The Bombay High Court (HC) has ruled in favor of Vodafone India in the transfer pricing case related to the sale of operator's call-centre business to Hutchison and assignment of call options to Vodafone International.

The Bombay HC's division bench, including S C Dharmadhikari and A K Menon, has set aside an order of Income Tax Appellate Tribunal (ITAT) which had ruled that I-T Department had the powers to raise tax demand on the company.

The case relates to the sale of one of the Vodafone's call centres in Ahmedabad in 2007; post which in October 2012, the I-T department has slapped a transfer pricing order on Vodafone asking the company to add Rs 85 billion to the taxable income for 2007-08. The demand was challenged by the telecom company in the ITAT.

In December 2014, the ITAT, however, ruled that sale of call-center business was an international transaction and assignment of call options had also taken place. It stated that revenue department has the jurisdiction to proceed against the company, as it was an "undisclosed, international transaction" and therefore transfer pricing norms applied to the case. Vodafone then challenged ITAT's order in the Bombay HC.

Bombay HC in its current verdict has stated that there is no transfer of the 'call options' and, hence, the transaction does not fall within the purview of transfer pricing.

The I-T Department can challenge this order in the Supreme Court.

This is the second major win for Vodafone in its ongoing tax-related issues with the Indian I-T Department. Earlier the Bombay HC had ruled that Vodafone is not liable to pay Rs 32 billion as taxes in a 2009-10 transfer pricing case. However, a verdict is still awaited in the $2.5 billion capital gains tax case, where the Department had asked Vodafone to pay tax for acquiring Hutchison's telecom operations in India.