India Inc lauds AG view on not appealing Vodafone tax case

New Delhi: The Federation of Indian Chambers of Commerce and Industry (FICCI) has welcomed Attorney General Mukul Rohatgi's advice to the Income Tax (I-T) department not to file an appeal against the Bombay High Court judgment in the Vodafone tax case.

"FICCI welcomes the decision of the government not to appeal against the judgment relating to the transfer pricing tax issue involving Vodafone," FICCI president Sidharth Birla said in a statement Thursday.

"The well considered decision of the government of not contesting the judgment will have a far reaching positive impact and support actualization of investment plans for India," he added.

"India has the largest number of transfer pricing disputes globally and quick resolutions are critical to building investor confidence. Fair taxation principles and administration, and clear dispute resolution when necessary, soothe a key anxiety amongst all investors," FICCI said.

Attorney General Rohatgi Wednesday said that he has asked the I-T department not to appeal against the high court ruling that Vodafone is not liable to pay an income tax demand of Rs.3,200 crore in a case relating to transfer-pricing.

Transfer-pricing describes the practice of arm's length pricing for transactions between group companies based in different countries to ensure that a fair price is levied.

The government's highest law official also said he was in agreement with the view taken by the chairman of the Central Board of Direct Taxes (CBDT) in the matter.

"I have concurred with the view of the CBDT chairman," Rohatgi said.

Last month, the court had ruled in favour of the Indian subsidiary of Vodafone Group in two cases of transfer-pricing adjustments of over Rs.4,500 crore made by the income tax department.

Last week, the Bombay High Court ruled in favour of the Indian arm of Royal Dutch Shell on two transfer-pricing adjustments made by the income tax department -- of Rs.15,000 crore and Rs.3,000 crore for 2007-08 and 2008-09, respectively -- to the taxable income of Shell India Markets Pvt Ltd (SIMPL).

The tax orders passed against Shell and Vodafone relate to alleged undervaluing of shares issued by the Indian subsidiaries to their parent companies.