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Updated Saturday, January 21, 2012 0:03 am TWN, AP

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India Supreme Court rules Vodafone not liable for US$4.4 billion tax bill

MUMBAI, India -- British telecom giant Vodafone is not liable for up to US$4.4 billion in back taxes and penalties, India's top court said Friday, in a ruling that removes significant uncertainty for foreign companies investing in the country.

The decision will come as a relief to international investors who feared the Vodafone precedent would expose them to unforeseen tax liabilities.

“The Supreme Court has come with a thumping judgment,” Vodafone lawyer Harish Salve told reporters.

Faced with flagging growth and investment and a weakening currency, the Indian government has been scrambling to rekindle foreign investment.

Analysts say the Vodafone tax case had cast a chill on investor sentiment, serving as a powerful emblem of the danger of shifting regulations in Asia's third largest economy.

At the same time, the Indian government is eager to boost revenues to help balance its budget and pay for planned increases in spending on social programs in a country where some 800 million live on less than US$2 a day.

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