Vodafone Group, the world’s largest telecom company by revenue, will challenge the Income-Tax Department’s latest notice regarding the transfer pricing case.

“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 told Business Line in an e-mail reply.

Last week, the I-T Department had issued an order to Vodafone alleging that Vodafone India under-priced its shares issued to a Mauritius—based group company by about Rs 1,300 crore.

“Vodafone has received a transfer pricing order in relation to the issue of shares by VISPL (Vodafone India Services Pvt Ltd). This new order is linked to the 2007/8 transfer pricing dispute, which Vodafone is already challenging before the dispute resolution panel. 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 judgment,” the mail added.

The tax authorities have challenged the valuation method adopted by VISPL, which had issued shares to Vodafone Teleservices Mauritius in 2007—08.

BACKGROUND

The I-T Department had slapped an Rs 11,200-crore demand notice to the British telecom major on the capital gains arising from its $11.2-billion offshore deal with Hutchison Whampoa in 2007.

Through this deal, Vodafone International had acquired a controlling interest in the Indian telecom unit of the Hong Kong-based Hutchison Whampoa, then Hutchison Essar.

In January, the Department had sent a reminder letter seeking Rs 14,000 crore in dues, including interest on delayed payment. Announcing its third quarter results today, Vodafone said it is engaged in a dialogue with the Union Government to explore whether a solution can be found.

rajesh.kurup@thehindu.co.in

(This article was published on February 7, 2013)
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