HC Order on Vodafone Transfer Pricing Being Analysed: CBDT
November, 10th 2014
The Central Board of Direct Taxes (CBDT) will give its views on the high court order on Vodafone transfer pricing case after studying the judgement, chairman K V Chowdary said today.
“We are examining transfer pricing issue at both the (Income Tax) commissioner and Central Board of Direct Taxes (CBDT) levels. We will take a view shortly,” he told reporters.
He said that all relevant issues would be considered and the department has also sought advice from the Law Ministry in the matter.
On Friday, the Bombay High Court ruled in favour of Vodafone, saying that the British telecom giant is not liable to pay Rs 3,200 crore demanded by the Income Tax department in a case related to transfer pricing.
The Income Tax department had charged Vodafone India additional income tax alleging that it had undervalued its shares in its subsidiary Vodafone India Services, while transferring them to its parent company in Britain. The transaction took place in FY2010.
Transfer pricing is the practice of arm’s length pricing for transactions between group companies based in different countries to ensure that a fair price — one that would have been charged to an unrelated party — is levied.
Since cases similar to Vodafone’s transfer pricing cases have come to the light, Chowdary said, “Existing cases will be treated as per relevant laws in existence while new ones related to transfer pricing will go to a specially constituted High Level Co-ordination Committee (HLCC)”.
As for the second case on Vodafone involving an Income Tax claim of USD 2 billion after a controversial amendment in the statute retrospectively, Chowdary said an arbitration is under way to arrive at a solution.