Supreme Court directs Bombay High Court to decide Vodafone Tax Appeal on merits

The Supreme Court of India directed the Bombay High Court to decide the appeal of Vodafone India Service the Indian arm of Vodafone Group Plc on its merits. The High court should take its decision without being influenced by the earlier findings in the case related to Rs 8,500 crore transfer- pricing tax dispute.

Senior counsel Harish Salve informed that that the tax tribunal had ruled in favour of the income tax department and the company has already appealed to the HC.

Solicitor general Ranjit Kumar then argued, “The tribunal has given us what we wanted today”.

The bench headed by Justice AR Dave said in its order that, “In view of this, it will be open to the HC to decide the matter on merits and uninfluenced by any observations made in the impugned judgment.”

As per ITAT the department has jurisdiction in issuing a draft transfer-pricing order that sought to add R8,500crore to its taxable income for FY08, it did not accept the valuation arrived at by the tax authorities and asked them to arrive at a correct valuation.

The department had moved to the Supreme Court so that apex court could bring on record the facts that have come to light in after the 2012 Supreme Court judgment of the Vodafone case.

The Bombay high court earlier held that the SC had analysed Vodafone’s agreement with Hutchison Whampoa Properties and had struck down the tax demand on Vodafone for its purchase of Hutchison’s telecom business in India in 2007.  The SC had held the call and put options were contractual rights that were vested in the company and had not been transferred or assigned by it. ITAT bench said that “…according to us, this is an international transaction and the assignment of call option took place”, adding the grant of call option under framework agreements 2007, against the consideration is an international transaction as per provisions of Section 92B read with Section 92F(v).

The department in its SLP gave the direction to the ITAT that they should decide the matter on merits and taking all facts into account. They should uninfluenced by the finding of the Bombay HC to the effect that the SC had decided the issue on merits.