Vodafone (NYSE: VOD) has suffered a setback in its plans to expand its business in India after the Mumbai High Court threw out the company’s challenge against a $2 billion capital gains tax bill for its $11 billion acquisition of Hutchison Essar. Vodafone is planning to appeal to the Supreme Court in Delhi, and has been granted an extension to an existing eight-week order banning the tax authorities from seizing any cash. The company says it owes no tax because the transaction took place between two foreign companies. It says in a statement (via FT.com): “Vodafone, based on advice received, continues to believe that the transaction is not subject to tax in India and is confident of a positive outcome ultimately”. Vodafone bought a 67 percent stake in Hutchison, now known as Vodafone Essar. Vodafone is one of several western mobile operators with large-scale investments in India and is now the third-largest operator in the country with 56.7 million subscribers as of the end of October.

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