India court rules in favour of Vodafone in tax case

MUMBAI, Oct (HKSE: 3366-OL.HK - news) 8 (Reuters) - A Mumbai court has ruled in favour of Vodafone in one of a series of tax cases involving the British telecoms company in India, a decision seen as positive for several other firms fighting similar disputes.

The Bombay High Court backed Vodafone's efforts to oppose a move by tax authorities to add 85 billion rupees ($1.3 billion) to the taxable income of a unit, Vodafone India Services Pvt Ltd, which provided call centre services to some group companies.

It (Other OTC: ITGL - news) had initially received a tax claim of about $600 million.

Vodafone, one of India's largest corporate investors, has repeatedly clashed with the authorities over taxes since it bought Hutchison (HKSE: 0013-OL.HK - news) 's mobile business in 2007. It was held liable for capital gains tax which authorities say is owed on the deal.

A dispute over a capital gains tax demand worth more than $2 billion related to that deal has yet to be resolved.

Vodafone's treatment, seen by many investors as heavy-handed, had fuelled debate over India's unpredictable rules and regulations.

The Bombay High Court had separately ruled in favour of the group last year in a transfer pricing tax dispute. In that case, India's tax office had accused Vodafone India Services Pvt Ltd of under-pricing shares in a rights issue to its parent, and had demanded tax of about 30 billion rupees.

The government, seeking to clean up a reputation for "tax terrorism", decided to not appeal that case.

Transfer pricing is the value at which firms trade products, services or assets between units across borders, a regular part of doing business for a multinational.

Several other multinationals including IBM Corp, Royal Dutch Shell Plc (Xetra: R6C1.DE - news) and Nokia Oyj are also fighting transfer-pricing cases in India.

Vodafone said in a statement that it welcomed the latest court ruling. It did not comment further. ($1 = 65.0800 Indian rupees) (Reporting by Nivedita Bhattacharjee in Mumbai; Editing by Keith Weir)