Friday October 30, 10:10 PM

Tax dept issues claim notice to Vodafone

NEW DELHI/LONDON (Reuters) - India on Friday asked Vodafone Group to defend itself in the latest twist of a long-running tax dispute sparked by the $11.2 billion stake purchase of Hutchison Telecom's Indian operations in 2007.

Vodafone, in a statement issued in London, confirmed it had received a notice from the tax department and said it remained confident that no tax was payable on the transaction.

The announcement is the latest procedural development in the case, which has pitted Indian authorities against Vodafone. Indian media estimates the tax demand at about $2 billion.

Vodafone had appealed to the Supreme Court of India after the Bombay High Court last year dismissed its petition against the tax bill. The Supreme Court in January asked tax authorities to decide whether they had jurisdiction to proceed against Vodafone.

As part of this decision, India's Central Board of Direct Taxes said Vodafone needed to comply with its notice by Nov. 16 "as to why it should not be held that the (tax) department has competent jurisdiction to proceed against it for the default of non-deduction of tax at source from the payment."

Vodafone said it would continue to defend its position vigorously and intended to respond to the tax department after reviewing the document in detail. Its shares were down 1 percent at 1355 GMT.

Indian authorities have said Vodafone's deal was liable for tax because most of the assets were based in India and because under Indian tax law, buyers have to withhold capital gains tax liabilities and pay them to the government.

But Vodafone, the world's largest mobile phone company by sales, has said Indian law did not require it to deduct tax, and that capital gains tax was usually paid by the seller.

(Reporting by Rajkumar Ray, Devidutta Tripathy in New Delhi and Kate Holton in LONDON ; Editing by John Mair and Jon Loades-Carter)

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