www.WirelessFederation.com/news: A new notice served by India’s Income Tax Department has pushed Vodafone back to court in a long-running $2bn battle with Indian tax authorities over an acquisition it made three years ago. The tax department was ordered by the Supreme Court in January last year  to re-examine the case, which centers on whether Vodafone should have paid tax on its $11bn acquisition of Hutchison Essar, India’s third largest mobile phone operator, in 2007.

In its argument the tax department has opined that even though Vodafone was the buyer and Hong Kong’s Hutchison was the seller of Hutchison Essar, the UK group should have withheld an estimated $2bn of capital gains tax on the deal on the government’s behalf. On the other hand, as per Vodafone, the Supreme Court granted it the right of appeal to the Bombay High Court if it disagrees with the tax authorities’ determination.

In its counter, Vodafone also made it clear that the sale of shares took place overseas between offshore companies, which under past practice would have exempted the transaction from Indian jurisdiction. Under the Hutchison Essar sale, $11bn had been paid by Vodafone International, a Dutch company controlled by Vodafone to a Cayman Island entity run by Hutchison for another Cayman Island company that indirectly held a controlling stake in the India-based mobile operator.

In January it was decided by the Supreme Court that the case first be returned to the tax department, which should determine whether it did in fact have the jurisdiction to tax Vodafone in the Hutchison Essar deal. According to Vodafone, it  remains fully confident that no tax is payable by Hutchison on this transaction and that Vodafone has no liability in any event; and all of the taxation and legal advice received continues to be consistent with this view.