Vodafone’s long-running spat with the Indian tax authorities over its acquisition of the country’s third-largest mobile operator in 2007 looks set to return to court. According to the Financial Times, India’s Income Tax Department served new notice on Vodafone yesterday, restating its claim that the UK firm owes the Indian government around US$2 billion in capital gains tax relating to its US$11 billion acquisition of Hutchison Essar three years ago. Vodafone lost an earlier case in the Bombay High Court challenging the tax department’s right to assess it for tax on the transaction and had appealed to the Supreme Court. The Supreme Court in January last year ordered that the case first be returned to the tax department, which should determine whether it did in fact have the jurisdiction to tax Vodafone in the Hutchison Essar deal. “The Supreme Court granted Vodafone the right of appeal to the Bombay High Court if we disagree with the tax authorities’ determination,” Vodafone said in a statement on Monday. People familiar with the matter said it was likely to appeal against the latest notice immediately.

Vodafone has repeatedly argued that it is not liable to pay tax on the deal as the sale of shares took place overseas between offshore companies, which under past practice would have exempted the transaction from Indian jurisdiction. In the 2007 sale, Vodafone International – a Dutch-based company controlled by Vodafone – paid the US$11 billion to a Cayman Island entity run by Hutchison for another Cayman Island company that indirectly held a controlling stake in the Indian mobile operator. “Vodafone remains fully confident that no tax is payable by Hutchison on this transaction and that Vodafone has no liability in any event; and all of the taxation and legal advice received continues to be consistent with this view,” Vodafone said yesterday.