Vodafone in $2bn Indian tax setback

Steve Dinneen
Follow Steve
VODAFONE’s long-running battle over an acquisition it made three years ago continued yesterday when India’s tax department served a new notice on it, which could see the pair battle it out in court afresh.

The case relates to Vodafone’s $11bn (£7.5bn) acquisition of Hutchison Essar in 2007. Indian authorities believe Vodafone should have paid a mammoth capital gains tax bill on the acquisition as the transfer involved an Indian asset, even though the business was registered in the Cayman Islands and is not usually liable to pay tax in India.

The Indian authorities argue Vodafone should have withheld $2bn in capital gains tax on the deal on the government’s behalf. Vodafone is expected to appeal against the notice.

The move is the latest in a long tussle over the UK firm’s Indian ?business.

This year Vodafone was forced to take a £2.3bn impairment charge on the division thanks to fierce com petition and rapidly escalating spectrum costs.

And last month it paid £1.74bn for a section of the Indian mobile phone spectrum to provide 3G services. The telecoms giant was involved in a fierce bidding war that pushed the price far higher than it hoped to pay – three times the predictions of some analysts.

Vodafone last month revealed ?overall profits of £8.7bn, up from £4.2bn a year earlier. Revenue for the group rose 8.4 per cent to £44.5bn.