British mobile phone giant Vodafone on Tuesday asked India's top court to stop the government fining it over a $2.5 billion tax bill and warned the row could discourage foreign investors. India slapped the disputed $2.5 billion tax bill last October on Vodafone over its $11.1 billion purchase four years ago of a 67-percent stake in Hong Kong-based Hutchison Whampoa's Indian mobile unit.
The penalty being sought by tax authorities "can be up to 100 percent of any tax owed," Vodafone spokesman Simon Gordon told AFP. Vodafone's Supreme Court petition, which a company spokesman said would be heard Thursday, is the latest development in a long-running battle with India's tax office that is being closely watched by foreign investors. "The position being taken by the tax authorities is both unprecedented and also out of step with international taxation principles governing acquisitions, which are designed to encourage investment," Vodafone said in a statement.
The dispute is being scrutinised by international investors with experts saying the case could have implications for big-ticket purchases of Indian firms by other foreign companies. The row comes as foreign direct investment in India plunged in the past year amid investor concern over widespread corruption, bureaucratic delays, a lack of economic reform and an uncertain regulatory climate. The penalty demand for the unpaid tax, received last month, "is only likely to raise further concerns amongst potential investors into India," Vodafone said.