Vodafone Victorious In Multi Million Transfer Pricing Battle, Yet Again!

• Bombay High Court holds that shares issued at a premium by a resident entity to a non-resident entity is a capital account transaction and does not give rise to any income;
• Income arising from an International Transaction between AEs must satisfy the test of 'income; as provided under the ITA and fall under any of the charging provisions. In the absence of income, no international transaction can arise;
• 'Income' as defined under the ITA cannot be given a broader meaning to include notional income within its ambit;
• Transfer pricing provisions under the ITA are not a code by itself but only a machinery provision to compute ALP.

Recently, the Bombay High Court ("Court") in the case of Vodafone India Services Pvt. Ltd. v. Union of India¹held that shares issued at premium by a resident entity to a non-resident entity didn't give rise to income and there is no 'international transaction' to trigger transfer-pricing provisions as provided under the Income Tax