Vodafone wins relief as IT department drops ₹8,500 crore long-running tax dispute

The Income Tax Department has withdrawn its ₹8,500-crore transfer pricing case against Vodafone India Services, ending a decade-long tax dispute and signalling a shift towards tax certainty and investor-friendly policy in India

In a major relief for Vodafone India, the Income Tax Department has withdrawn its long-pending ₹8,500-crore transfer pricing case, formally concluding one of India’s most contentious corporate tax battles. Appearing before a Supreme Court bench led by Chief Justice B.R. Gavai, the department’s counsel sought permission to withdraw the petition, which the court accepted.

The decision marks the end of a legal battle that began more than a decade ago, highlighting the government’s changing stance on legacy tax disputes with multinational companies.

Background of the case

The dispute originated in 2008, when Vodafone India transferred its call centre business, 3 Global Services, based in Ahmedabad, to Hutchison Whampoa Properties (India) during an internal restructuring. The Income Tax Department classified this transaction as an international one, alleging that it involved the transfer of intangible assets and call options to a related entity.

Based on this view, authorities increased Vodafone’s taxable income by ₹8,500 crore, claiming the deal was not conducted at arm’s length under transfer pricing rules.

In 2014, the Income Tax Appellate Tribunal (ITAT) upheld the department’s position. Vodafone challenged the ruling before the Bombay High Court, asserting that the transaction was domestic and not subject to transfer pricing provisions. The High Court ruled in Vodafone’s favour in 2015, declaring the tax demand invalid. The department then appealed to the Supreme Court in 2016, but no significant progress occurred until this week’s withdrawal.

Significance and broader context

The withdrawal comes shortly after the Supreme Court’s recent relief to Vodafone Idea Ltd. on reassessing its Adjusted Gross Revenue (AGR) dues, signalling a more conciliatory approach towards the telecom sector.

Industry observers see this move as part of the government’s broader efforts to reduce tax litigation and rebuild investor trust after years of controversy surrounding retrospective taxation.

By dropping this high-profile case, the government appears to be prioritizing predictability and transparency in tax administration, reinforcing its commitment to a more stable and investment-friendly regulatory environment.