Vodafone files appeal in Bombay High Court against $2-billion tax claim

With Vodafone filing an appeal in the Bombay High Court, the second round of litigation between Vodafone and the income tax (I-T) department is about to begin in the Bombay high court.

The dispute relates to the acquisition of the stake of Hutchinson International, in Hutchison-Essar in Februrary 2007.

On 31 May, 2007, the income tax department said it had the jurisdiction to tax the transaction with Vodafone's tax liability assessed at around $2 billion.

The company however rejects the IT department's claim and says it ''remains firmly confident that not tax is payable''.

The tax department argues that Hutchison made capital gains with the deal, for which it should have deducted tax while making paying the purchase amount to Hutchison.

The department first served a show-cause notice to Vodafone in 2007, which it challenged in the Bombay high court, and on the high court dismissal of its petition, it approached the apex court in January 2009.

The Supreme Court returned the case to the I-T department, to decide first whether it had the jurisdiction, as both Vodafone and Hutchison are overseas entities.

With the department holding it has the jurisdiction, the case is set to begin afresh in the high court now.