Big relief for Vodafone Idea: Supreme Court upholds Rs 1,128 cr tax refund

In a big relief to Vodafone Idea, the Supreme Court on Monday upheld a Bombay High Court order that asked the income tax authorities to refund excess prepaid tax of Rs 1,128 crore to the telco.

Vodafone had sought refund of prepaid taxes with interest amounting to around Rs 1,600 crore for the assessment year 2016-17, which comprised tax deducted at source and advance tax.

UK’s Vodafone Group PLC’s India unit, Vodafone India, has since merged with Aditya Birla Group’s Idea Cellular in August 2018.


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A bench led by Justice JB Pardiwala dismissed the department’s appeal against the HC order that held the assessment order against the telecom major as “unsustainable and time-barred".

“There is a gross delay of 295 days in filing the SLP, which has not been satisfactorily explained by the petitioners (department),” the apex court said while dismissing the income tax department’s appeal.

While additional solicitor general S Dwarakanath appeared for the department, senior counsel Sachit Jolly appeared for the operator.

Terming the HC order as “perverse as it is going beyond its jurisdiction of interpreting law,” the department told the apex court that the HC had in a way prescribed a time limit for communication of an appellate authority's direction to the assessing officer (AO), though there is no time limit given in the Income Tax Act for such direction.

The HC has "barged into drafting legislation regarding time limit where none exists,” the department said, adding that the reason for insertion of Section 144C was to provide an alternative dispute resolution mechanism within the department to speedily correct any conservative view been taken by the AO or the transfer pricing officer (TPO).

An AO had passed the order against Vodafone Idea in August 2023, two years after a dispute resolution panel (DRP) issued directions to the company. The order was issued under the faceless assessment system, which is meant to eliminate the human interface between taxpayers and the department.

However, the operator had taken a stand that even though the DRP had issued direction in March 2021, the final order was not passed by the AO within the prescribed period of one month, thus the return income filed by the telco for assessment year 2016-17 had become time-barred in April 2021. Therefore, the company had sought a direction to the Central Processing Centre, Bengaluru to grant refund of taxes paid by it with interest.

Vodafone in its return income for AY 2016-17 had disclosed a loss of around Rs 5,042 crore. The telecom major’s claim for refund went through different levels as it involved some international transactions, eventually reaching DRP set up under the Income Tax Act.

The department claimed that the AO had received the DRP directions only in August 2023, and he passed the final assessment order in seven days, i.e., within the statutory time limit, a contention opposed by the telecom company.