Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: VAT RATES :: ACCOUNTING STANDARD :: articles on VAT and GST in India :: empanelment :: cpt :: TAX RATES - GOODS TAXABLE @ 4% :: TDS :: form 3cd :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ACCOUNTING STANDARDS :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: list of goods taxed at 4% :: Central Excise rule to resale the machines to a new company :: VAT Audit :: due date for vat payment
 
 
« Transfer Pricing »
 Central Board of Direct Taxes (CBDT) signs two Unilateral Advance Pricing Agreements (APAs) with Indian taxpayers
 Duff & Phelps Acquires Leading Transfer Pricing Asia-Pacific Advisory Firm
  Updated UN manual reveals India’s transfer pricing positions
  Transfer pricing: Centre moves forward, introduces ‘secondary adjustments’
 India Issues First Comprehensive Report on Advance Pricing Accords
 Godrej & Boyce Manufacturing Co Ltd vs. DCIT (Supreme Court)
  Domestic transfer pricing leeway provides a loophole for Indian companies
 CBDT signs two unilateral APAs with taxpayers
 India signs record 88 APAs in FY17
 Relief for Indian MNCs likely as government mulls diluting POEM rules
 EY Azerbaijan holds seminar on transfer pricinga

Transfer pricing dispute: ITAT says it has jurisdiction to raise Vodafone tax demand
December, 12th 2014

Vindicating the income tax department's stand, the Income Tax Appellate Tribunal (ITAT) has ruled that it has the jurisdiction to raise a tax demand in the Rs 8,500-crore transfer pricing tax dispute relating to the Indian subsidiary of Vodafone Group.

The tribunal, however, in a partial reprieve for Vodafone India, sent the case back to the tax authority for deciding the revised taxable amount of Vodafone India. The tribunal also did not accept the valuation arrived at by the tax department and asked it to revise the same.

"The assessee's (Vodafone India) appeal is partly allowed," said presiding officers Vijay Pal Rao and RC Sharma on Wednesday while pronouncing the operative part of the order. "According to us, this is an international transaction since the assignment of the call option took place." An email query to Vodafone did not elicit any response.

The dispute relates to a transaction involving the sale of its call centre business by Vodafone India to another India based company Hutchison Whampoa Properties and an assignment of call options to its group entity Vodafone International in 2007-2008.

The transaction attracted transfer pricing norms as there was no arm's length dealing between the two entities.

Transfer pricing involves related entities dealing at arm's length to ensure fair pricing of the asset that is transferred. In 2013, the tax department had issued a tax demand of Rs 3,700 crore to Vodafone India. However, the tribunal stayed the demand till the plea is decided and directed telecom company to deposit Rs 200 crore by February 15, which was deposited by the assessee.

The Mumbai ITAT in its 189-page order has held that the transaction of sale of call centre business was structured with the motive to "circumvent" the transfer pricing provisions of the act and the transaction was in essence an international transaction between two related parties and thus would be subject to the transfer pricing provisions.

As regards determination of arm's length price for the said transaction, the tribunal has directed the matter back to the transfer pricing officer and has ordered that the discounted cash flow (DCF) method should be considered as the most appropriate method for valuing the call centre business.

Discounted cash flow uses the time value of money wherein future cash flows are estimated and discounted to give their net present value.

"The ruling bestows undue hardship on taxpayers and is contrary to the principles of legitimate tax planning which have been time and again upheld by the Indian Courts," Rakesh Nangia, managing partner, Nangia, told ET. "A careful analysis of the judgment would reveal the extent to which the tribunal has taken the liberty in piercing the corporate veil while upholding the applicability of transfer pricing provisions for otherwise third-party transactions. In our view, this judgment could add to the already gloomy foreign investment scenario in India and would push back India as a promising investment destination."

On the main takeaway of the ITAT ruling, Samir Gandhi, partner, Deloitte Haskins & Sells, said: "Substance as against form will govern the determination of chargeability to tax -one has to be aware of provisions of lifting of the corporate veil in typical facts.

"In cross-border mergers and demergers, more focus has to be given to clauses in agreements & the legal language need to match with facts; interposed entity to be given considerable thoughts & economic substance & commercial justification. Valuation should not to be considered as mere compliance filing of form exercise -specialisation of valuation of business , options will play a part," said Gandhi.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Portfolio

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions