The Supreme Court has asked the Bombay High Court to decide on the Vodafone transfer pricing case without taking into account the apex court’s judgement in 2012 on the deal between Vodafone and Hutchison. This has come after the Income Tax (IT) department filed a special leave petition in the Supreme Court to review and consider certain facts pertaining to the taxable income of Vodafone India Services in 2007-08. The case relates to the transfer pricing order regarding the sale of the operator’s call centre business to Hutchison Whampoa Properties India Limited and the assignment of call options to Vodafone International Holdings BV in 2007.

The IT department stated that Income Tax Apellate Tribunal (ITAT) and the Bombay High Court had not considered some facts while giving their decisions on the matter. Also, the tax department added that the high court’s verdict was based on the Supreme Court’s judgement which noted that the call and put options exercised during the Vodafone’s agreement with Hutchison Whampoa Properties were contractual rights vested in the company and therefore, had not been transferred or assigned by it. Taking this into account, the high court had observed that the transfer of options took place in India and there was no taxable income arising out of the issue of shares and the share premium received on the issue of shares was not taxable.

Earlier, in December 2014, ITAT had stayed the IT department’s tax demand of Rs 37 billion on Vodafone India for six months or till the final disposal of the petition. The ITAT had directed the operator to make an initial deposit of Rs 2 billion. It had also held that the tax department had jurisdiction in the matter, but needed to revise its valuation of the tax liability. Consequently, Vodafone India Services challenged the decision in the high court which ruled against the tax department stating that there was no question of applying the transfer pricing regulations on the agreement.