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Vodafone slapped with tax notice of Rs 3700 crore

Like the phoenix rising from the ashes, Vodafone India’s taxation problems have once again risen. Income Tax authorities have slapped Rs 3700 crore tax notice as their liability to pay to the authorities on transfer pricing from the sales of shares by its local subsidiary. Vodafone India has been asked to clear the tax within 30 days or face penal action. Vodafone has hit back saying it will contest it in courts. Only last month the Bombay High Court had ruled that the tax department’s dispute resolution panel should quickly decide on the transfer pricing tax case of Vodafone. DRP is now considered as the alternative mechanism to settle tax disputes arising from transfer pricing. Transfer pricing is a practice where transactions are priced between a group’s companies based in different countries.

    The case relates to transfer pricing order for assessment year 2008-09 over the sales of shares by the UK company’s local units, Vodafone India Services Pvt Ltd, to a Mauritius based group. Vodafone sold shares to the Mauritius Company for Rs 246 crore at a value of Rs 8519 per share. The Tax department has, however, determined the value of the shares at Rs 53,775 per share. The difference is being sought to be taxed by the Income Tax authorities’ as income in the hands of the tele services provider. The original tax demand against the firm was just around Rs 400 crore.

 

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