MUMBAI: India's Supreme Court ordered Vodafone to deposit 25 billion rupees ($554 million) within three weeks on its contested $2.5 billion tax bill, a company spokesman said Monday. The British telecoms company said it also would arrange a guarantee with an Indian bank for the remaining Rs85 billion ($1.9 billion) within eight weeks, as ordered by the court. The Supreme Court has not yet delivered a verdict in the case, which is being closely watched by foreign companies fearful that it could set a precedent that might make them liable for retroactive changes under Indian tax law. The next hearing is set for Feb. 24. The tax relates to Vodafone's acquisition of the Indian telecom assets of Hong Kong's Hutchison Telecommunications International Ltd. Vodafone, whose joint venture with India's Essar group is one of India's largest mobile operators, maintains that it does not owe tax on the $11 billion transaction because it took place between two foreign entities. In May 2007, Vodafone International Holdings BV – a Dutch subsidiary of the British telecom giant – acquired a 67 percent stake in CGP Investments Ltd., a Cayman Islands company which held the Indian telecom assets of Hutchison. The Dutch government has stepped in to try to resolve the case out of court under the terms of a government-to-government tax treaty, Vodafone said, after earlier efforts by British officials to lobby New Delhi. “We can confirm that the Dutch government has been in discussion with Vodafone and we believe it has initiated a formal process under the Tax Treaty between both the Dutch and Indian governments,” Vodafone said in a statement. Vodafone said the $554 million deposit is to be held by the court. If the case is decided in Vodafone's favor, the money will be returned with interest, it said.
