Yesterday, the government decided not to appeal against the Bombay High Court's order that favored Vodafone in a transfer pricing case. The tax department alleged that Vodafone had under-priced its Indian subsidiary shares when transferring them to it’s main in 2009-10 and slapped a notice of Rs 3, 2000 crores. As per transfer pricing norms, when assets are transferred between group companies in different geographies, the pricing should be unwavering.

The company had moved the Bombay High Court against the tax notice. The court gave a verdict on 10 October ruled in favor of the company saying "there is no taxable income on share premium received on the issue of shares". Announcing the decision of not lingering the issue further, Telecom Minister Ravi Shankar Prasad said the government decided to avoid useless litigations and convey a clear and positive message to investors globally that it would be "fair, transparent and within the four corners of law". The decision to not file an appeal in the Vodafone case was taken by the advice of Attorney General Mukul Rohatgi.

The investors and tax experts globally hailed government's decision. Vodafone Counsel Anuradha Dutt has said the Cabinet’s decision is a positive move and will certainly help boost investment. In the last year’s elections, BJP leaders had promised to end the "tax terrorism" that resulted in much heartburn among the international investors.

- Manohar