India’s CBDT asks ITAT and DRP to apply Vodafone ruling to similar transfer pricing cases

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

India’s CBDT asks ITAT and DRP to apply Vodafone ruling to similar transfer pricing cases

The Central Board of Direct Taxes (CBDT) has requested that Income Tax Appellate Tribunals (ITAT) and dispute resolution panels (DRP) apply the principle behind the Bombay High Court’s Vodafone ruling for similar transfer pricing cases.

As a result, the income tax department will not be able to make transfer pricing adjustments on the shares issued by Indian units to their overseas parents.

On January 28, the Union Cabinet decided to accept the Bombay High Court’s ruling in Vodafone’s transfer pricing case.

The cabinet came to the conclusion that the transaction between Vodafone and its Mauritius subsidiary was on the capital account and that there was no income to be chargeable to tax; therefore, applying any pricing formula was irrelevant.

In addition, the Cabinet agreed to accept “orders of courts/ITAT/DRP in cases of other taxpayers where similar transfer pricing adjustments have been made and the courts/ITAT/DRP have decided/decide in favour of the taxpayer”.

This decision is expected to facilitate tax compliance and reduce litigation on similar issues.

“This is a major correction of a tax matter which has adversely affected investor sentiment,” read Prime Minister Modi’s website.

Positive outlook

In line with recent efforts to create a more stable tax environment in India, the cabinet’s decision is expected to provide greater clarity and predictability for both taxpayers and tax authorities.

India has long been associated with an aggressive tax policy and lengthy transfer pricing disputes. This decision will come as welcome news to taxpayers who have found themselves embroiled in court battles.

The ruling is also bound to be beneficial for India’s economy. The government is aiming to “set at rest the uncertainty prevailing in the minds of foreign investors and taxpayers in respect of possible transfer pricing adjustments in India on transactions related to issuance of shares, and thereby improve the investment climate in the country”.

more across site & shared bottom lb ros

More from across our site

It should be easy for advisers to be transparent about costs, Brown Rudnick partner Matthew Sharp said in response to exclusive ITR in-house data
The sprawling legislation phases out Joe Biden-era green tax incentives for businesses; in other news, the UK will reportedly maintain its DST despite US pressure
New French legislation should create a more consistent legal environment for taxing gains from management packages, say Bruno Knadjian and Sylvain Piémont of Herbert Smith Freehills Kramer
The South Africa vs SC ruling may embolden the tax authority to take a more aggressive approach to TP assessments, an adviser tells ITR
Indirect tax professionals now rate compliance as a bigger obstacle than technology and automation; in other news, Italy approved a VAT cut on art sales
AI-powered tax agents are likely to be the next big development in tax technology, says Russell Gammon of Tax Systems
FTI Consulting’s EMEA head of employment tax and reward tells ITR about celebrating diversity in the profession, his love of musicals, and what makes tax cool
Canadian Prime Minister Mark Carney and US President Donald Trump have agreed that the countries will look to conclude a deal by July 21, 2025
The firm’s lack of transparency regarding its tax leaks scandal should see the ban extended beyond June 30, senators Deborah O’Neill and Barbara Pocock tell ITR
Despite posing significant administrative hurdles, digital services taxes remain ‘the best way forward’ for emerging economies, says Neil Kelley, COO of Ascoria
Gift this article