The Bombay High Court has rejected the writ petition filed by the telecom giant Vodafone, regarding the capital gains tax, against income tax department. The company has challenged the show cause notice by the IT department, for about $1.7 billion capital gain tax in the High Court.  

The division bench of Justices S Radhakrishnan and Anand Nirgude has also extended the stay on the show cause notice and given a time of eight weeks to Vodafone to file appeal in the apex court. The company may approach the Supreme Court against the income tax department in the next week.

The company had bought 67% stake of Hutchisson in Hutchisson-Essar in February 2007. IT department had directed the company to pay tax on the $11.2-billion purchase and disclose the confidential documents, signed with Cayman Islands-based Hutchison Telecommunications International at the time of the transaction. The company has to pay a penalty of an equal amount and a tax on both sums at 18% per annum, if it loses in the case in SC.

A spokesman of Vodafone International said that the company is not liable to pay tax in India and hopes respite from the apex court. Additional solicitor general, Mohan Parasharan, GC Srivastava of Chaturvedi, Shah Raghavendra Rao and Beni Chatterjee represented the IT department in the court while Vodafone was represented by advocate Iqbal Chagla and Dinesh Vyas.