The government Wednesday decided not to contest a Bombay High Court ruling that telecom major Vodafone was not liable to pay tax demand of Rs.3,200 crore in a transfer pricing case, Communications and IT Minister Ravi Shankar Prasad said and hoped that the decision would boost foreign investors’ sentiment.
“The cabinet has decided not to move the Supreme Court in this regard. This is an important decision,” he told reporters after a meeting here of the union cabinet presided over by Prime Minister Narendra Modi.
Prasad said: “Today, the Cabinet by taking a decision not to challenge in the Supreme Court (the Bombay High Court) order upholding Vodafone India’s contention that the transaction, being international, is not amenable to tax… we have given a kind of signal…”
“Mainly, where Income Tax liability is clear, unambiguous, it shall be charged, where it is over-stretched without any legal authority, the government will be fair. That is the indication,” the minister said.
“We welcome the Indian government’s decision not to appeal the Bombay High Court ruling. Stability and predictability in tax matters are important for long-term investors such as Vodafone,” a Vodafone Group spokesperson told IANS in an email from Britain.
Prasad said Finance Minister Arun Jaitley discussed the matter with the entire Central Board of Direct Taxes (CBDT), Attorney General Mukul Rohatgi and Solicitor General Ranjit Kumar before arriving at this decision.
“After legal examination, it was deduced that the Bombay High Court decision was right and this fruitless litigation is avoidable. Therefore, a conscious decision has been taken not to file an appeal in the Supreme Court,” Prasad said.
The Bombay High Court, in an order Oct 10, 2014, said the UK-based Vodafone is not liable to pay an income tax demand of Rs.3,200 crore in a case relating to transfer pricing.
