adding details of the order were not available.

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.

The court was of the view that there is no transfer of the “call options” and, hence, the transaction does not fall within the purview of transfer pricing.

Thursday’s ruling followed a similar victory late previous year in which the same court threw out a transfer pricing case against Vodafone.

The Indian Finance Ministry wants to pitch India as a great investment, and due to this, it is considering burying the remaining high-profile tax cases, and not delaying the on-going ones.

However, the tribunal referred the case back to the IT department asking it to revise the amount to be recovered from Vodafone. Bidness Etc believes that the stock will surge after the company’s win, which also suggests that there are chances that Vodafone’s other cases in India will also be solved soon.

“We will study the order and then take a call accordingly”, revenue secretary Hasmukh Adhia said in New Delhi.