Bombay High Court rules in favour of Vodafone in tax case

The I-T department had slapped a transfer pricing order against Vodafone's India arm

The Bombay High Court has ruled in favour of Vodafone in one of a series of tax cases involving the British telecoms company in India, a decision seen as positive for several other firms fighting similar disputes.

The court backed Vodafone's efforts to oppose a move by tax authorities to add Rs 8,500 crore ($1.3 billion) to the taxable income of a unit, Vodafone India Services Pvt Ltd, which provided call centre services to some group companies.

It had initially received a tax claim of about $600 million.

Vodafone, one of India's largest corporate investors, has repeatedly clashed with the authorities over taxes since it bought Hutchison's mobile business in 2007. It was held liable for capital gains tax which authorities say is owed on the deal.
 

 

A dispute over a capital gains tax demand worth more than $2 billion related to that deal has yet to be resolved.

Vodafone's treatment, seen by many investors as heavy-handed, had fuelled debate over India's unpredictable rules and regulations.

The Bombay High Court had separately ruled in favour of the group last year in a transfer pricing tax dispute. In that case, India's tax office had accused Vodafone India Services Pvt Ltd of under-pricing shares in a rights issue to its parent, and had demanded tax of about 30 billion rupees.

The government, seeking to clean up a reputation for "tax terrorism", decided to not appeal that case.

Transfer pricing is the value at which firms trade products, services or assets between units across borders, a regular part of doing business for a multinational.

Several other multinationals including IBM Corp, Royal Dutch Shell Plc and Nokia Oyj are also fighting transfer-pricing cases in India.

Vodafone said in a statement that it welcomed the latest court ruling. It did not comment further.

($1 = 65.0800 Indian rupees)