Bombay HC rules in favour of Vodafone in Rs 8500cr tax case

Moneycontrol BureauThe Bombay High Court today ruled in favour of British telecoms firm Vodafone in the contentious Rs 8,500 crore transfer pricing case.The court's decision is significant as it comes about a year after a tax tribunal ruled against the company, and marks progress in a case that is synonymous with a litany of tax cases that started during the tenure of the the UPA 2 government.The case involves the sale of Vodafone's call centre business (Vodafone India Services, earlier 3 Global Services) to Hutchison in 2007 as well as transfer of call option pricing rights to an overseas entity, in which the Income-Tax Department had ruled that the company owed a tax liability.The IT Appellate Tribunal had on December 10 last year held that the company had structured the deal with another India-based entity Hutchison Whampoa Properties with the intention to circumvent the transfer pricing norms, even though it was an international transaction wherein there was no arm's length dealing between the two related entities. Vodafone had appealed against the order of the Tribunal which was admitted by High Court division bench of Justices S C Dharmadhikari and Anil Menon. Vodafone pleaded in High Court that IT department had no jurisdiction in the transfer pricing case because the said transaction was not international and did not attract tax. Transfer pricing involves related entities dealing at arm's length to ensure fair pricing of the asset that is transferred. "It's a welcome decision. It will help investments come in," senior lawyer KTS Tulsi said.He added that the tax department would likely appeal in the Supreme Court, which would mean the case is far from closed.The case, however, is different from a bigger USD 2.5 billion tax case involving the Vodafone's purchase of the Indian telecom business from Hutchison."The court upheld Vodafone's contention on the stand because the Supreme Court has ruled on the option pricing case, and said there is no case for tax on the sale of call centre business," Fereshte Sethna, partner at DMD Associates and counsel for Vodafone, said.- With inputs from PTI