The Bombay high court on Thursday ruled in favour of the Indian arm of Vodafone Group Plc in the Rs.8,500-crore transfer pricing tax dispute involving the sale of its call centre business to Hutchison and assignment of call options to Vodafone International BV in 2007-08.

The court overruled the order of the Income Tax Appellate Tribunal (ITAT) issued last year suggesting that the income tax (I-T) department has jurisdiction in this dispute. The I-T department’s draft transfer-pricing order was issued in December 2011.

Vodafone India Services Pvt. Ltd moved the high court in February 2012 challenging the jurisdiction of the tax department in issuing a transfer-pricing order that sought to add Rs.8,500 crore to its taxable income for 2007-2008.

Vodafone has maintained that the transaction is not an international transaction and so it does not attract tax. In 2013, the tax department had issued a demand notice of Rs.3,700 crore to Vodafone India in this case.

While ITAT stayed the tax demand in December 2013 for six months or till the plea is decided, it directed Vodafone India to deposit Rs.200 crore by 15 February. Vodafone India was also asked to provide corporate guarantees of Rs.3,500 crore. Vodafone has since deposited Rs.200 crore as per the ITAT order.