$2.6bn tax threat for Vodafone

8th Sep 2010 15:49

Vodafone plans to appeal the Bombay High Court decision that it is liable for tax on its 2007 acquisition of a 67% stake in Hutchison Essar. Vodafone had appealed to the Bombay High Court about a ruling by the Indian tax department that it could levy tax on the company's $11.2bn acquisition. There could be as much as $2.6bn in tax payable on this deal. According to the judgement "...the income from the transaction accrues or arises in India and is chargeable to tax...", according to the judgement. There is a potential get out in the judgement which says that Vodafone could argued that it was not liable to withhold tax in the deal. Vodafone argued that the deal happened on foreign soil but the court said this argument can't be accepted. The tax authorities are not allowed to pass a final order for the tax for eight weeks. The latest appeal will be heard in the Indian Supreme Court.