Vodafone Current Affairs

TRAI recommends Rs 3,050 crore penalty on Airtel, Vodafone & Idea

Telecom Regulator Telecom Regulatory Authority of India (TRAI) has recommended Department of Telecom (DoT) to impose combined penalty of 3,050 crore rupees on Bharti Airtel, Vodafone and Idea cellular.

It had mentioned that the penalty should be imposed on these telecom companies for allegedly denying interconnectivity to newcomer Reliance Jio.

What is the issue?

  • The Reliance Jio had alleged that due to inadequate interconnection points its subscribers were unable to make calls to other networks.
  • TRAI has found that these three companies have violated licence norms by denying adequate interconnection points to Reliance Jio Infocomm.
  • Their combined actions have stifled the competition and are seen as anti-consumer and against public interest.

Now the DoT will decide on next course of action. If DoT finds violations of norms in all circles as mentioned by TRAI, these three telcos will be imposed combined penalty of Rs 3,050 crore.

About Telecom Regulatory Authority of India (TRAI)

  • The TRAI is an independent regulator of the telecommunications business in India. It came into existence by the Act of the Parliament in 1997.
  • It was established in wake of entry of private sector in telecom industries after Government had constituted the National Telecom Policy (NTP) to attract domestic and FDI investment in the telecommunication sector.
  • Its main purpose is to deliver a fair and transparent environment for fair competition in telecom market. TRAI also fixes or revises the tariffs for telecom services in India.

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Vodafone wins transfer pricing tax dispute case

British telecom giant Vodafone has the transfer pricing tax dispute case against Indian Income Tax authorities after Bombay High Court ruled in its favour.

The court decision came after Vodafone India had challenged the order of the Income Tax Appellate Tribunal (ITAT). In 2014, the IT tribunal had stayed the tax demand during the proceeding of the case and had asked Vodafone India to deposit 200 crore rupees by February 2014.

What is the case?

  • Income tax authorities had imposed Rs. 3,700 crore transfer pricing tax on Vodafone India over the capital gains made by the company after selling its call centre business to its Mauritius based subsidiary in 2008.
  • Vodafone had argued that the IT Department has no jurisdiction in this case because the transaction was between it and its subsidiary. It also had mentioned that the transaction was not an international one so it does not attract any tax.
  • IT Department had claimed that Vodafone’s Indian arm had deliberately sold its shares at a lower price (undervalued). These shares were sold to third party at market price making huge capital gains from the deal.

What is Transfer pricing?

  • Transfer pricing is referred to the fixing of the price for goods and services sold between related legal subsidiaries (entities) within an enterprise.
  • This is to ensure fair pricing of the asset transferred without any manipulation of reduce tax liability.
  • For example, if a subsidiary company sells goods to a parent company, then the cost of those sold goods is deemed as transfer price.

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