NEW DELHI: Indian tax authorities on Friday asked Vodafone to pay Rs 11,218 crore ($2.53 billion) tax on its 2007 purchase of Hutchison Whampoa Ltd's mobile business in the country.
"The tax demand is to be paid within 30 days of the receipt of the notice of demand," the tax office said in a statement.
Supreme Court had asked the tax department to determine by Oct. 25 the potential tax liability over the deal. The Supreme Court will set a date on October 25 for hearing Vodafone's appeal challenging a lower court ruling that Indian tax authorities had jurisdiction over tax bills in cross-border deals.
An earlier High Court judgement had identified two parts of the transaction, the transfer of shares between Vodafone and Hutch and an additional transfer of the 15% interest held by Analjit Singh and Ashim Ghosh.
Vodafone argues that only the 15% is subject to tax, according to its reading the judgement. The IT department disagrees with this analysis of HC ruling.
But, if the company is viewed as an acting agent to pay tax on behalf of Hutch, its liability and the method for calculating outstanding tax will be different.
For now, the Bombay High Court has given a stay order for any action against Vodafone. The case will be heard on October 27 after the Supreme Court hearing on October 25.
Vodafone, whose joint venture with India's Essar group is one of India's largest mobile operators, maintains that it does not owe tax on the $11 billion transaction because it took place between two foreign entities.
"Vodafone strongly disagrees with the tax calculation," the company said in a statement Friday. "The tax authority is attempting to interpret Indian law as it has never been interpreted for the past 50 years, and this interpretation also goes against internationally recognized tax norms."
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