Indian government accepts verdict High Court re issuance of shares
On January 28, 2015 the Indian government announced not to appeal against the decision of the High Court of Bombay in the “Vodafone” case.
In this case Vodafone India issued new shares to its existing foreign parent company. The Indian tax authorities argued that the issue price of these new shares was lower than market value and therefore not at arm’s length. As a result the difference between the issue price and the value calculated by the Indian tax authorities was treated as a transfer pricing correction and subject to Indian corporate income tax. Furthermore, the tax authorities argued that the same transfer pricing correction should be qualified as a loan (against an interest rate of around 13%) that was granted from Vodafone India to its parent company.
The High Court of Bombay rejected both claims of the Indian Tax Authorities. This decision and also the announcement of the Indian government not to appeal against this decision for the Indian Supreme Court, is very positive for the investors climate in India.back to overview