September 8, 2010 10:28 AM EDT
A court has dismissed a petition filed by Britain's Vodafone against the country's tax department, saying the department does have jurisdiction over tax bills in cross-border mergers.
"The petition is dismissed," one of the judges said in the ruling.
"The IT authority's order cant be held to lack jurisdiction," he said.
Vodafone, fighting a tax bill in India from its 2007 purchase of Hutchison Whampoa Ltd's mobile business in the country, had filed an appeal with the court in June challenging the tax department's jurisdiction over the tax bill.
Vodafone has not said how much the authorities were seeking, but a person with knowledge of the matter has said it was about 120 billion rupees ($2.6 billion).
The Bombay High Court had concluded its hearing in Vodafone's appeal against the country's tax department last month.
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A spokesman for Vodafone in India had no immediate comment.
The tax authorities have said Vodafone's deal was liable for tax because most of the assets were based in India and under Indian law, buyers have to withhold capital gains tax liabilities and pay them to the government.
But Vodafone has said Indian law did not require it to deduct tax, and that capital gains taxes are usually paid by the seller.
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