In a clear signal to foreign investors, Attorney-General Mukul Rohatgi on Wednesday advised the Centre not to prefer an appeal in the Supreme Court against a Bombay High Court verdict setting aside the Income-Tax Department’s demand for Rs. 3,200 crore as additional tax from Vodafone, a British telecom major.
In his opinion sent to the Centre, the A-G concurred with the views of the Chairman of the Central Board of Direct Taxes that no appeal should be filed to ensure that there was a right climate in the country for foreign investment. If the Centre accepts the A-G’s opinion, it could have a significant bearing on several multinationals fighting transfer-pricing cases in India.
The A-G disagreed with Solicitor-General Ranjit Kumar’s advice that it was a fit case for appeal.
The I-T department had slapped a demand notice of Rs. 3,200 crore on Vodafone India alleging that it had under-priced its shares in a rights issue to its parent company. The tax demand was for the two financial years ended March 2011. The amount included tax and interest for the tax demand for assessment year 2009-10.
On a petition from Vodafone, the Bombay HC held in October 2014 that there was no taxable income arising out of the issue of shares, and share premium received was not taxable.