India has brushed aside  Dutch government''s plea for an out-of-court settlement of Netherlands-registered Vodafone International Holdings BV's dispute involving a tax claim of over Rs 11,000 crore. The Netherlands had written to the Indian government on the behalf of the company in November, asking it to consider an outof-court settlement, called mutual agreement procedure, of the three-year-old dispute. "The request has been turned down," said an income-tax department official familiar with the development.

MAP is an alternative process available to a taxpayer that can run alongside appellate proceedings. It is a preferred way to settle crossborder disputes and was widely used by India and the US last year. The case relates to a Rs 11,000-crore tax demand imposed by the income-tax department on Vodafone International, after the UKheadquartered Vodafone bought Hutchison's India operations through its Dutch subsidiary in 2007 in a $11-billion deal.

The Supreme Court, which will hear the case on July 19, had earlier affirmed the I-T department's jurisdiction to tax the acquisition as the asset transferred was in India. In its interim order, the court had directed Vodafone to deposit Rs 2,500 crore with the court registry and a submit a bank guarantee of Rs 8,500 crore. However, it had asked the I-T department not to impose any penalty on Vodafone.

The I-T department says that since Vodafone did not deduct tax while making payment to Hutchison, it was liable to pay tax on it. The department has also claimed that Vodafone was informed in advance about the tax liability arising in India on account of its acquisition of Hutch Essar while the government was processing its foreign investment application. Consequently, the department issued the order treating Vodafone as an assessee in default.

Vodafone maintains that it is not subject to tax in India. It had earlier said the I-T department was "attempting to interpret Indian law as it has never been interpreted for the past 50 years". Vodafone did not respond to ET's emailed query and phone messages.