India’s tax authorities filed a request on Friday for a review of a Supreme Court ruling dismissing a $2.2-billion tax bill imposed on British phone giant Vodafone.
Indian tax authorities imposed the 112.2 billion rupee ($2.2 billion) bill and sought an equal sum in penalties over Vodafone’s 2007 acquisition of Hong Kong-based Hutchison Whampoa’s Indian mobile subsidiary.
But the Supreme Court ruled in January that Indian tax authorities “had no jurisdiction to tax Vodafone” over the $11.1 billion purchase.
Vodafone’s clear-cut win in the bitter legal battle was seen as delivering a shot in the arm to India’s battered reputation among foreign investors who have been rattled by the country’s uncertain regulatory climate.
But in a review petition lodged in the Supreme Court on Friday, the income tax department asked that the judgment be reconsidered and argued the tax act “has not been correctly interpreted”.
Vodafone said that it had noted the the filing, which will be evaluated by the same bench that ruled on the case in January. “We have no further comment to make at this stage,” it added.
The company, the world’s largest mobile operator by subscribers, has argued it was exempt from tax on the deal because it took place in the Cayman Islands and both buyer and seller were foreign.
Vodafone’s purchase of Hutchison Essar, now renamed Vodafone India, was intended to expand revenues in the face of saturated cellular markets in Western Europe.
But despite securing 147 million subscribers, or 17 percent of the Indian market, it has faced a rough ride.
Two years ago, it took a writedown of $3.4 billion, reflecting a disappointing performance in a cut-throat sector where competition has forced down call rates to below a cent a minute.