Vodafone, India In New Tax Row

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

27 December 2013

Vodafone is to appeal yet another tax demand issued by the Indian authorities.

The telecoms company has been handed a final assessment order, which relates to a share transfer involving its Vodafone India Services subsidiary and the sale of a call centre business. The transfer, which took place in 2008-09, is alleged to have undervalued the shares in question.

The authorities are therefore seeking the payment of INR37bn (USD598m) in taxes.

A Vodafone spokesperson said of the charges: "There is no tax payable on this transaction and the company will file an appeal before the tax appeal tribunal as soon as possible."

Earlier this month, it appeared that Vodafone and India were inching closer to a settlement on their long standing dispute over a USD2.2bn bill for back taxes and penalties relating to the firm's 2007 acquisition of Hutchison Essar. The Finance Ministry asked Vodafone to put its views on the issue into writing, a request that came hot on the heels of a meeting between Finance Minister P. Chiambaram and the Vodafone CEO Vittorio Colao.

Whether this latest quarrel will hamper these efforts remains to be seen.

In another, separate case, Vodafone was accused in February of undervaluing shares transferred between Vodafone India and Vodafone Teleservices Mauritius in 2007-08 by as much as INR13bn. A petition against the Transfer Pricing Order was filed with the Bombay High Court, but was rejected in October on the grounds that the transfer pricing authorities did have the right to investigate the supposedly unreported cross-border transaction. The Income Tax Department's Dispute Resolution Panel (DRP) was instructed to deal with the matter.

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