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Vodafone wins £2.8bn India tax case

Mobile phone giant Vodafone has celebrated a tax victory after a court ruled it did not have to pay a £3.1 billion bill on the acquisition of an Indian business.

The row kicked off after Vodafone's 11 billion US dollar (£7.1 billion) acquisition of Hutchison's stake in a joint-venture with Essar in May 2007.

The Indian tax authorities hit Vodafone with a £1.6 billion tax bill but with penalties for late payment its liabilities had climbed to up to £3.1 billion.

The UK-based company claimed it did not owe tax on the deal because the transaction happened between two firms outside India.

After a long-running legal battle, the Indian Supreme Court found in Vodafone's favour.

The case is being seen as a landmark ruling because it sets a precedent that other companies will not have to pay taxes on similar deals and will encourage more overseas companies to invest in India.

It also means that Vodafone will receive a refund of £1.8 billion which it was ordered to stump up as deposits and guarantees.

Vodafone chief executive Vittorio Colao said: "We welcome the Supreme Court's decision, which underpins our confidence in India.

"We will continue to grow our Indian business - including making significant investments in rural areas and in 3G network coverage - for the benefit of Indian consumers."

The acquisition in 2007 was Vodafone's first move into the Indian market. Shares rose by around 2%.

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