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Tribunal upholds I-T stand on raising tax demand on Vodafone
December, 12th 2014

In a fresh blow to Vodafone India, the Income Tax Appellate Tribunal has ruled that the tax authorities have the powers to raise a demand on the telecom major in the Rs 8,500 crore transfer-pricing dispute.

The case relates to the sale of one of its call centres in Ahmedabad in 2007.

The tribunal held that the company had structured the deal with another India-based entity Hutchison Whampoa Properties with the intention to circumvent the transfer pricing norms, even though it was an international transaction wherein there was no arm's length dealing between the two related entities.

However, the tribunal has sent the case back to the Income Tax department, asking them to revise the amount to be recovered from the company.

The Mumbai bench of ITAT, in a 189-page order yesterday, ruled that the deal relating to sale of the call centre business was structured with the motive to "circumvent the transfer pricing provisions of the Income Tax Act" and was in essence an "international transaction between two related parties and thus would be subject to the transfer pricing provisions".

Presiding officers Vijay Pal Rao and R C Sharma said: "According to us, this is an international transaction since the assignment of the call option took place."

In a partial reprieve for the company, the tribunal however sent the case back to the I-T dept for determining the revised taxable amount as it did not accept the valuation arrived at by the tax authority.

"Vodafone India's appeal is partly allowed," the presiding officers said.

A Vodafone India spokesman refused to comment on the development, saying that only its London headquarters could offer a reaction. A mail sent to the company's spokesman in London did not elicit any response.

The dispute relates to the sale of the Ahmedabad-based call centre business (Vodafone India Services formerly known as 3 Global Services) for assessment year 2008-09. The department slapped a tax demand on the company on October 31, 2012 under sections 143(3) and 144C(13) of the Income Tax Act.

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