IT department asks Vodanfone to pay Rs11,218 crore

Vodafone has been asked by the IT department to pay Rs11,218 crore tax on its 2007 purchase of Hutchison Whampoa Ltd's mobile business in the country.

"The tax demand is to be paid within 30 days of the receipt of the notice of demand," the tax department said in a statement.

The Supreme Court has asked the tax department to work out by 25 Ocotober, the deal's potential tax liability. The Supreme Court will on 25 October set a date for hearing Vodafone's appeal against a lower court ruling that Indian tax authorities had jurisdiction over tax bills in cross-border deals.

An earlier High Court judgment identified two parts of the transaction, the transfer of shares between Vodafone and Hutch and an additional transfer of the 15 per cent interest held by Analjit Singh and Ashim Ghosh.

According to Vodafone only 15 per cent was subject to tax, based on its reading of the judgment whereas the IT department disagrees with the analysis of the High Court's ruling.

However, if the company is viewed as an acting agent to pay tax on behalf of Hutch, its liability and the method for outstanding tax calculation would be different.