Vodafone India Services Pvt. Ltd vs. UOI (WRIT PETITION NO.871 OF 2014) (Bombay High Court) dated 10.10.2014 Background: The Petitioner, Vodafone India Services Pvt. Ltd., is a wholly owned subsidiary of a non-resident company, Vodafone Tele-Services (India) Holdings Limited. The Petitioner issued 2,89,224 equity shares of a face value of Rs.10/- each at the premium of Rs.8,519/- per share to its holding company. The Fair Market Value for the issue of equity shares was determined by the Petitioner in accordance with the methodology prescribed under the Capital Issues (Control) Act 1947. The Petitioner filed Form 3CEB alongwith return of income wherein the transaction of issuance of equity shares was declared as an International Transaction and also the ALP of the shares so issued, was determined. However, a note was appended to its Form 3-CEB report by the Accountant making it clear that the transaction of issue of equity shares did not affect the income of the Petitioner and was being reported only as a matter of abundant caution. According to the AO and TPO, the Petitioner ought to have valued each equity share at Rs.53,775/- and on that basis shortfall in premium to the extent of Rs.45,256/- per share resulted into total shortfall of Rs.1308.91 crores. The short fall in the value of shares issued by the Petitioner to its holding company was also treated as a deemed loan by the Petitioner to its holding company. This deemed loan was sought to be charged with interest at 13.5% per annum amounting to Rs.88.35 crores. Thus the total amount of Rs.1397,26,37,035/- was treated as transfer pricing adjustment for the FY 2008-09, relevant for the AY 2009-10.