The government asked Vodafone to pay Rs 11,218 crore in taxes within a month for the acquisition of Hutchison’s stake in the telecom joint venture in India in 2007.

“The IT department today issued an order raising a tax demand of Rs 11,217.95 crore on Vodafone International Holdings B.V., treating it as an assessee in default, for failure to deduct tax as required before making a payment of USD 11,076 million (about Rs 55,000 crore) to Hutchison Telecommunication International Ltd,” according to a press statement issued by Income tax department in New Delhi.

The notice was issued following the Supreme Court directive on September 27 to the IT assessing officer to determine and quantify the tax liability of Vodafone within four weeks.

Vodafone, however, opposed it.

“Vodafone strongly disagrees with the tax calculation released by the Indian Tax Office to the media today,” said Vodafone spokesperson.

“Vodafone continues to believe that it is not liable for any tax on this transaction involving the transfer of a company outside of India. Further, Vodafone was the acquirer and not the vendor and has made no gain on the transaction. In this "test case", the tax authority is attempting to interpret Indian law as it has never been interpreted for the past 50 years, and this interpretation also goes against internationally recognized tax norms,” added the spokesperson.

“In any event, Vodafone also believes the tax calculation released by the Indian Tax Office today is unfounded as it has failed to follow the conclusions of the recent Bombay High Court judgment.”

Vodafone had bought majority stake owned by Hutchison in the Hutchison-Essar joint venture offering mobile services in India.