The NDA Government decided not to appeal against a Bombay High Court ruling that
Vodafone was not liable to pay tax demand of Rs 3,200 crore in a
transfer pricing case.
In a clear signal to global investors that India has moved to a
fair and transparent tax regime, the NDA Government on Wednesday Jan 28,2015revoked the
former United Progressive Alliance (UPA) government’s decision to
challenge in the Supreme Court a Bombay High Court ruling in favour of
Vodafone.
The Cabinet decision came just two days after Prime Minister Narendra Modi in the presence of US President Barack Obama assured the world investment community that India was moving fast on removing all ambiguities in its tax regime.
The decision of not filing an appeal in the Vodafone case was taken at the highest-level following advice by Attorney General Mukul Rohatgi.
Attorney General Mukul Rohatgi had advised the income department to accept the judgement of the Bombay High Court in the Vodafone case. The High Court in its October 10, 2014 order had given a big relief to the UK-based mobile service provider by ruling that it is not liable to pay an income tax demand of Rs 3,200 crore in a case relating to transfer pricing.
The Case
The Income Tax (I-T) department had asked Vodafone to pay additional tax of Rs 3,200 crore stating that the telecom firm had undervalued its shares in its Pune BPO, Vodafone India Services, while transferring them to the parent company in Britain.
The tax authorities later issued a show cause notice against the company in January 2014 and passed an order asking it to pay the tax.
The I-T Department had asked the company to pay additional income tax alleging that it had undervalued its shares in subsidiary, Vodafone India Services while transferring them to the parent company in Britain. The transaction took place in financial year 2010. Transfer pricing is the practice of arm's length pricing for transactions between group companies based in different countries to ensure a fair price one that would have been charged to an unrelated party is levied.
On January 27, Vodafone moved the High Court challenging the I-T order and contended that its transaction on transfer of shares was not taxable under the Indian tax laws.
Vodafone then moved the Bombay High Court against the I-T department decision. The court said in its order in October 2014 that the UK-based telecom firm was not liable to pay income tax demanded in the case relating to transfer pricing.
The Bombay High Court had said "in our opinion there is no taxable income on share premium received on the issue of shares." The tax authority had issued a show cause notice to Vodafone India on January 17, 2014 and later passed an order asking it to pay additional Rs 3,200-crore tax for allegedly undervaluing the shares of its Pune BPO.
Note
Tussle Over Tax
The Cabinet decision came just two days after Prime Minister Narendra Modi in the presence of US President Barack Obama assured the world investment community that India was moving fast on removing all ambiguities in its tax regime.
The decision of not filing an appeal in the Vodafone case was taken at the highest-level following advice by Attorney General Mukul Rohatgi.
Attorney General Mukul Rohatgi had advised the income department to accept the judgement of the Bombay High Court in the Vodafone case. The High Court in its October 10, 2014 order had given a big relief to the UK-based mobile service provider by ruling that it is not liable to pay an income tax demand of Rs 3,200 crore in a case relating to transfer pricing.
The Case
The Income Tax (I-T) department had asked Vodafone to pay additional tax of Rs 3,200 crore stating that the telecom firm had undervalued its shares in its Pune BPO, Vodafone India Services, while transferring them to the parent company in Britain.
The tax authorities later issued a show cause notice against the company in January 2014 and passed an order asking it to pay the tax.
The I-T Department had asked the company to pay additional income tax alleging that it had undervalued its shares in subsidiary, Vodafone India Services while transferring them to the parent company in Britain. The transaction took place in financial year 2010. Transfer pricing is the practice of arm's length pricing for transactions between group companies based in different countries to ensure a fair price one that would have been charged to an unrelated party is levied.
On January 27, Vodafone moved the High Court challenging the I-T order and contended that its transaction on transfer of shares was not taxable under the Indian tax laws.
Vodafone then moved the Bombay High Court against the I-T department decision. The court said in its order in October 2014 that the UK-based telecom firm was not liable to pay income tax demanded in the case relating to transfer pricing.
The Bombay High Court had said "in our opinion there is no taxable income on share premium received on the issue of shares." The tax authority had issued a show cause notice to Vodafone India on January 17, 2014 and later passed an order asking it to pay additional Rs 3,200-crore tax for allegedly undervaluing the shares of its Pune BPO.
Tussle Over Tax
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