Govt unlikely to challenge HC's tax relief to Vodafone

Govt unlikely to challenge HC's tax relief to Vodafone

The government is unlikely to challenge to the Bombay High Court’s order quashing the Rs 3,200-crore tax demand raised by the Income Tax (I-T) department for transfer pricing of shares.

Attorney General Mukul Rohatgi gave an opinion to the Centre advising against filing the appeal against the HC’s order of October 10, sources said.

The top law officer’s view is in sync with the recent statement given by Finance Minister Arun Jaitley in which he expressed his intent to adopt a “benign, predictable and pragmatic tax policy”.

The HC gave telecom giant Vodafone big relief in Rs 3,200 crore tax case. The I-T department raised the demand for undervaluation of share capital issued by Vodafone India Services Private Limited (Vodafone India) to its Mauritius parent.

The I-T department had sought to bring the transaction of issue of share capital within the transfer pricing ambit.  It held that the differential between the price at which shares were issued by Vodafone India and the valuation done by the I-T department to be in the nature of a loan to the Mauritius-based parent company. In other words, equity was recharacterised as a loan. The I-T department raised a demand of around Rs 3,200 crore.

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