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Not in favour of appeal in Vodafone tax case, says AG

Asks I-T department to accept the judgment of Bombay High Court.

By: Express News Service | New Delhi |
Updated: November 27, 2014 1:06:47 am

Not concurring with the legal opinion tendered by Solicitor General (SG) Ranjit Kumar, Attorney General (AG) Mukul Rohatgi on Wednesday asked the Income Tax (I-T) department to desist from filing an appeal against the October 10 judgment of the Bombay High Court which held that Vodafone was not liable to pay the income tax demand of Rs 3,200 crore in a case relating to transfer pricing.

“I have advised the I-T department to accept the judgment of the High Court. I have said in my opinion don’t file an appeal. I have concurred with the view of the CBDT (Central Board of Direct Taxes) chairman,” Rohatgi told The Indian Express.

The AG’s opinion, if accepted by the government, is expected to send a positive signal to foreign investors, who have been repeatedly questioning the tax demands raised on companies like Vodafone, which happens to be one of the biggest foreign firms operating in India.

Vodafone is also fighting a legal battle over the I-T department’s tax demand of over Rs 12,000 crore following its acquisition of its mobile operations in India in 2007 from Hutchison Whampoa.

Government sources said even though the I-T department was keen on challenging the Bombay High Court verdict, senior functionaries of the government were against it.

In its judgment, the Bombay High Court had ruled against the case of the I-T department that Vodafone India had under-priced its shares while transferring them to the parent company in the United Kingdom. The tax demand was for two financial years.

Vodafone had moved the High Court challenging the I-T department order, asserting that its transaction was not taxable.

If the Attorney General’s opinion prevails, it would benefit not only Vodafone but also energy giant Shell, which also obtained a favourable ruling from the same HC on a similar tax issue on November 18.

The development also spells good news for several other companies, including Essar Group firms and HSBC Securities and Capital Markets that are fighting similar tax demands in various courts.
The HC last week set aside the I-T department’s notices that sought to increase the income of Shell’s Indian arm for two years — 2007-08 and 2008-2009 — by close to Rs 18,000 crore. To seek the income addition, the taxman had applied the transfer pricing principle to Shell India’s issue of shares to its Dutch parent alleging an undervaluation.

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