The Indian telecom sector is in for another major tax battle, with the income tax department hitting Bharti Airtel with a $212 million bill, and the operator pledging to fight the demand.
The tax department alleges that Bharti Airtel owes 10.67 billion rupees ($212.1 million) in unpaid dues accumulated from its overseas operations, Economic Timessaid.
Bharti Airtel, India's largest mobile operator, also offers services in 17 African countries, after gaining a foothold in the region through the $11.7 billion acquisition of Zain's African assets in 2010. The company also operates in Sri Lanka and Bangladesh.
The tax department asserts that these services are subject to tax deducted at source (TDS) payments under a provision requiring taxation on paid-for technical services, and that the location of operation is irrelevant in this case.
The demand covers a four year period, commencing with the financial year ending in 2008.
But Bharti has insisted it is fully compliant with the provisions of taxation law, and has revealed it will challenge the demand in court.
In a statement, the operator said the demand was “not justified” and promised to “take appropriate legal recourse.”
Vodafone, which owns a controlling stake in Bharti rival Vodafone India, has been fighting a long-running Indian tax battle of its own.
In 2010, Vodafone was ordered to pay $2.5 billion in tax on its 2007 acquisition of Hutchison's majority stake in the Indian operator, which was then called Hutchison Essar.
Vodafone appealed the tax bill, and when it lost the initial case it took the fight to the supreme court. The final verdict in the case is expected shortly.