Vodafone appeals to India’s Supreme Court to overturn $2.6 billion bill for back taxes

Vodafone appeals $2.6 billion Indian tax bill

MUMBAI, India — British telecom giant Vodafone Group Plc said it appealed to India’s Supreme Court Tuesday to overturn a ruling that it is liable for up to $2.6 billion in back taxes.

The case is being closely watched by foreign companies that fear it will set a precedent that could make them liable for retroactive changes in the application of Indian tax law.

In a landmark ruling last week, the Bombay High Court ruled that Vodafone had to pay taxes on a May 2007 deal in which its Dutch subsidiary, Vodafone International Holdings BV, acquired a 67 percent stake in CGP Investments Ltd., a Cayman Islands company. CGP held the India telecom assets of Hong Kong’s Hutchison Telecommunications International Ltd.

Vodafone maintains that it does not owe tax on the $11 billion transaction because it took place between two foreign entities.

“The appeal challenges the recent High Court judgment on the issue of jurisdiction,” Vodafone said in a statement Tuesday. “Vodafone remains convinced that there is no tax to pay on the Hutchison transaction and we will continue to defend this position vigorously.”

The High Court ruled that at least part of the deal is taxable in India because it involved the indirect transfer of Indian assets, which accrue revenue in India.

Central Board of Direct Taxes Chairman S.S.N. Moorthy told reporters in New Delhi on Monday that officials are already investigating similar cross-border deals.

The Vodafone litigation has revealed uncertainties in India’s tax code, some of which should be clarified by new tax laws set to take effect in 2012. But for now, tax experts say hundreds of cross-border transactions that have taken place in the last seven years could come in for fresh scrutiny.