Vodafone tax case rumbles on in India

An Indian court resumed hearing a €1.2 billion (US$2 billion) tax case relating to Vodafone's purchase of a cell phone operation in the country last year, a Reuters report said.

The UK firm has also restated its position that it was not liable for capital gains tax, the report said.

The hearing at the Bombay High Court is expected to continue at least until the end of this week, a spokesman for Vodafone said, in a case being closely watched by international investors.

Vodafone Group last year paid €7.06 billion (US$11.1 billion) to a unit of Hong Kong's Hutchison Whampoafor a controlling stake in an Indian mobile operator, which has now been renamed Vodafone Essar.

Vodafone has received a US$2 billion bill from the income tax department, which says the company was liable to pay capital gains tax as most of the assets it bought are based in India.

Vodafone has said Indian law at the time did not require it to withhold tax on the acquisition, and has said that capital gains tax is usually paid by the seller, not the buyer.

It has also questioned the 'constitutionality' of a retrospective change to the Indian tax law in May this year that would allow the government to take action against companies which do not withhold taxes when making a transaction.

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