The Bombay High Court today heard the Income Tax (I-T) Department’s challenge against the stay granted by the Income Tax Appellate Tribunal (ITAT) on tax demand of Rs 3700 crore on Vodafone.
In December 2013, the I-T department slapped a tax demand of Rs 3700 crore against Vodafone, under Transfer Pricing norms. The issue pertains to sale of call centre business to Hutchison Whampoa Properties India Ltd and the "assignment of call options" to Vodafone International Holdings BV in 2007-08. Red-flagging these transactions, the department had sought to add 8500 cr to the British telecom major’s taxable income.
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After having been slapped with the tax demand, Vodafone moved the ITAT. The ITAT, consequently, passed an order staying the tax demand till the final disposal of the matter or 6 months, whichever is earlier. The ITAT also directed to deposit Rs 200 crore with the department. The department had argued before ITAT, seeking a deposit of Rs 1850 crore. The Tribunal also directed Vodafone to furnish corporate guarantees for the remaining sum of 3500 cr.
The Department challenged this ITAT order before the Bombay High Court. The Department, today, argued that Vodafone should at least deposit 25% of the tax demand, as was the norm in tax disputes. Twenty five percent of the demand would amount to Rs 925 crore. The Department also argued that as opposed to the ITAT order providing for Vodafone to furnish corporate guarantees for the remaining sum of the demand , the department would require bank guarantees.
The department conceded that with the end of the fiscal year nearing, it was under pressure to meet targets.
The Bombay HC will now hear both the parties, the I-T Department and Vodafone, on Jan 30.
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