Vodafone India, the Indian arm of British telecom giant Vodafone PLc, suffered a jolt on Friday when his writ petition challenging a transfer pricing order by the income-tax (I-T) department was dismissed by the Bombay High Court.

The transfer pricing order by the I-T department is related to transactions at Vodafone India's Pune-based call centre. The income tax authorities asked the company to pay another Rs 8,500 crore in tax to the government, taking the subsidiary's total tax liability to Rs 2,805 crore. After the addition of 18 per cent interest, the company is now liable to pay a tax of Rs 4,200 crore.

Vodafone challenged the order in February 2012, claiming that the transactions didn't fall under the transfer pricing norms as the transactions were domestic in nature.

But, the High Court yesterday dismissed the petition, ruling that the company should take matter to the tax tribunal and pursue with dispute resolution panel, under the I-T Act.

However, some experts are of the view that the court's ruling isn't a blow to the company as the court hasn't gone into the case's merits.

Now, Vodafone India has two options: It can either go back to Income Tax Appellate Tribunal or challenge the Bombay High Court's order in the Supreme Court.