India's tax chief says Vodafone must pay taxes

India's income tax department on reiterated its stand that British telecom giant Vodafone was liable to pay tax for acquiring a majority stake in Hutch Essar, a Financial Express report said.

'Vodafone is the payer in this case. So it has the liability of payer,' GC Srivastava, director-general in the finance ministry, quoted by the report, said.

Speaking on the sidelines of the fourth international tax conference by Assocham, he said the liability of payer and payee was different and Vodafone had the liability of the payer.

Simply put, this would mean that Vodafone should have deducted tax at source before making payment to Hutchison, the report said.

Vodafone CEO Arun Sarin had, however, said last week that Vodafone had no tax liability in India.

The income tax department has sent a notice to Vodafone, seeking around $1.7 billion as capital gains in the $11.2-billion acquisition of Hutchison Telecom International's 67% stake in Hutch-Essar, now renamed Vodafone-Essar.

However, the company has contested this notice and approached the Bombay High Court.