International - POSTED: 2010/09/08 11:07
In a landmark ruling Wednesday, an Indian court said Vodafone Group Plc is liable for an estimated $2.6 billion in taxes for its 2007 acquisition of one of India's largest mobile phone companies.
The decision sets a precedent that could impact hundreds of foreign transactions and have a chilling effect on foreign investment, tax experts say.
"We will very seriously consider an appeal," a Vodafone executive said Wednesday after the verdict.
The Bombay High Court said Vodafone won't have to pay any tax for at least eight weeks, while it considers an appeal to the Supreme Court, the nation's highest court. The tax amount due is also up for negotiation.
"We expect them to pay the tax unless the Supreme Court stays it," Tax Department attorney B.M. Chatterjee told The Associated Press after the verdict.
In May 2007, Vodafone International Holdings BV — a Dutch subsidiary of the British telecom giant — acquired a 67 percent stake in CGP Investments Ltd., a Cayman Islands company, which held the India telecom assets of Hong Kong's Hutchison Telecommunications International Ltd.
Vodafone maintains that it did not owe tax on the $11 billion transaction because it took place between two foreign entities.