The Financial Times (FT) reports that Vodafone’s tax battle with the Indian government has suffered a further setback, with news that the country’s Supreme Court has refused to hear an appeal by the operator and sent it back to the tax department for deliberation. Last month, Vodafone announced it would appeal to India’s Supreme Court in a bid to halt the Indian government’s plans to impose a US$2 billion capital gains tax bill on it following its US$11 billion acquisition of Hutchison Essar in May 2007. A Bombay High Court had earlier dismissed a petition by Vodafone seeking exemption from the charges.

According to the FT report, a Vodafone statement noted: “Should Vodafone be aggrieved by the order of the tax authorities’ preliminary adjudication on jurisdiction, Vodafone has been permitted to again directly approach the High Court.” However, observers have commented that, since the High Court originally dismissed Vodafone’s appeal, the chances of a decision in favour of Vodafone this time are slim. The case is believed to have broader implications for India and could potentially deter future deals from foreign investors.