Vodafone is being pulled back into a long-running dispute with Indian tax authorities over a multi-billion dollar tax bill.
Tax officials have sent the operator a formal demand for $2.5 billion to settle allegedly outstanding taxes related to the 2007 acquisition of its Indian unit from Hutchison, The Telegraph reported.
This bill factors in interest dating back to the time of the transaction.
The notice marks the latest development in a long-running saga over the tax demand. After Indian authorities demanded Vodafone pay up in 2010, the operator won a Supreme Court challenge, with a court ruling early last year that tax was not payable as the transaction was between two offshore holding companies.
The government subsequently amended the nation's tax code to cover similar transactions, and included a provision that allowed the new laws to be enforced retroactively.
But this retroactive provision is itself on shaky ground. A parliamentary panel set up by Prime Minister Manmohan Singh in response to criticism from multinational business groups last year recommended that the provision be scrapped.
In a statement published by Reuters, Vodafone said it has replied to the government's notice with a statement “that it continues to believe that no tax is payable on the... transaction.”
The operator group has previously threatened to pursue international arbitration against the Indian government if tax authorities continue with their demands.