Vodafone case: Govt not to appeal against Bombay High Court order

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New Delhi: The Union Cabinet has given its biggest positive signal till now to foreign investors for fair & transparent tax policy and decided not to oppose the Bombay High Court order which overturned a 3,200 crore rupees tax demand from Vodafone in a transfer pricing case.

The government has taken another significant decision in the telecom sphere related to 3G spectrum auction.

In a significant development, Government has decided not to appeal against the Bombay High Court ruling that Vodafone was not liable to pay tax of 3,200 crore rupees in a transfer pricing case.

Telecom Minister Ravishanker Prasad said the decision would send the right signal to investors that Government was fair in its dealings.

The decision of not filing an appeal in the Vodafone case was taken by the Union Cabinet following advice by Attorney General Mukul Rohatgi, and after various rounds of discussion held by Finance Minister Arun Jaitley.

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

The I-T Department had asked the company to pay additional income tax alleging that it had undervalued its shares in subsidiary, Vodafone India Services while transferring them to the parent company. The transaction took place in financial year 2010.

Transfer pricing is the practice of arm’s length pricing for transactions between group companies based in different countries to ensure a fair price — one that would have been charged to an unrelated party is levied.

The Cabinet also approved 3,705 crore rupees per Megahertz as base price for 3G spectrum auction in the 2100 megahertz band.

Previously, the auction of 2G and 3G bandwidth was scheduled to commence on February 25. The government is hopeful of raising at least Rs 80,000 crore from the sale.

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