Seeking penalties on a “test case” involving a major infrastructure investor highlights the unpredictable nature of India’s taxation policy.
This move is only likely to raise further concerns amongst potential investors into India, the company said in a statement.
Vodafone maintains it does not owe any tax on its $11 billion acquisition of the Indian telecom assets of Hong Kong’s Hutchison Telecommunications in 2007.
The case is being watched closely by foreign investors who fear it could set a precedent that would expose them to new tax liabilities.
The demand for penalties on a tax bill it is now fighting in court is the latest blow for the British company in India.
India is a growing market for Vodafone, but the company has struggled with regulators, pricey spectrum fees and stiff competition.
Its $5 billion cash offer last week to buy out its estranged partner, the Essar Group, in their telecom joint venture also potentially puts it in violation of India’s foreign investment caps.
Vodafone Essar Ltd. is India’s third largest mobile operator by subscribers, with a 16.5 percent share of India’s 752.2 million wireless subscribers as of December.
India accounted for 8.8 percent of Vodafone’s total revenue during the December quarter.
