Hindu Business Line

VODAFONE TRANSFER PRICING
Bombay High Court should have looked into merits: Experts

The Bombay High Court’s dismissal of Vodafone’s writ petition on the Rs 8,500-crore transfer pricing adjustment case came as some disappointment for tax experts.

This is because the Bombay High Court had not gone into the merits of the case as regards sale of call centre business or assignment of call options.

It merely declined to entertain the writ on the ground that an alternative remedy under the income-tax law — Income Tax Appellate Tribunal or Dispute Resolution Panel (DRP) — was available for Vodafone to pursue this matter.

“The Supreme Court had recently held that in case alternative remedy is available then writ is not maintainable.

“However, considering the impact of this case, it would have been better if the High Court would have ruled on merits,” Amit Maheshwari, Partner, Ashok Maheshwary & Associates, told Business line.

In coming to the conclusion, the Bombay High Court held that once an order is passed by a Transfer Pricing (TP) officer, alternative remedy available under the administrative law has to be resorted to. This is because Article 226 of the Constitution gives limited jurisdiction to intervene after an order is passed by a TP officer, the court has ruled.

ARTICLE 226
The Bombay High Court has held that Article 226 gives limited jurisdiction to intervene after an order is passed by a TP officer, said Mukesh Bhutani, Chairman, BMR Advisors, a professional services firm.

“The High Court, considering Vodafone facts, has come to the conclusion that an alternative remedy to file an appeal with the Tribunal and/ or pursue with DRP is available under the income-tax law and hence, writ petition will not be entertained.

In coming to the conclusion, it has held that once an order is passed by a TP officer, alternative remedy available under the administrative law has to be resorted to”, Butani said.

Grant Thornton, an assurance, tax and advisory firm, said that the judges have clearly interpreted that the issues in the case of Vodafone Transfer pricing adjustment are not exceptional i.e. against the fundamental principles of judicial procedure or violation of principles of natural justice.

The latest Vodafone verdict is nothing unusual or surprising and adds to the list of Supreme Court cases that support the basic principle of resorting to alternative remedies before filing a writ petition before the High Court, according to Grant Thornton.

It seems more practical for Vodafone to pursue the alternative remedies — ITAT or DRP, Grant Thornton said in a statement even while acknowledging that Supreme Court option is feasible.