Bombay High Court ruled on 8 September that Vodafone must pay a US$2.6 billion tax bill as a result of its acquisition of a majority stake in Hutchison Essar for US$11.1 billion in 2007. Vodafone has filed an appeal with the Supreme Court.
The high court held that Vodafone should have deducted tax at source (withholding tax) on capital gains to Hutchison that resulted from the deal.
Vodafone argued that under Indian law it was not liable to pay withholding tax because the deal was not completed in India. Hutchison had previously held its stake in the company through a subsidiary called GCP, which was based in the Cayman Islands. Vodafone purchased GCP from Hutchison in the 2007 deal and argued that Indian tax authorities did not have jurisdiction over Cayman Islands transactions.
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