Bombay HC came to Vodafone India's rescue in its battle against the income-tax department over transfer pricing.
The appellate tribunal's previous ruling that had gone against the telecom company was inverted.
The bench relied on Supreme Court's previous judgment and decreed that "there had been no transfer of call options" and hence the transaction wasn't a case of transfer pricing.
18 Nov 2011
Beginning of the conflict
The dispute stemmed from the deal of the Ahmedabad-based call centre business- Vodafone India Services, previously called as 3 Global Services.
Vodafone's India arm was slapped with a transfer pricing order by the I-T department seeking to attach Rs.8,500 crore to its taxable earnings for 2008.
The tax officials said the transaction was an "undisclosed, international transaction" and, therefore, transfer pricing criteria applied.
What is transfer pricing?
Transfer price is the exact price at which a sale takes place between two related companies, usually pertaining to the same group. According to law, "all cross-border deals between group companies need to be at arm's length, that is, as if it was with an unrelated company."