Transfer pricing refers to the setting of the price of goods or services sold between entities within an enterprise. For example, if a subsidiary sells good or services to its parent company, then the price set for this sale is the transfer price.
Vodafone Case:
- Bombay HC ruled in favor of Vodafone setting aside tax demand of 3700 crore.
- In 2007-08, the call center business of Vodafone was sold to Hutchinson and tax authorities sought capital gain tax
- Vodafone said the deal was between two domestic firms and transfer pricing authorities had no jurisdiction over the deal
- Judgement will benefit many global firms such as IMB, Shell, Nokia etc. who are facing similar tax demands by the authorities