Vodafone is facing a $2.6 billion tax bill, after an Indian high court dismissed the company's appeal against paying taxes on its $11.2 billion acquisition of what is now Vodafone Essar.
But the operator has not given up on the fight, and plans to take the battle to India's supreme court, a Vodafone lawyer told WSJ.com.
The high court has ordered that the income tax department not issue a capital gains tax bill for at least eight weeks to give Vodafone time to appeal.
The decision could have implications for more historic foreign investments in India, although new M&As will be governed by a new Direct Taxes code which is clear on foreign transactions, India's Economic Times reported.
Vodafone argued in court that it should not have to pay taxes on the 2007 acquisition of 67% of the then-Hutchison Essar from Hutchison Telecom International, because the transaction was between two foreign companies.
Even if tax is due, the operator argues, it should be Hutchison, not Vodafone, which has to pay.