I-T dept slaps fresh Rs. 3,700-crore tax demand on Vodafone

  • HT Correspondent, Hindustan Times, New Delhi
  • Updated: Dec 19, 2013 23:32 IST

In yet another tax dispute with the Vodafone Group, the income tax (I-T) department has imposed a tax liability of Rs. 3,700 crore on the company in a share transfer case from its subsidiary Vodafone India Services Pvt Ltd.

Vodafone India sold shares to the Mauritius-based Vodafone India Services for `246 crore at a value of Rs. 8, 519 per share. As per the initial calculations, the tax was estimated to be over Rs. 400 crore.

According to I-T department officials, the latest tax liability relates to a transfer-pricing order for assessment year 2008-09 over the sale of shares. The value of the shares has been determined at `53,775 per share. The difference is being sought to be taxed by the authorities as income to Vodafone India.

Ved Jain, a direct tax expert with industry chamber ASSOCHAM, said, “The issue is different from the earlier tax dispute. The issue is about transfer-pricing. It is the practice of arm’s-length pricing, especially for transactions between group companies based in various locations globally.”

Transfer-pricing is undertaken between group companies based in different countries to ensure that a fair price is derived. Vodafone India can appeal against the order in next 30 days.

Vodafone in response to an email query from HT said, “Vodafone maintains that there is no tax payable on this transaction and the company will file an appeal before the tax appeal tribunal.”

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