India slapped a 2.53-billion-dollar tax bill on British cell phone giant Vodafone on Friday over its 2007 purchase of an Indian mobile company and demanded payment within 30 days. The formal demand is the latest development in Vodafone's bitter row with Indian tax authorities over its 11.1-billion dollar purchase of a 67-percent stake in Hong Kong-based Hutchison Whampoa Ltd's Indian mobile unit.
Indian tax officials have call the long-running dispute a "test case." It is being closely watched by international investors with experts saying the case could have implications for big-ticket purchases of Indian firms by other foreign companies. "The income tax department today issued an order raising a tax demand of 112.17 billion rupees (2.53 billion dollars) on Vodafone International Holdings BV," owned by Vodafone Group Plc, the tax office said in a statement.
"The tax demand is to be paid within 30 days," the statement said. The bill follows a lower court ruling last month ordering Vodafone to pay taxes on the acquisition. India's Supreme Court is slated to set a date for a hearing on the company's appeal next Monday.
The tax demand brought a stinging response from Vodafone, which accused tax authorities of "attempting to interpret Indian law as it has never been interpreted for the past 50 years." "This interpretation also goes against internationally recognised tax norms," a Vodafone spokesman said. Vodafone "strongly disagrees with the tax calculation" and believes "it is not liable for any tax on this transaction involving the transfer of a company outside of India," the spokesman said.