Taxman wants to challenge Bombay HC’s Voda ruling

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New Delhi | Published: November 28, 2014 12:59:51 AM

Though attorney general Mukul Rohatgi has advised the government against appealing the Bombay High Court’s judgment...

Bombay High Court ruling in October that struck down its bid to add about Rs 5,000 crore to the taxable income of Vodafone in India for FY09 and FY10. Bombay High Court had in October struck down government’s bid to add about Rs 5,000 crore to the taxable income of Vodafone in India for FY09 and FY10.

Though attorney general Mukul Rohatgi has advised the government against appealing the Bombay High Court’s judgment in the Vodafone transfer pricing case, the income tax department wants to appeal the case at the Supreme Court.

A senior finance ministry official told FE that the Mumbai wing of the department handling the case has said this in response to Rohatgi’s advice. He added that the government will have to take a final call now on whether this case will be appealed in the Supreme Court or not based on the two views.

The attorney general has asked the income tax department to desist from filing an appeal against the Bombay High Court ruling in October that struck down its bid to add about Rs 5,000 crore to the taxable income of Vodafone in India for FY09 and FY10.

Though finance minister Arun Jaitley has said the government will not pursue tax cases mindlessly, more often than not, the government has toed the income tax department’s line in the past, and if he goes by the attorney general’s opinion, it will be a clear deviation from the past.

The Vodafone  transfer pricing case is significant in several ways, the government decision will impact the handling of similar cases including that of Shell India, in which too, the Bombay High Court’s verdict on November 18, has been against the taxman.

Other over two dozen other companies, including Essar Group firms and HSBC Securities and Capital Markets, that are fighting similar tax demands in various courts, are also keenly watching the government move.

What will help Jaitley in taking a call is the fact that even the officials dealing with the transfer pricing issues in the Central Board of Direct Taxes (CBDT) feel that the income tax department is on a weak footing in the Vodafone and Shell case.

The Vodafone case involves its issue of 5.6 lakh shares to Vodafone Tele-Services India Holding, Mauritius in two tranches — one on July 16, 2009, at R7,110 and another on January 24, 2010, at R6,447 each. Shell India’s case involves the issue of 4.78 crore shares to Shell Gas on December 24, 2009, at par value of R10/share.

In both the cases, the high court has ruled that these are not capital transactions so the question of taxing them doesn’t arise but the income tax department wants to tax them as per the transfer pricing norms.

Taxing times

The Vodafone case will impact the handling of similar cases, including that of Shell India, in which the Bombay High Court’s verdict on November 18 has been against the taxman

Other over two dozen other companies, including Essar Group firms and HSBC Securities and Capital Markets that are fighting similar tax demands, are keenly watching the governments’ move

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