The Bombay high court has ruled in favour of Vodafone India in the Rs 32 billion tax dispute. The order relates to a case in which India’s Income Tax (I-T) department had accused Vodafone India of selling it shares to its parent company under the rights issue at a lower price in 2009-10. The high court has ruled that there is no taxable income arising out of the issue of shares and the share premium received on the issue of shares is not taxable.

Earlier in January 2014, the I-T department had issued a show-cause notice to Vodafone India adding Rs 32 billion to its taxable income for two fiscal years up to March 2011. After this, Vodafone had approached the tax office seeking a decision on whether any potential income arises or is affected by issue of shares. The firm had also asked for an extension of the deadline for filing a reply to the show-cause notice. Thereafter the company moved the Bombay high court challenging the I-T department’s show-cause notice.

The company has taken the tax authority to court over other transfer pricing tax order that raised a demand of Rs 42 billion on Vodafone India. The case is currently pending with the Bombay high court. The company and the government are also locked in a Rs 110 billion tax dispute related to the 2007 transaction, in which Vodafone International Holdings BV, a Dutch unit of Vodafone, bought the Indian operations of Hutchison Telecommunications International Limited.