In a significant development, the Income‑Tax Department (I-T Dept) has withdrawn its longstanding ₹8,500 crore transfer-pricing case against Vodafone India Services Pvt Ltd, a subsidiary of the global telecom major Vodafone Group Plc.
This move comes as a major relief for Vodafone and the broader telecom sector, which has been grappling with regulatory and financial burdens.
What happened
- The dispute traces back to FY 2007-08, when Vodafone India sold its Ahmedabad-based call-centre business (formerly 3 Global Services Pvt Ltd) to Hutchison Whampoa Properties (India) Ltd as part of an internal restructuring. mint+1
- The I-T Dept alleged that the transaction involved “intangible rights” and “call options” transferred to a related entity, thereby qualifying as an “international transaction” under transfer-pricing rules. It sought to add ₹8,500 crore to Vodafone’s taxable income, arguing that the sale was not at arm’s length.
- In 2014, the Income Tax Appellate Tribunal (ITAT) upheld the I-T Dept’s view.
- However, in October 2015 the Bombay High Court ruled in favour of Vodafone India Services, stating the transaction was purely domestic and therefore outside the ambit of transfer-pricing jurisdiction.
- The I-T Dept had appealed to the Supreme Court of India in April 2016 but the case staled and remained un–heard since April 2017.
- On 3 November 2025, the I-T Dept filed a withdrawal plea before a Bench led by Chief Justice B. R. Gavai, and the Supreme Court allowed the withdrawal, formally closing this decade-old dispute.
Why it matters
1. Relief for Vodafone & its group
This withdrawal removes a massive potential liability (₹8,500 crore) from Vodafone India Services’ books and improves its legal clarity. For Vodafone Group Plc, it signals a de‐risking of earlier legacy tax exposures in India.
2. Positive signal for telecom sector
The development comes in the wake of a favourable Supreme Court direction allowing the government to revisit full “adjusted gross revenue” (AGR) liabilities of Vodafone Idea Ltd (Vi) including interest and penalties.
It suggests a more accommodative regulatory stance for stressed telecom players — which could boost investor confidence.
3. Clarification on transfer-pricing jurisdiction
The case underscores legal precedent that domestic transactions may not automatically fall under cross-border transfer-pricing rules. The Bombay High Court’s 2015 ruling that the transaction was entirely domestic was a key factor in Vodafone’s favour.
For companies operating in India, this sets a noteworthy benchmark for how restructuring and intra-group transactions are viewed.
4. Timing & broader implications
That the withdrawal follows closely on the heels of the Supreme Court’s AGR ruling suggests possibly broader regulatory coordination and consolidation of relief efforts for telecoms.
It might prompt other corporates in similar long-running disputes to revisit their cases or seek settlement.
What led to the decision
- The protracted litigation: The case had been in limbo for nearly a decade, with no hearing since 2017. The inertia likely made continuation less viable for the tax department. The Economic Times
- Legal risk and cost: With the Bombay High Court already siding with Vodafone, and the case dragging on, the chances of the I-T Dept winning may have diminished.
- Sector stress: The telecom sector has been under pressure with competition, regulatory burdens and large dues (like AGR). Offering relief may be seen as pragmatic for both the government and industry.
- Strategic choice: The I-T Dept’s decision to withdraw may reflect a broader shift towards resolving past legacy issues rather than continuing uphill legal battles.
What to watch going forward
- Whether the government affords similar relief or clarifications to other telecom players.
- How corporates structure intra-group transactions, knowing the jurisdictional subtleties of transfer-pricing law.
- Market reaction for Vodafone, Vodafone Idea and wider telecom stocks — while the liability is removed, the underlying business challenges remain.
- Whether tax departments raise or settle other legacy transfer-pricing issues proactively.
