Vodafone gets fresh Rs 3k-crore tax demand

Last month, I-T department sent Rs 3,700 cr tax order on same issue for assessment year 2008-09

British telecom major Vodafone got interim relief on Thursday from a new transfer-pricing tax demand, with the high court here staying a Rs 3,000-crore order from the income tax department.

The interim stay is till March 7 and the tax department has been asked not to take any steps till then. This fresh demand pertains to a case wherein the revenue department believes a share sale between the Pune outsourcing unit of Vodafone and its parent company was not done at arms-length pricing.  

Last month, the department sent a Rs 3,700-crore order on  the same issue for the assessment year of 2008-09. The latest Rs 3,000-crore order belongs to yet another assessment year, of 2010-11. The department has been treating the amount remitted to the parent company as a ‘loan’ and this can be extended for other assessment years. The orders come with the interest associated and the penalty.

NETWORK SNAG

• The fresh demand pertains to a case wherein the revenue department believes a share sale between the Pune outsourcing unit of Vodafone and its parent company was not done at arms-length pricing
• The interim stay is till March 7

The two transfer-pricing orders together will net a Rs 6,700-crore claim on Vodafone. Apart from this, the second largest telecom operator is also fighting a much bigger tax case, over capital gains, whose claim is at Rs 11,200 crore. This case pertains to the 67 per cent stake purchase by Vodafone from Hutchison in 2007.  

Vodafone had said the IT department’s transfer-pricing claim had no basis in law, that the transaction was a share subscription and not a share sale, and the former was not covered by transfer pricing rules, either in India or abroad.

The HC had refused to hear a petition by the company for the assessment year 2008-09, sending it back to the disputes resolution panel. The Income Tax Appellate Tribunal had given a six-month stay on the Rs 3,700-crore order in December last year.