I-T slaps Vodafone with fresh Rs 3000-cr tax order

There appears to be no relief in sight for Vodafone from the tax department, with the British telecom major being slapped with a fresh tax order seeking transfer pricing adjustment of Rs 3000 crore. The department has red flagged issuance of shares to Voda’s parent in FY 09-10.

The income tax department has alleged undervaluation of shares issued. This is similar to an ongoing dispute for previous fiscals where the department had added 1300 crore to Voda’s taxable income. Meanwhile, Vodafone moved the Bombay HC for relief and has secured an interim stay on the fresh tax order until further hearing. Bombay HC will hear Vodafone’s appeal on March 7.

The issue pertains to the issuance of shares by Vodafone to its parent company. While the department contests the issue of shares as having been undervalued, Vodafone is likely to contend that the I-T department has no jurisdiction. Vodafone is likely to argue that the said transaction involved only fresh capital being pumped into Vodafone India and that there was no revenue component that could be taxed under Indian laws.

The case involving the 1300 cr tax dispute, had raised similar issues about issuance of shares to parent company, has been challenged by the British telecom major before the Bombay HC. The Bombay HC after hearing the matter had remanded the matter back to the Dispute Resolution Panel for adjudication on the jurisidiction of the department in such cases of capital receipts.

Meanwhile, Shell has been slapped with similar transfer pricing order, questioning the valuation of shares is also before the Bombay HC. The Bombay HC will hear the 15,000 cr Shell tax dispute on March 7 along with Vodafone's appeal against the latest order.