The Supreme Court on Tuesday rejected the government’s review petition it filed after its $2.2 billion tax claim on Vodafone Group Plc was dismissed in January.

The finance ministry last Friday proposed in the Union Budget some changes in the country’s tax rules retrospectively from 1962. This means that cross-border transactions are taxable. This includes the $11.08 billion (around Rs 55,735 crore today) Vodafone-Hutchison deal. 

The amendment which seemed to be an attempt to overrule the Supreme Court’s verdict on Vodafone-Hutchison deal will be applicable to the assessment year 1962-63. This will have an impact on many foreign investments which will now be open to taxation.

A panel of judges comprising Chief Justice S H Kapadia, K S Radhakrishnan and Swatanter Kumar rejected a government plea to review the court's January decision to dismiss a tax claim on Newbury, England-based Vodafone's 2007 purchase of Hutchison Whampoa Ltd's India operations, the court master said citing the chief justice.

The income Tax Department had demanded more than $2 billion in tax on Vodafone's $11.2 billion deal to buy Hong Kong-based Hutchison Whampoa Ltd.'s roughly 67% stake in Indian mobile phone company Hutchison-Essar Ltd. But Vodafone said it didn't have to, because the deal was between two foreign companies.

The apex court in its January verdict had ruled in favor of Vodafone directing the government to return a 25 billion-rupee ($495 million) deposit Vodafone made on the contested tax bill, plus 4 percent interest.