The tax department has asked its officers not to press ahead with transfer pricing cases similar to Vodafone, a signal which is expected to bring comfort to several multinational firms grappling with such tax demands.
The move comes a day after the government on Wednesday decided it will not appeal against a Bombay high court order in a Rs.3,200-crore tax case involving global telecom giant Vodafone to avoid “fruitless litigation”. Officers dealing with similar transfer pricing cases have been asked to adhere to the court ruling.
In a circular to field officers, the Central Board of Direct Taxes (CBDT) said: “…the Board has accepted the decision of the high court. It is directed that the ratio decidendi of the judgment must be adhered to by field officers in all cases where this issue is involved.” “Ratio decidendi” refers to the logic or rationale behind the judgment.
The case involving Vodafone India is a transfer pricing dispute, dating back to August 2008, and is different from the Rs.13,000 crore capital gains tax levy, which was to be paid by Hutch when it sold its stake to the British major. Several multinational firms such as Shell and Nokia have complained of getting unfair deal with the Dutch oil major winning the case in similar transfer pricing case in the Bombay HC.
Nokia has decided to shut shop after it had to keep the Indian plant, and its vendors such as Flextronics too is downing shutters due to what many term as “adversarial” tax regime.
The Modi administration has vowed to provide a non-adversarial tax regime and has asked the tax authorities to ensure that there is no harassment of taxpayers. The string of high-profile tax cases include the issue of retrospective taxation that scared investors and prompted them to go slow on their plans in the country. The Modi government is now seeking to attract foreign investment to boost growth and is keen to provide a “predictable and transparent tax regime.”
The move comes a day after the government on Wednesday decided it will not appeal against a Bombay high court order in a Rs.3,200-crore tax case involving global telecom giant Vodafone to avoid “fruitless litigation”. Officers dealing with similar transfer pricing cases have been asked to adhere to the court ruling.
In a circular to field officers, the Central Board of Direct Taxes (CBDT) said: “…the Board has accepted the decision of the high court. It is directed that the ratio decidendi of the judgment must be adhered to by field officers in all cases where this issue is involved.” “Ratio decidendi” refers to the logic or rationale behind the judgment.
The case involving Vodafone India is a transfer pricing dispute, dating back to August 2008, and is different from the Rs.13,000 crore capital gains tax levy, which was to be paid by Hutch when it sold its stake to the British major. Several multinational firms such as Shell and Nokia have complained of getting unfair deal with the Dutch oil major winning the case in similar transfer pricing case in the Bombay HC.
Nokia has decided to shut shop after it had to keep the Indian plant, and its vendors such as Flextronics too is downing shutters due to what many term as “adversarial” tax regime.
The Modi administration has vowed to provide a non-adversarial tax regime and has asked the tax authorities to ensure that there is no harassment of taxpayers. The string of high-profile tax cases include the issue of retrospective taxation that scared investors and prompted them to go slow on their plans in the country. The Modi government is now seeking to attract foreign investment to boost growth and is keen to provide a “predictable and transparent tax regime.”
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