$490-million tax battle: Vodafone welcomes ruling
NEW DELHI: Vodafone welcomed an Indian court ruling in favor of the British mobile giant which was engaged in a $490-million tax battle with local authorities.
The tax fight is one of several embroiling the British company that has become a symbol of problems facing foreign firms doing business in Asia’s third-largest economy.
Mumbai’s high court rejected allegations Friday by local authorities that an Indian unit of Vodafone had underpriced shares in a rights issue to its British parent.
Indian tax authorities had been seeking payment of 30 billion rupees ($490-million) from Vodafone.
“Vodafone has maintained consistently throughout the legal proceedings that this transaction was not taxable. We welcome the decision today in the Bombay (Mumbai) High Court,” the company said in a statement.
It was not immediately known whether Indian tax authorities would appeal the court order.
So-called transfer pricing — the value at which companies trade assets between units in different countries — has become a major legal issue in India and in other countries.
Tax authorities often contend that companies set the prices for transferring assets for their own gain.
Legally, prices for cross-border transfer of assets are supposed to be set as if the transactions were carried out with separate companies.
A number of other multinational firms are fighting similar transfer-pricing cases in India.
Foreign companies allege that Indian tax laws are sometimes applied in an uneven and capricious manner, making it difficult to do business in the country.
Uncertainty about India’s regulatory climate has dampened foreign investment at a time when the country urgently needs it to upgrade dilapidated infrastructure and spur economic growth.
Vodafone is still battling a more than $2-billion tax demand over its $10.7-billion purchase of Indian mobile operations in 2007 from Hong Kong-based Hutchison Whampoa.