The Supreme Court on Friday agreed to hear the taxman's plea against Vodafone India in a transfer pricing case. The Income Tax Department had earlier challenged the Bombay High Court order which granted relief to the telecom giant.

Last October, the high court had set aside a tax demand of Rs 3,700 crore imposed on Vodafone India by the tax authorities. The high court had contended that the Income Tax Department didn't have the jurisdiction regarding the sale of Vodafone's call centre business to Hutchinson Whampoa Properties and assigment of call options to Vodafone International BV in 2007-08.

The tax authorities demanded capital gains tax for this transaction. The Income Tax Department had demanded that Rs 8,500 crore be added to the company’s taxable income.

Transfer pricing pertains to the setting of the price for goods and services sold between related legal entities within an enterprise. It is meant to ensure fair pricing of the asset transferred. In simpler words, if a subsidiary company sells goods to its parent, the cost of the goods involved is termed as transfer price.