The Income Tax Appellate Tribunal (ITAT) gave a stay order on Friday regarding the Rs 3,700-crore (Rs 37 billion) tax demand made on Vodafone Plc.
The final assessment on the company’s transfer pricing had included interest on the tax; it was made earlier this month. Officials said ITAT gave a six- stay on the order.
However, Vodafone will have to pay Rs 100 crore (Rs 1 billion) by January 15 and another Rs 100 crore by February 15. It will also also have to give corporate guarantees worth Rs 3,500 crore (Rs 35 billion).
“Vodafone can confirm that the Income Tax Appellate Tribunal (ITAT) has granted a stay of execution of the Transfer Pricing Order which Vodafone received in December 2011,” the company said.
“Vodafone maintains that there is no tax payable on this transaction and will continue to strongly defend its position against this order.”
The order was on the company's Pune outsourcing unit, which had transferred some shares to the parent company. This, the I-T department believes, did not comply with the transfer pricing rules, that deals between related parties should be at arms-length pricing. The order was passed for a share transfer done in 2008-09.
Vodafone maintains the transaction was a share subscription and not a share sale. It also believes share subscriptions are not covered by transfer pricing rules, either in India or abroad. “The I-T department's claim has no basis in law,”
The department has another case on the same matter, pending on the same issue. This related to the tax assessment year of 2009-10. Both cases were heard by the high court here and referred back to the DRT; the court felt such technical matters should be dealt by the tax authorities.
Vodafone is also mired in a much bigger issue, on which the demand is for tax payment of Rs 11,200 crore (Rs 112 billion). In 2007, it bought a 67 per cent stake in Hutchison Essar; the department has claims for a capital gains tax.
THE TRANSFER PRICING SAGA
2007-08: Vodafone India Services issues shares to Mauritius-based group company
2008-09: I-T department sends a notice on the transfer pricing issue
December 2011: I-T department issues draft transfer pricing order to Vodafone
February 2012: Vodafone challenges the jurisdiction of transfer pricing order in Bombay HC
February 2013: IT department sends assessment order
February 2013: Vodafone says order has no basis in law as it relates to share subscription and not sale
September 2013: Bombay HC dismisses Vodafone's petition
December 18: IT department sends Rs 3,700 crore final tax assessment order
December 29: ITAT gives a six-month stay on I-T department’s order