India’s Supreme Court has directed UK-based Vodafone Group to pay a INR25 billion (USD550 million) deposit whilst it continues to challenge a tax bill totalling USD2.5 billion, India’s Economic Times reports. In addition, Vodafone has also been told it must make a bank guarantee for INR85 billion within the next eight weeks, whilst the Supreme Court has set a 5 February 2011 date for the final hearing date in the matter.
According to TeleGeography’s GlobalComms Database, the tax issue stems from Vodafone’s acquisition of its stake in Vodafone Essar, then Hutchison Essar. In December 2008 the Vodafone Group filed a petition against tax charges after claims that the UK group was liable for capital gains tax, as most of the assets it bought were based in India. Vodafone challenged the charge however, arguing that 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. After its initial petition was dismissed Vodafone launched a fresh appeal in January 2009, but in September 2010 it was finally announced that the Mumbai High Court had dismissed the case, prompting Vodafone to appeal once more, this time to the country’s highest judicial body, the Supreme Court in New Delhi.