Vodafone  moved Bombay High Court on 07th June 2010, challenging the income tax (I-T) department’s right to levy a tax on its $11.1-billion deal in 2007 to acquire Cayman Island-based Hutchison International’s stake in Hutchison Essar.

The telecom giant has argued that the tax authorities have no jurisdiction over the overseas deal with Hutchison.

In a statement, Vodafone said the appeal was filed by Vodafone International Holdings BV (VIHBV) against the order on jurisdiction issued by the tax authority on May 31.

In its ruling, the I-T department held that it had the jurisdiction to tax the transaction. While the tax liability of Vodafone was estimated earlier at around $2 billion, the department had assessed Vodafone’s liability at Rs 12,000 crore, which includes interest and penalty.

In 2007, Vodafone had acquired the 67 per cent stake held by Hutchison International in Hutchison Essar for over $11 billion. However, the I-T department demanded the payment of capital gains tax, which it said had to be deducted by Vodafone before it made the payment to Hutch.

Later the same year, Vodafone received a show-cause notice from the I-T department asking it why it had not deducted tax. After this, the company approached Bombay High Court, which dismissed its petition challenging the tax department’s notice.

Last year, it approached the Supreme Court. Although the apex court did not intervene in the dispute, it asked the department to check whether it had the jurisdiction in the case. It also granted Vodafone the right to appeal in Bombay High Court if it did not agree with the tax authorities.

Vodafone today added that its appeal was in line with the Supreme Court judgment, granting VIHBV a specific right of appeal to Bombay High Court. “Vodafone remains fully confident that no tax is payable and the legal advice we have received unanimously agrees,” it said.

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