High Court rules in favour of Vodafone in transfer pricing case

12 Oct 2015

The Bombay High Court has ruled in favour of UK-backed operator Vodafone India in an INR85 billion (USD1.31 billion) tax case over transfer pricing, the Economic Times reports. The case revolved around the sale of Vodafone India’s call centre business to sister company Hutchison Whampoa Properties in 2007-2008. In December 2011, the Income Tax Department sought to add INR85 billion to Vodafone’s taxable income for the 2007/2008 financial year, claiming that the sale was subject to transfer pricing norms. The tax authority’s position was supported by a December 2014 ruling by the Income Tax Appellate Tribunal (ITAT), although the decision was challenged by Vodafone the following month. The most recent ruling, from the Bombay High Court, has set aside the ITAT’s decision in favour of Vodafone, stating that there had been no transfer of call options and the transaction was therefore not subject to transfer pricing rules.

Whilst the Indian government may continue to pursue the case, the country is attempting to shake its reputation for ‘tax terrorism’ in a bid to make the nation more appealing to foreign investors. To that end, the government dropped a similar case against Vodafone in January this year – also relating to transfer pricing – after the Bombay High Court ruled in favour of the telco.

India, Vodafone India