Reuters is reporting that an Indian court has dismissed a petition against a USD2 billion tax bill by UK-based mobile group Vodafone. The bill stemmed from the purchase of Hutchison Essar from Hutchison Whampoa in May 2007, when Vodafone paid USD11.1 billion for a controlling stake in the Indian cellco. Vodafone subsequently received a tax invoice which claimed that the UK company was liable for capital gains tax, as most of the assets it bought were based in India. Vodafone challenged the charge, arguing the Indian law at the time did not require it to withhold tax on the acquisition, and that capital gains tax was usually paid by the seller, not the buyer.
Vodafone has announced it will appeal the decision but is understood it will wait for the written order by the Bombay High Court in order to consider grounds for appeal. In a statement to comment on the case Vodafone said, ‘based on advice received, [Vodafone] continues to believe that the transaction is not subject to tax in India and is confident of a positive outcome ultimately.’