The Income Tax Department on Monday withdrew its long-pending Rs 8,500-crore transfer pricing case against Vodafone India Services. The commissioner of income tax filed the withdrawal plea before a Supreme Court bench led by Chief Justice BR Gavai. The court allowed the withdrawal, bringing an end to a dispute that had lingered for nearly a decade.
The case goes back to the sale of Vodafone India’s Ahmedabad-based call centre business, 3 Global Services, to Hutchison Whampoa Properties (India) during the financial year 2008.
Following the internal restructuring, the tax department alleged that Vodafone had transferred intangible rights and call options to a related entity, treating it as an international transaction under the transfer pricing laws. Based on this, it sought to add Rs 8,500 crore to Vodafone’s taxable income, arguing that the deal wasn’t conducted at arm’s length.
The Income Tax Appellate Tribunal upheld the department’s view in 2014, ruling that the transaction fell under transfer pricing scrutiny.
Vodafone, however, contested the decision in the Bombay High Court, maintaining that the transaction was entirely domestic, involving no cross-border component. In October 2015, the High Court agreed, stating that the transfer pricing provisions did not apply to purely domestic transactions and struck down the tax demand.
The tax department appealed to the Supreme Court in 2016, but the case never progressed after an initial listing in 2017.
