Vodafone will have to front up at least some of its estimated $2.7 billion (€2 billion) tax bill over the acquisition of Vodafone Essar while it appeals the order in the Indian supreme court.
The court gave the income tax department until the next hearing on October 25 to calculate the exact sum it believes Vodafone owes from the 2007 transaction, but has told the carrier it will have to pay a deposit on the tax demand if it wants a stay on the lower-court ruling while the case is heard, The Telegraph India said.
The total tax bill is estimated at 120 billion rupees (€1.9 billion), comprising 85 billion rupees in capital gains tax and 35 billion rupees in interest.
Vodafone could also face a fine for failure to deduct the tax.
But the carrier is not giving up on the fight, stating that it maintains its belief that the transaction is not taxable and that, as the buyer, it made no capital gains on the sale.
The current battle is Vodafone's fourth attempt at contesting the tax claims – the case has been in litigation since 2008.
Vodafone has long argued that the $11.2 billion purchase of Hutchison International's stake in what was then Hutchison Essar should not be taxable, as it took place offshore between two foreign companies.
After the Bombay High Court ruled that the transaction is taxable so long as Indian links could be established to the assets, Vodafone argued it should only have to pay tax on the 15% holding acquired directly from two Indian shareholders.
But the tax department believes the entire transaction should be taxable, because the underlying asset itself is an Indian company.