Telecom major Vodafone received a setback in the Bombay high court on Friday, as its petition challenging the jurisdiction of Income Tax department to pass Rs. 8,500-crore transfer pricing order was dismissed by the court.
The case relates to the sale of Vodafone's call centre business in Pune. The IT Department's order, passed in December 2011, was challenged by the British telecom giant on the ground that the disputed transactions were domestic in nature and did not fall within the jurisdiction of `transfer pricing' norms.
Transfer pricing refers to charges made between controlled or related entities within a group.
Dismissing the petition, the bench headed by justice SF Vazifdar said since an alternate remedy was available to Vodafone which could file an appeal with the Income Tax Appellate Tribunal or go to dispute resolution panel under Income Tax law, the petition cannot be entertained.
The IT department had issued a tax assessment order in December 2011 asking Vodafone to add Rs. 8,500 crore to its taxable income. This would have taken the tax liability to Rs. 2,805 crore and along with interest the total amount payable would have been Rs. 4,200 crore.
The company is already fighting with the government over $2.3-billion tax dispute, after the government amended laws following the Supreme Court dismissing the I-T Department's tax order.
Meanwhile, in a statement, Vodafone said, "The court ruled that the matter should be looked at by the Tax Tribunal in first instance, rather than passing directly to the Bombay high court.
"The HC also extended the stay on the final assessment order, already granted by the court and the company now has almost 12 weeks to review its options," the statement added.