Vodafone gets Rs 3,700-cr transfer pricing order

The claim includes tax as well as interest for the assessment year 2008-09, and does not include penalty

The income tax (I-T) department has slapped a Rs 3,700-crore final order on telecom major Vodafone, on a transfer pricing case. The claim includes the interest on the tax for assessment year 2008-09; it does not include a penalty.

The high court here had dismissed a case filed by Vodafone on the matter in September, sending it back to the dispute resolution panel of the department. A final assessment order on the matter was sent on Wednesday. “Vodafone disagrees with the panel decision relating to the transfer pricing order which Vodafone received in December 2011. Vodafone maintains there is no tax payable on this transaction and the company will file an appeal before the tax appeal tribunal as soon as possible,” stated the British corporation.

LEGAL HASSLES

• The claim includes the interest on the tax for assessment year 2008-09; it does not include a penalty
• final assessment order on the matter was sent on Wednesday
• The Pune unit of Vodafone came under the department's scanner for having transferred some of its shares to the parent company

The Pune unit of Vodafone came under the department's scanner for having transferred some of its shares to the parent company. Tax authorities say this was done on the lines of the accounting practice of transfer pricing, when it should have been done at an arms-length pricing between related parties.

Vodafone had earlier said thetransaction was a share subscription and not a share sale, and that the former were not covered by transfer pricing rules, either in India or abroad. And, hence, the I-T department's claim had no legal basis.

“The facts of this case – including the transaction structure – were examined in considerable detail by India’s Supreme Court, which delivered an unambiguous judgment affirming that there is indeed no tax due. Vodafone will continue to strongly defend its position against this order,” stated Vodafone on Wednesday.

Typically, we get 30 days to file in the (I-T Appeal) tribunal and 60 days to file subject matter appeal. We shall stick to it,” said a Vodafone official, who refused to be named.

Earlier  
This is the not only transfer pricing case Vodafone has been battling. In October, another matter came to court as the I-T department sent another tax claim, of around Rs 400 crore, to the company for the assessment year of 2009-10. This was also referred back to the dispute resolution panel, as the court felt complex matters such as transfer pricing were better decided by tax authorities.

Vodafone is also battling a much bigger tax case, where the claim made on it is Rs 11,200 crore. This is the capital gains tax claim for having bought a 67 per cent stake in Hutchison Essar in 2007. The Supreme Court gave it a favourable judgment but the government changed its tax laws with retrospective effect to ensure Vodafone came under the tax ambit.