Vodafone gets $604 million tax demand from Indian authorities

Thu Dec 19, 2013 5:15pm IST

A vendor selling ''paani puri'', a traditional snack, walks past closed shops displaying an advertisement for Vodafone in Jammu May 22, 2012. REUTERS/Mukesh Gupta/Files

A vendor selling ''paani puri'', a traditional snack, walks past closed shops displaying an advertisement for Vodafone in Jammu May 22, 2012.

Credit: Reuters/Mukesh Gupta/Files

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REUTERS - Vodafone Group Plc(VOD.L) has received a final tax demand of about $604 million from Indian authorities, adding to its tax disputes in the country since it bought Hutchison Whampoa's (0013.HK) mobile business there in 2007.

The British mobile operator would appeal the order soon, it said in a statement on Thursday.

Last year, Vodafone filed a petition in a local court in a so-called transfer pricing dispute after authorities sought to add 85 billion rupees to the taxable income of a unit, Vodafone India Services Pvt Ltd, which provided call centre services to some group companies.

In September this year, the Bombay High Court extended a stay on a final tax demand order by the authorities.

Transfer pricing is the value at which companies trade products, services or assets between units. Rules require all cross-border transactions between group companies to be valued at arm's length - or at the same value as if the transaction was with an un-related company.

"Vodafone maintains that there is no tax payable on this transaction and the company will file an appeal before the tax appeal tribunal as soon as possible," the company said.

"Vodafone will continue to strongly defend its position against this order."

Vodafone, the largest corporate investor in India, has repeatedly clashed with the authorities over taxes since it bought Hutchison's mobile business and was held liable for the capital gains tax which the authorities say is owed on the deal.

This transfer pricing dispute is separate from the more than $2 billion tax demand on that deal.

(Reporting by Devidutta Tripathy and Sumeet Chatterjee; Editing by Mark Potter)

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