"Vodafone is confident that no tax is payable on this transaction and all of the taxation and legal advice received remains consistent with this view," said their media release in response to the Income Tax department's second show cause notice. The notice is reported to be 531 pages in length, along with a 1901 page supplement.

The British mobile services giant purchased 52 percent of Hutchinson's stake in Hutchinson Essar for $10.9 billion (Rs. 52, 320 crores) in 2007. One of the biggest deals in mobile telephony, it set a precedent for cross-border transactions in India. For this deal, Vodafone was represented by its global legal counsels Linklaters along with 'best friend' Talwar Thakore, and Trilegal. Hutchinson was represented by Khaitan, Freshfields and Paul, Weiss. AZB and Herbert Smith represented the minority shareholder Essar Group.

The Central Board of Direct Taxes (CBDT) claims that Vodafone owes them about $2 billion (Rs. 9,485 crore) as Tax Deduction at Source and an additional $2 billion as penalty. Vodafone is required to respond to the show cause notice before November 16.

The IT department had earlier issued a notice on the same default. Vodafone had filed a petition before the Bombay High Court challenging the jurisdiction of CBDT.  Additional Solicitor-General Mohan Parasaran, who appeared for the CBDT, had submitted that when Vodafone signed the agreement to acquire interests in India in 2007, it automatically acquired a nexus to a source of income in India, consequently making it liable for taxation. The Court noted that the agreement between Vodafone and Hutchison was not produced before them to ascertain the nature of the agreement and consequently drew an adverse inference against Vodafone. The Court, and later the Supreme Court, dismissed Vodafone's petition questioning the jurisdiction of the CBDT.  

Sameer Tapia, Partner at ALMT Legal, confirmed to Bar & Bench that Partners Aliff Fazelbhoy and Hitesh Jain are advising Vodafone in the tax matter. ALMT had briefed Senior Counsels Iqbal Chagla and Dinesh Vyas before the Bombay High Court. Fali Nariman appeared for Vodafone before the Supreme Court. Mohan Parasaran was assisted by Special Counsel G. Srivastava with Beni M. Chatterjee, who was the standing counsel for the Union of India.

Media reports confirm that the second show cause notice is a result of information gleaned from Vodafone from the first round of litigation. This case is said to set precedent for the various cross border deals that have India connections. While the first round of litigation is pending, the matter, the largest tax issue ever decided on, is now on the verge of seeing the second round of litigations.