India’s government has served fresh notice on Vodafone in its bid to claim taxes it says the carrier owes after buying the country’s third-largest mobile operator.
The Income Tax Department said yesterday it would take Vodafone back to court to claim the $2 billion (€1.6 billion) it says the government is owed in capital gains tax, after the carrier’s $11 billion acquisition of Hutchison Essar in 2007.
Vodafone is likely to immediately appeal the notice, FT.com reports, citing internal sources.
The carrier argues that it doesn’t owe the government anything because the transaction was completed outside India, and that precedents set in similar deals support its view, the newspaper states.
Hutchison International, the previous owner of Hutchison Essar, is based in Hong Kong, however the deal was brokered through a third company based in Mauritius, India’s Economic Times reports.
“Vodafone remains fully confident that no tax is payable by Hutchison on this transaction and that Vodafone has no liability in any event,” it said in a statement published by the newspaper.
The tax office argues the deal is liable for taxation because most of the assets are based in India, and because Indian law requires buyers to pay the government capital gains tax.
India’s Supreme Court ordered a fresh investigation into the deal in January 2009, after Vodafone appealed a decision by the Bombay High Court to dismiss its petition against the tax bill in December 2008.
However, the Supreme Court gave Vodafone leave to appeal any decision against it by the tax office.