In a development which have dramatic impact on not only Vodafone’s India business but also on a global scale, The Bombay High Court (HC) ruled on Wednesday that the company was liable to pay taxes for a deal carried out with Hutch towards acquiring the latter’s stake in Indian operations.

The HC ruled in response to a petition filed by Vodafone challenging the Income-Tax department’s notice to it towards payment of tax. The HC ruled that the I-T 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," said the HC.

Vodafone said that it will appeal the ruling in the Supreme Court.

The case dates back to 2007 when Vodafone purchased all the stake of Hutchison Whampoa Ltd's mobile business in the Indian operations for $ 11.1 billion. The I-T department has been claiming that 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.