In a relief to Vodafone Group Plc, the Income-Tax Department has withdrawn its long-pending Rs 85 billion transfer pricing case related to the sale of the British telecom operator’s call centre business.
The case pertains to a transfer pricing order linked to the sale of Vodafone India’s Ahmedabad-based call centre business to Hutchison Whampoa Properties India as part of an internal restructuring in financial year 2007-08 (FY08), along with the “assignment of call options” to Vodafone International Holdings BV.
Further, the department’s withdrawal comes shortly after the Supreme Court allowed the government to formulate a special relief package for the financially stressed telco concerning its adjusted gross revenue (AGR) dues, including interest and penalties, amounting to more than Rs 834 billion.
The department had, in April 2016, challenged the Bombay High Court’s October 2015 ruling that favoured Vodafone India Services, the Indian subsidiary of Vodafone Group Plc, in the Rs 85 billion transfer pricing dispute. The case remained pending without a hearing in the Supreme Court since 2017. Earlier, on October 8, 2015, the High Court had overturned a 2014 Income Tax Appellate Tribunal (ITAT) order which held that the tax department had jurisdiction in the transfer pricing matter involving the sale of the call centre business to Hutchison Whampoa Properties and the assignment of call options to Vodafone International Holdings BV in FY08.
Meanwhile, Vodafone India Services had contested the tax department’s jurisdiction to add Rs 85 billion to its taxable income for the FY08. In 2013, the department had raised a tax demand of Rs 37 billion from Vodafone India in this case. Vodafone consistently maintained that the transaction did not qualify as an international transaction and therefore did not attract transfer pricing tax provisions.
