Accordingly, the Bombay High Court judgment now attains finality and will thus accord a great measure of tax clarity to foreign investors in India.
Further to our previous Duane Morris Alert from 14 October 2014, in which we reported that the Bombay High Court delivered a judgment in favour of Vodafone India in a $490 million tax dispute, the Government of India on 28 January 2015 has decided not to file an appeal in this case before the Supreme Court of India. Accordingly, the Bombay High Court judgment now attains finality and will thus accord a great measure of tax clarity to foreign investors in India.
For the ease of reference, the principle enunciated by the Bombay High Court was that share issuance by a Indian subsidiary to a foreign holding company to raise funds will not give rise to any income, and hence, there can be no question of application of the transfer pricing regulations. The vexed question of application of transfer pricing principles to share issuance has been laid to rest, and it can be anticipated that another 25 cases that are being litigated on a similar point before the courts may come to a near-identical conclusion.
If you have any questions about the topics discussed in this Alert, please contact Saionton Basu in Duane Morris' London office, any of the attorneys in our India Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.