The Bombay High Court on Friday dismissed a writ petition filed by Vodafone India questioning the jurisdiction of a transfer pricing order passed by the income-tax (I-T) department relating to transactions at the company’s call centre business unit in Pune.
The Pune outsourcing unit handles network operations of Vodafone’s European businesses.
The court directed Vodafone to appeal against the tax order in the appellate tribunal or pursue with the dispute resolution panel, under the income tax law.
The telecom giant had in February 2012 challenged the jurisdiction of the I-T department in issuing a transfer pricing order issued in December 2011 that sought to add Rs 8,500 crore to its taxable income.
This would, in turn, take the tax liability of the firm’s unit to Rs 2,805 crore.
And with an 18% interest per annum, the amount should turn out to be around Rs 4,200 crore.
Vodafone, however, said that the Bombay High Court’s decision focused solely on procedure and not on the merits of the firm’s case.
The court ruled that the matter should be looked at by the tax tribunal in first instance, rather than passing directly to it. The court also extended the stay on the final assessment order it had granted. Vodafone now has almost 12 weeks to review its options.
Vodafone can challenge the decision of the Bombay High Court in the Supreme Court, asking them to entertain their petition against the I-T department.
It can also go back to Income Tax Appellate Tribunal.
According to Vodafone, the disputed transactions are domestic in nature and, therefore, does not fall within the jurisdiction of transfer pricing norms.
This is the second tax dispute that Vodafone has got embroiled in in India. In the other case, it is negotiating with the government and the I-T department regarding its 2007 acquisition of Hong Kong-based Hutchison Whampoa’s stake in its Indian telecom business.
The I-T department has raised a tax demand of Rs 11,200 crore regarding the acquisition, a move which was legally challenged by Vodafone.
However, the government revived its case against Vodafone by changing the tax rules retrospectively to bring such deals under the tax net.
The Delhi High Court has, however, directed the I-T department not to serve the final assessment order to Vodafone till November 30.
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