Relief for Vodafone in Rs 3700-cr transfer pricing dispute

After a fresh tax blow in the form of a fresh demand of Rs 3,700 crore, the legal eagles of the British Telecom major have secured relief from the Income Tax Appellate Tribunal (ITAT). After hearing Vodafone, the ITAT has stayed the tax demand for six months or till disposal of appeal, whichever is earlier. 

The ITAT arrived at its ruling after Vodafone offered a compromise formula. The tax department had been seeking an upfront payment of Rs 1,850 crore from Vodafone, with bank guarantees for the remaining tax demand. Vodafone offered to pay Rs 150-200 crore, with corporate guarantee for the rest of the demand. 

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ITAT has directed Vodafone to make payment of Rs 100 crore on or before January 15 and to pay the second installment of Rs 100 crore on or before February 15.

ITAT has also directed Voda to furnish corporate guarantees to the extent of the remaining demand, on or before February 15.  This tax dispute goes back to 2007-08, when the tax department had sought to add Rs 8,500 crore to Voda’s taxable income. The transaction in question involved an assignment of call options and the sale of the call centre business.

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Ashmit Kumar

Reporter|CNBC-TV18

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Abhishek Manu Singhvi, appearing for Voda, argued that the SC order of 2011 had upheld Voda’s position, with respect to there being no assignment of call options and hence no question of taxable income. He also argued, with respect to the sale of call centre business, that the transaction in question was between two Indian companies and that the transfer pricing officer had no jurisdiction over the transaction. 

Vodafone counsel added that they had established a conclusive case at the prima facie stage. Meanwhile, the I-T Department had argued that the stay application was not maintainable as other legal remedies, by way of an appeal before the assessing officer or CIT appeals, had not been exhausted. 

The matter will come up for further hearing on March 19.