Income Tax Department not to appeal against the Bombay High Court order in the Vodafone transfer pricing case

In a decision aimed at avoiding "fruitless litigation"  and improving the investment sentiment by allaying investors' concerns on tax issues, the Cabinet Committee on Economic Affairs (CCEA) on Wednesday took a decision not to challenge the judgment of the Bombay High Court that said that Vodafone was not liable to pay a tax demand of Rs. 3,200 crore in a transfer pricing case. 

  

The decision follows the advice given by Attorney General Mukul Rohatgi to the Income Tax Department not to prefer an appeal to the Supreme Court against the judgment of the Bombay High Court in the 'Vodafone transfer pricing case'. 

“The decision to not appeal against the Bombay High Court ruling that was in favour of Vodafone sends out the message to global investors whose confidence in India was shaken in the past… Prime Minister Modi wants it to be known that his government will take decisions that will be fair, transparent and within four corners of the law,” said Union Telecom Minister Ravi Shankar Prasad after the meeting of the Cabinet. 

The Bombay High Court in its October 10, 2014 order had given relief to the UK-based mobile service provider by ruling that it is not liable to pay an income tax demand of Rs 3,200 crore in a case relating to transfer pricing.

Centre seeks Apex Court's permission to resume process of selection for the post of CVC; Bench posts matter for hearing on December 11

The Centre on Wednesday sought the Supreme Court's permission to resume the process for selection of the chief vigilance commissioner and a vigilance commissioner, two posts which have been lying vacant for months because of a petition in court questioning the NDA government's selection criteria. 

 

(Supreme Court of India)

 

Attorney General Mr. Mukul Rohatgi mentioned the matter before a Bench of the Supreme Court headed by Chief Justice H L Dattu, which then posted it for hearing on December 11.

The appointment of the CVC was lying in limbo since the time the Supreme Court had in August admitted on its file a Public Interest Litigation (PIL) alleging that the Union Government was adopting a non-transparent, restrictive and non-uniform approach in selecting the CVC.

The Court had also criticized the government for allowing the short-listing to be done by senior bureaucrats in various ministries, which implied that there was no uniformity in the short-listing criteria.

The Centre had said it was in the process of short-listing 20 candidates from 120 names received by various ministries and that the job was being done by the cabinet secretary and 36 secretaries of other departments.

The AG had requested that the process of short-listing be allowed to go on but informed the Court that the government would not select the CVC till the Supreme Court finally decided the petition on the process of the CVC selection.

Attorney General recommends repeal of the Arbitration & Conciliation Act, 1996

Attorney General of India, Mukul Rohatgi, in a legal opinion to the Ministry of Law and Justice, Government of India, has recommended the repeal of the Arbitration and Conciliation Act, 1996 and mooted a new law in tune with the Union Government’s larger push to provide a business-friendly environment for foreign investors.

(File photo: Mukul Rohatgi)

The Attorney General had tendered his legal opinion on the subject after the Ministry of Law and Justice, Government of India had specifically sought his views of the same. In his legal opinion, AG, Mukul Rohatgi has advised the Government to replace the present law with a new one stressing timely settlement of business disputes and fixing greater onus on arbitrators against delay.

To strengthen the arbitration mechanism framework, the AG has suggested to the Government, the introduction of  statutory measures like a “strict” time limit of probably six months for giving the arbitration award in a dispute. The AG also recommended the imposition of penalty on arbitrators who delay matters.

Mr. Rohatgi has further suggested a ceiling for arbitration fee and expenses. In case of challenge to an arbitration award, a provision should be introduced in the statute, whereby a stay is granted after hearing both parties. 

 

The AG's legal opinion on repeal of the Arbitration and Conciliation Act, 1996 which has been on the statute books for 18 years now, comes close on the heels of the Union Law Minister D.V. Sadananda Gowda's Law Day speech at the Supreme Court, wherein he had said that changing the 1996 law was a top priority for the government’s ‘Make in India’ policy to attract foreign investments.

Attorney General advises Tax Department not to prefer an appeal from the verdict of Bombay High Court in Vodafone tax case

The Attorney General of India, Mukul Rohatgi has advised the Income Tax Department against preferring an appeal from the judgment of the Bombay High Court wherein it had ruled in favour of Vodafone Group Plc in the transfer pricing case relating to (alleged) undervaluation of share capital issued by Vodafone India Services Private Limited (Vodafone India) to its Mauritius parent. 

On August 21, 2008, Vodafone India had issued 2,89,224 equity shares of Rs 10 each at a premium of Rs 8,500 per share. However, the Income Tax Department revalued the shares at Rs 53,775 per share claiming that the company had underpriced its shares which led to an income of Rs. 45,000/- (roughly) apiece. It held that the differential in share price ought to be treated as Vodafone India's taxable income through an international transaction. Based on arm's length pricing adjustment (treating the transaction as if it was with an unrelated company) , the tax department held a total shortfall of Rs 1,308.91 crore to be a deemed loan given by Vodafone India to its holding company. Periodical interest income was also held chargeable to tax in the hands of Vodafone India. The Income Tax Department thus accused Vodafone India Services Private Ltd, a unit of the British group, of under-pricing shares in a rights issue to its parent company and demanded tax of about 3,200 crore rupees ($486 million) for two financial years leading up to March 2011.

Challenging the demand, the company had approached the Bombay High Court. However, the Bombay High Court had held in its judgment on October 10, 2014 that issue of shares does not give rise to any income and there can be no question of any transfer pricing adjustment. Transfer pricing is the value at which companies trade products, services or assets among units in different countries, a regular part of business for a multinational company. Rules require all cross-border transactions among group companies to be valued at ‘arm’s length’, or as if the transaction was with an unrelated company. A Bench comprising Chief Justice Mohit Shah and Justice M S Sanklecha had ruled thus: "Issue of shares at a premium by the petitioner to its non-resident holding company does not give rise to any income from an admitted international transaction." 

The verdict of the Bombay High Court was interpreted by experts as a shot in the arm of several other companies such as Nokia, IBM, Shell India, Cairn India and Leighton India contractors among others who are all enmeshed in a similar legal dispute with the Income Tax Department. 

The Income Tax Department was awaiting the advice of the Central Board of Direct Taxes (CBDT) and the Attorney General before taking a decision on preferring an appeal to the Supreme Court of India against the adverse ruling of the Bombay High Court. In thus giving his opinion, the Attorney General has concurred with the opinion of the Chairman of the CBDT against preferring an appeal from the Bombay High Court ruling.

not appeal a Bombay high court judgement which ruled last month in favour of the Indian unit of Vodafone Group Plc. in a Rs.3,200 crore tax dispute—

Read more at: http://www.livemint.com/Politics/5L6D8zMuWCl5op4W95U23H/AG-tells-govt-not-to-appeal-Vodafone-tax-dispute-ruling.html?utm_source=copy

not appeal a Bombay high court judgement which ruled last month in favour of the Indian unit of Vodafone Group Plc. in a Rs.3,200 crore tax dispute

Read more at: http://www.livemint.com/Politics/5L6D8zMuWCl5op4W95U23H/AG-tells-govt-not-to-appeal-Vodafone-tax-dispute-ruling.html?utm_source=copy

not appeal a Bombay high court judgement which ruled last month in favour of the Indian unit of Vodafone Group Plc. in a Rs.3,200 crore tax dispute

Read more at: http://www.livemint.com/Politics/5L6D8zMuWCl5op4W95U23H/AG-tells-govt-not-to-appeal-Vodafone-tax-dispute-ruling.html?utm_source=copy