Bombay HC directs Vodafone call centre to move income tax tribunal in transfer pricing case

The Bombay High Court on Friday dismissed a petition filed by Vodafone India Services Pvt Ltd, the Pune unit of the UK-based telecom company, which had argued that the income tax department had no jurisdiction over its cross-border transaction with its UK parent.

The high court ruled that the revenue department has the right to suo motu investigate any cross-border deal, but allowed the company the option to move the Income Tax Appellate Tribunal pending further action by the income tax department.

While passing the order, a division bench of the high court also directed the income tax department to keep the final assessment notice in abeyance till 30 November, to allow Vodafone to seek alternate remedy.

Vodafone Group Plc, one of the world's largest telecom companies, would now have to file a fresh appeal with the Income-Tax Appellate Tribunal (ITAT).

Vodafone had, in February 2012, moved the high court, challenging the income tax department's notice seeking to add Rs8,500 crore to the UK company's taxable income in India.

Vodafone had claimed that it was a domestic transaction and did not fall under the transfer pricing norms.

The court, however, held that a transfer pricing officer (TPO) has jurisdiction on such cases and can pass an order without determining the international or domestic status of a deal.

Transfer pricing involves the pricing of transactions between associated enterprises that are different from transactions between unrelated entities.

It refers to the value of the transfer of goods, services and technology between related entities in comparison to the value of such transfers between unrelated entities.

In an official release issued on Friday, Vodafone said the court's decision focused solely on procedure and not on the merits of the case.

The company, however, did not elaborate.