I-T dept within its jurisdiction in Vodafone transfer pricing case: ITAT

The income tax appellate tribunal (ITAT) on Wednesday ruled that the income tax department was within its jurisdiction in the Rs8,500 crore transfer pricing tax dispute relating to the sale of Vodafone Group Plc's call centre business in India Hutchison in 2007.

''Assessee's (Vodafone India) appeal is partly allowed. But according to us, this is an international transaction and the assignment of call option took place,'' said an ITAT bench comprising RC Sharma and Vijay Pal Rao.

The tribunal, however, did not accept the valuation arrived at by the I-T department and asked the authority to correctly assess the taxable income of Vodafone India and decide on the revised amount accordingly.

The I-T department had asked Vodafone India to pay Rs8,500 crore tax following the sale of its call centre business to Hutchison. The British telecom group, however, decided to challenge the order first at the ITAT and later at the Mumbai High Court, which again directed Vodafone back to the tribunal for redressal.

While the ITAT stayed the tax demand in December 2013 for six months or till the plea was decided, it had directed Vodafone India to deposit Rs200 crore by 15 February. Vodafone India was also asked to provide corporate guarantees of Rs3,500 crore. Vodafone has since deposited Rs200 crore as per the ITAT order.

The Bombay High Court had, earlier, refused to intervene in the matter and had asked the tribunal to hear the case on a day to day basis. The matter will now go back to the Bombay High Court as Vodafone can appeal against the ITAT order, according to tax experts.

The I-T dept issued the draft transfer pricing order in December 2011, but the British company argued that the transaction does not attract tax.
Vodafone is involved in another case involving capital gains in India. The tax department, however, lost a plea in the tax dispute in the Supreme Court, which forced the Indian government to pass a retrospective tax law, under which Vodafone would have to pay.

Then finance minister Pranab Mukherjee and the country's present President had faced severe criticism for the move, with industry experts saying a retrospective tax would cloud the foreign investment climate in the country. That dispute is now under arbitration.