Vodafone to challenge IT dept's order in transfer pricing case

Telecom giant Vodafone today said it will challenge the Indian tax authorities order regarding the transfer pricing case pertaining to sale of shares of its Indian unit to a Mauritius-based group company.

"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 Group spokesperson said.

The Indian tax authorities last week have issued a order to Vodafone alleging that Vodafone India under-priced its shares issued to a Mauritius-based group company reportedly by around Rs 1,300 crore.

The tax authorities have challenged the valuation method adopted by Vodafone India Services Pvt Ltd (VISPL) while issuing shares to Vodafone Teleservices Mauritius in 2007-08.

"Vodafone has received a transfer pricing order in relation to the issue of shares by VISPL. This new order is linked to the 2007-8 transfer pricing dispute, which Vodafone is already challenging before the Dispute Resolution Panel," the spokesperson said.

The spokesperson added 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 judgement.

Vodafone is also engaged with the Indian government regarding the Rs 11,200 crore tax liability issue related to the British firm's acquisition of Indian telecom assets of Hutchison Whampoa.

Last week, Vodafone India non-executive Chairman Analjit Singh met Revenue Secretary Sumit Bose in an attempt to resolve the matter.

Vodafone has been slapped with an income tax demand notice of Rs 11,200 crore on the 2007 acquisition of Hong Kong-based Hutchison Whampoa's stake in its Indian telecom business.

The liability arose following the then Finance Minister Pranab Mukherjee amending the Income Tax Act, 1961 with retrospective effect to undo the Supreme Court judgement that had ruled in favour of the company.

The government is working towards a solution based on recommendations of the Shome panel, which suggested that either government withdraw the retrospective tax amendment or waive the penalty in case it had to recover the taxes.

The government is likely to announce some steps to deal with the issue in the Budget for 2013-14 which will be unveiled in the Lok Sabha on February 28.