Vodafone wins India tax battle

VODAFONE HAS WON its long-running battle against the Indian tax authorities over multi-billion dollar tax liability.

Vodafone's $11.2bn ($7.2bn) acquisition of an Indian-based company in 2007 saw India claim $2.2bn in capital gains tax, which has been vigorously disputed by the telecoms business since.

The Indian Supreme Court overturned an earlier High Court decision in the tax authority's favour, ordering that Vodafone be repaid around $500m held by the Indian taxman.

India charges capital gains tax on the disposal of shareholdings of assets I its territory held by foreign investors. The court decided that while the sale involved an Indian company, Vodafone had purchased a Caymans Islands-based business that owned the company.

Kevin Phillips, corporate tax partner and international tax specialist at Baker Tilly, said: "The case represents a huge relief, not just for Vodafone, but for a host of other large multinationals that have undertaken similar deals in India and that were anxiously awaiting the outcome.

"The case effectively restores the previously widely understood order, and gives much needed confidence to existing and future foreign investors, and not just in India."

ACCA head of tax Chas Roy-Chowdhury warned that from 2013 India's laws on taxing transactions have been tightened.