British telecom major Vodafone on Thursday said that it will challenge the income tax department’s order on the transfer pricing case pertaining to 2007-08 on sale of shares of its Indian unit to a Mauritius-based group company.
“As this latest order relates to a share subscription, and share subscriptions are not covered by transfer pricing rules either in India or internationally, we will be challenging the order as it has no basis in law,” a Vodafone spokesperson said.
Last week, the income tax authorities had issued an order to Vodafone alleging that Vodafone India under-priced its shares issued to Vodafone Teleservices Mauritius in 2007-08, by around Rs 1,300 crore. The department also challenged the valuation method adopted by Vodafone India Services Pvt Ltd (VISPL) while issuing shares to the Mauritius-based company.
“Vodafone has received a transfer pricing order in relation to the issue of shares by VISPL. This new order is linked to the 2007-08 transfer pricing dispute, which Vodafone is already challenging before the Dispute Resolution Panel,” the spokesperson added.
The company is already tangled in an another tax dispute with the income tax department regarding its 2007 acquisition of Hong Kong-based Hutchison Whampoa’s stake in its Indian telecom business.
The department has raised a tax liability of Rs 11,200 crore regarding the acquisition, a move which was challenged by the company on the grounds of jurisdiction.
“Vodafone has also filed a writ petition challenging the jurisdictional issues on the basis of precedent established in the recent Vodafone International Holdings BV- Hutchison Supreme Court judgement,” the spokesperson said.
While the income tax department had claimed that it had jurisdiction to tax Vodafone-Hutchison deal, the Supreme Court upheld that the tax authorities had no jurisdiction over the deal, bringing in a huge relief to the company.
However, the government in Budget 2012-13, changed the tax rules retrospectively to bring such deals under the tax net.
After indicating its willingness to negotiate with the government, Vodafone has started meeting the senior government officials to resolve the issue. Last week, Vodafone India non-executive chairman Analjit Singh met revenue secretary Sumit Bose regarding the matter.
According to sources, the government may bring in certain provisions including waiving off penalty and interest where retrospective rules are applied, to soften the blow of the amendment.
Vodafone India revenue up 10%
Boosted by strong growth in voice minutes, Vodafone India’s revenue grew by about 10 per cent to £1.1 billion (about Rs 9,388.40 crore) in