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By Maulik Vyas, ET Bureau | 29 Nov, 2013, 07.10PM IST 2 comments  | Post a Comment

The Bombay HC told Vodafone to submit its objections to a tax 

claim to the tax authorities' Dispute Resolution Panel.

ET SPECIAL:Save precious time tracking your 

investments

Bombay High Court refers Vodafoneshare sale dispute to tax panel

READ MORE ON » Vodafone Group Plc | Tax | Hutchison Whampoa | Dispute Resolution Panel | Bombay high court

MUMBAI: The Bombay High Court has

directed British telecom giant Vodafone

Plc's Indian subsidiary to approach the

Dispute Resolution Panel (DRP) with its

petition against the Income Tax

department's demand of Rs 1,300 crore.

The court has given Vodafone two weeks to

file its petition before the panel.

On Friday, the division bench comprising

Chief Justice Mohit Shah and Justice MS

Sanklecha while disposing the petition filed

by Vodafone India Services (VISPL)

directed DRP to give its ruling within two

months of filing of the appeal.

Meanwhile, the court will hear the petition

filed by the Anglo Dutch oil major ShellPlc's Indian subsidiary on December 11,

where the Indian entity is facing a tax

liability of about Rs 15,000 crore on similar 

grounds.

"The petitioner (Vodafone India) feels

harassed because no opportunity was given to the company by revenue authorities,"

observed the division bench and said that the DRP will consider preliminary applicability

of Chapter X (relating to the Transfer Pricing provisions) within 2 months. "The petitioner 

can approach court back if they have still any reservations."

Income Tax department raised a red flag when Vodafone India issued shares to itsMauritius affiliate for Rs 246 crore at a fair market value of Rs 8,519 a share, for a

transaction made during the assessment year 2008-09.

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7/27/2019 Bombay High Court Refers Vodafone Share Sale Dispute to Tax Panel - The Economic Times

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29/11/13 10:20 pmBombay High Court refers Vodafone share sale dispute to tax panel - The Economic Times

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The tax department claimed that the fair market value was Rs 53, 775 a share. The

differential amount is being sought to be taxed by the department as income in the hands

of the company.

"The court passed remarks on the manner in which tax proceedings took place" said

Dinesh Kanabar, Deputy CEO, KPMG India. "This is a very satisfactory ruling as court the

has directed DRP to consider the preliminary matters on the basis of merits and a specific

deadline has been set to deliver the Order. Vodafone has been given the liberty toapproach the Court thereafter, if needed," Kanabar added.

The DRP was set up in 2009 to deal with income tax related transfer pricing disputes. It

was largely meant to sort out tax assessments of foreign firms. The transfer pricing is the

practice of arm's length pricing for transaction between group companies to ensure that a

fair price is levied.

"Prima facie, the share capital or premium received for issue of shares by an Indian

company should be considered a capital receipt and not taxable in India," says

Ravishankar Raghavan, Principal -Tax Group, at corporate law firm Majmudar & Partners.

"What the tax department is trying to do is to bring that transaction into the transfer 

pricing ambit as an international transaction which includes capital financing, therebymaking a transfer pricing adjustment."

Transfer pricing provisions in a cross border transaction will not apply unless there is an

'income' which is arising in such transaction between two related enterprises where at

least one of whom is a non-resident.

"It will be interesting to wait for the finding of the DRP on whether the subscription to the

share capital of the Vodafone Group entity in India resulted in any notional 'income' in the

hands of the Indian entity," said Sanjay Sanghvi, Partner, Khaitan & Co.

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7/27/2019 Bombay High Court Refers Vodafone Share Sale Dispute to Tax Panel - The Economic Times

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Bring the dispute to a closure sooner than latter so that the perception of investors change

from negative to positive.The retrospective law is tantamount to changing the rule after the

game is over.If the laws have loop holes,all will take advantage and instead of blaming the

author of the law,why penalize who had used for his advantage.

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7/27/2019 Bombay High Court Refers Vodafone Share Sale Dispute to Tax Panel - The Economic Times

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