HC order on Vodafone transfer pricing being analysed: CBDT

All relevant issues will be considered and the department has also sought advice from the law ministry: K V Chowdary

The Central Board of Direct Taxes (CBDT) will give its views on a high court order on Vodafone transfer pricing case after studying the judgment, Chairman K V Chowdary said on Monday.

Transfer pricing is the practice of arm's length pricing for transactions between group companies based in countries to ensure a fair price — one that would have been charged to an unrelated party — is levied.

"We are examining the transfer-pricing issue at the income tax commissioner and CBDT levels. We will take a view soon," he told PTI.

He said all relevant issues will be considered and the department has also sought advice from the law ministry.

On Friday, the Bombay High Court ruled in favour of Vodafone, saying the British telecom company was not liable to pay Rs 3,200 crore demanded by the income-tax department in a case on transfer pricing.

The department had charged Vodafone India additional income tax saying it had undervalued its shares in its subsidiary Vodafone India Services, while transferring these to its parent company in Britain. The transaction took place in FY2010.

Since cases similar to Vodafone's have come to light, Chowdary said, "Existing cases will be treated in line with relevant laws. New ones related to transfer pricing will go to a specially constituted high-level coordination committee."

For the second case of Vodafone involving an income tax claim of $2 billion after a change in a law retrospectively, Chowdary said an arbitration was under way to arrive at a solution.