Attorney General Mukul Rohatgi has advised the government against challenging the Bombay high court verdict that Vodafone is not liable to pay an income tax demand of Rs 3,200 crore in a case relating to transfer pricing.
According to sources, the AG has advised the income department to accept the judgment of the HC, and not to file an appeal. “The Bombay HC judgment is correct,” the AG is learnt to have said in his opinion, endorsing the view taken by the CBDT chairman, who had earlier taken a similar stance.
The AG’s opinion reverses the earlier stand taken by solicitor general Ranjit Kumar who had said an appeal should be filed.
Rohatgi’s advice comes in the backdrop of reports that the income tax department was keen to challenge the October 10 HC verdict.
The HC ruling had come as big relief for the UK-based mobile service provider. The I-T department had asked the company to pay additional income tax alleging that it had undervalued its shares in its India arm, Vodafone India, while transferring them to the parent company.
The transaction took place in 2009-10.
Transfer pricing is the practice of arm’s length pricing for transactions between group companies based in different countries to ensure that a fair price — one that would have been charged to an unrelated party — is levied.
On January 27, Vodafone had moved the HC challenging the I-T order and contended that its transaction on transfer of shares was not taxable under Indian law.