Supreme Court asks Vodafone to deposit Rs2,500 crore in tax case

The Supreme Court has asked UK-based telecom giant Vodafone to make provisions for tax claims on it before the apex court starts hearing its petition in the Rs11,218 crore ($2.5 billion) tax dispute.

The SC has asked Vodafone to deposit Rs2,500 crore (about $550 million) within three weeks and also furnish a bank guarantee of Rs8,500 crore in eight weeks, before proceeding with its petition challenging the income tax deparment's tax demand.

The SC has also sought an undertaking from the director-general of international taxation, Central Board of Direct Taxes, to the effect that the government would refund the amount along with interest to Vodafone if the company wins the case.

The telecom giant has moved the Supreme Court challenging a lower court order on the I-T department's demand of Rs11,000 crore by way of capital gains tax on Vodafone's acquisition of Hutchison Wampoa's majority stake in Hutch Essar in India.

Vodafone moved the SC challenging the Mumbai high court order that, they said, gave tax authorities in India jurisdiction over tax bills in cross-border deals.

The Supreme Court bench comprising Chief Justice S H Kapadia and Justices K S Radhakrishnan and Swatanter Kumar, will start its final hearing in the Vodafone case from 5 February 2011.

The income tax authorities had asked Vodafone to pay Rs11,218 crore within 30 days. The I-T authorities fixed the tax claims on Vodafone at the instance of the Supreme Court.

The Supreme Court had, on 25 October, adjourned hearing in the tax case after Vodafone sought time to go through and file reply to the tax demand served by the IT department.