The Bombay High Court has dismissed a writ petition filed by Vodafone India against a transfer pricing adjustment of Rs 1,300 crore by the Income Tax Department. It further directed the Disputes Resolution Panel (DRP) to take over the matter on merits and pass an order with a finding within two months.
This verdict came as another major jolt for the telecom major. In September, the High Court had dismissed a petition that questioned the Income Tax Department’s jurisdiction in passing an Rs 8,500-crore order on transactions by the company’s outsourcing unit in Pune. The court had said that the Revenue Department can suo motu investigate any cross-border deal.
On Friday, a Division Bench comprising Chief Justice Mohit Shah and Justice M. S. Sanklecha directed the telecom major to file a plea/objection, if any, with the DRP within two weeks.
According to experts, Vodafone India might re-approach the High Court if it is not satisfied with the DRP’s verdict, said a lawyer at Majmudar and Partners. The case relates to a transfer pricing order given by I-T Department during assessment year 2009-10 over issuance of shares by Vodafone India to a Mauritius group company for Rs 246 crore at a fair market value (FMV) of Rs 8,519 per share. But, according to the Tax Department, the FMV was Rs 53,775 a share and thus the difference should be taxed.
Vodafone has been claiming that these are capital transactions and hence do not fall under the transfer pricing ambit.
According to Sanjay Sanghvi, a partner at Khaitan & Co, rRecently, the Income Tax Appellate Tribunal in Hyderabad in Vijay Electricals case had ruled that such transaction of subscription to share capital does not result in any income which can justify a TP adjustment.