Indian Tribunal Backs Tax Claim Against Vodafone

   By Prasanta Sahu 
 

NEW DELHI--An income tax tribunal in India Wednesday backed the claim of local authorities that Vodafone was liable to pay tax in a transfer pricing case, potentially dealing a fresh blow to the British telecommunication giant that has been embroiled in several disputes in the country.

The case relates to the sale of Vodafone's call centre business in India to Hutchison Whampoa Properties India and the transfer of call options to Vodafone International BV in 2007.

Indian authorities had demanded 37 billion rupees ($597 million) as tax from Vodafone, saying that the company had made an income of 85 billion rupees ($1.4 billion) on the deal that it classified as an "international transaction."

Vodafone, however, argued that the transaction wasn't an international transaction, hence it wasn't liable to pay tax on it.

The Income Tax Appellate Tribunal in Mumbai, which is a judicial authority, upheld the authorities stand that it was in fact an international transaction. However, it rejected the income determined by authorities and ordered them to revise the amount.

Vodafone has been stuck in several tax disputes in India. In another case relating to a deal with Hutchison Whampoa, India's Supreme Court had ruled in favor of the company, dismissing a nearly $2 billion demand by tax authorities. The Bombay High Court had also ruled in favor of the company in a separate transfer pricing case in October.

In the latest case, the company has the option to appeal to higher courts to overturn the order of the tribunal.

Write to Prasanta Sahu at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires