India's Income Tax department issued a notice to Vodafone Group Plc on a disputed tax bill of Rs 14,200 crore and said it may seize company assets if the dues are not paid. The tax bill is being discussed at international arbitration proceedings. The dispute goes back to 2007 when Vodafone agreed to acquire controlling interest held by Li Ka Shing Holdings in Hutchison Essar. Vodafone then entered India through a subsidiary based in the Netherlands.

While the I-T department says the transaction involved the purchase of an Indian company’s assets and is thus liable for tax in India, Vodafone argues that the transactions happened offshore, on the Cayman Islands. In 2012, India changed its Income Tax Act to ensure that other companies in similar circumstances cannot evade tax by operating out of places like the Cayman Islands, where there are no taxes on corporate profits, capital gains or personal income.

Citing Prime Minister Narendra Modi's promise of a tax-friendly environment in India for foreign investors, Vodafone said there was a complete disconnect between the government and the I-T department, PTI reported. Vodafone is the second largest mobile carrier in the country, with an estimated customer base of 185 million.