Vodafone anticipates USD5 bn bill from Indian taxman

Excerpts from Reporter's Diary on CNBC-TV18 Watch the full show »

Telecom operator Vodafone is anticipating a USD5 bn bill from the Indian taxman. The earlier claim was for around USD 2 bn but Vodafone is preparing for the worst and anticipating the tax man to add a 100% penalty and interest from 2007 on the disputed amount, reports CNBC-TV18's Nayantara Rai quoting sources.

Also Vodafone sources disagree the telecom major has been premature in serving a notice to the Prime Minister under the treaty with Netherlands, or that if it had to it should have been under the Double Taxation Avoidance Agreements (DTAA).

According to sources legal advice received by some of the best in the business makes it clear the tax matter is covered under the treaty. They disagree with the finance ministry's claims that Vodafone should have prepared to have pay tax after receiving three advisories in 2007. Vodafone sources say they never received any such advisory. Advisories were only sent to Hutchison Max, and in these letters the taxman said only the onshore transaction was taxable, and not the offshore transaction, which has now even been upheld by SC.