What is the Vodafone - Indian Government tax dispute all about

In 2007, Vodafone acquired 67 percent of Hutchison’s Indian mobile phone operations for $10.7 billion.

The transaction took place between Netherlands-based Vodafone International Holdings BV and Hutchison, based in Hong Kong. The Hutchison stake Vodafone acquired was owned by a Cayman Islands-based holding company.

After the deal, Indian tax department told Vodafone that it has to pay $2billion to Indian Government.

Vodafone argued that since the transaction took place between two overseas companies (Netherlands-based Vodafone International Holdings BV and Hutchison, based in Hong Kong); and the target asset was registered in the Cayman Islands, hence Vodafone doesn’t owe taxes in India.

Countering the argument the Indian Government told Vodafone that although the share transfer was of a Cayman Islands entity, the deal had an Indian connection.

The dispute is sub-judice. --------

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