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India Allowed To Appeal Landmark Vodafone Ruling

by Mary Swire, Tax-News.com, Hong Kong

17 May 2016


The Indian Supreme Court has admitted the Income Tax Department's appeal against the Bombay High Court's ruling delivered in favor of UK telecom giant Vodafone in a transfer pricing dispute worth INR85bn (USD1.27bn).

The original ruling, which was delivered on October 8, 2015, pertains to the sale of Vodafone India Services, a call center business in Ahmedabad, India. The Bombay High Court had ruled that the transaction is not subject to India's transfer pricing law, agreeing with Vodafone's argument that the transaction was not an "international transaction" and gave rise to no taxable income.

Noting its decision to appeal the ruling, the Department said on April 6: "In the case of one of the cases of Vodafone, it has been decided to file [a special leave petition] before Supreme Court against the order of [the] Bombay High Court. A substantial question of law has arisen on the issue of taxability of capital gains arising on the surrender of call option rights. [The] Bombay High Court held that surrender of option rights is not a transfer under the provisions of Income Tax Act."

"This ruling will have adverse effect in many other domestic cases also. As such it has been decided to challenge the said ruling."

The Department's appeal filed by way of a special leave petition was admitted on May 13 by a bench comprising Justices Anil Dave, Adarsh Goel, and D Y Chandrachud. The court ordered the Department to submit its reply in the case by July 28, 2016.

TAGS: court | compliance | tax | investment | business | tax compliance | India | tax avoidance | law | enforcement | tax authority | agreements | multinationals | tax planning | transfer pricing | trade | telecoms | Tax

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