Bombay High Court sends Vodafone back to DRP

IT department has claimed as much as Rs 370 crore in tax for assessment year 2009-10

The Bombay High Court today asked British telecom major Vodafone Plc to go back to dispute resolution panel (DRP) of the Income Tax Department in its second transfer pricing case. The IT department claimed as much as Rs 370 crore in tax for the assessment year 2009-10.  

 

In the judgment delivered today, the court said that the matter seems to be a case for the DRP to decide. “The petitioner (Vodafone) should submit its  preliminary objections on the case in two weeks. DRP will decide the area of jurisdiction,” it said. 

 

It also said that it is not going into the merits of the case and that it does not see a prima facie evidence in the matter. “No government has the right to harass the assesse, but has the right to collect taxes,” the verdict said. Vodafone is yet to send a response on the matter. 

 

The share transfer of the Pune outsourcing unit of Vodafone to its overseas subsidiary came under the tax scanner twice. 

 

Earlier too, a petition by Vodafone that has been turned down by the Bombay High Court in the last three months. In September this year, the court dismissed a petition by the company which challenged the jurisdiction of IT department on the matter. The IT department had asked the company to add Rs 8,500 crore to its taxable income in 2010-11, taking its tax liability to Rs 2,805 crore. After adding interest, the total payout was calculated at Rs 4,200 crore. 

 

Transfer pricing is an accounting norm used in the conduct of related party transactions. 

Vodafone had been claiming that that their transaction was a share subscription and not a share sale, and its not covered under transfer pricing rules. It said that the assessment by the tax authorities had no basis in law. In the latest transfer pricing case for which the order was delivered, was on similar lines for another assessment year. 

 

Vodafone is also fighting a much larger battle with the Indian tax department over the purchase of 67 per cent of Hutchinson's stake for $11.2 billion in Hutch Essar for 2007. The tax liability which is currently mired in multi-level controversy is at Rs 11,200 crore.