Pending a final decision on Vodafone’s appeal against a government directive that holds Vodafone liable for US$2.5 billion in taxes and interest accruing from the company’s 2007 acquisition of Hutchison Essar, the Supreme Court of India ordered Vodafone on Monday to submit a deposit of $554.1 million within three weeks as well as bank guarantees within eight weeks that would cover the outstanding portion of the government’s tax claim. Monday’s ruling constitutes the latest development in Vodafone’s long-running legal battle against the tax assessment that company officials insist is not owed as the $11 billion Essar deal took place between a Dutch-controlled subsidiary of Vodafone and a Cayman Islands group that indirectly held a controlling stake in Essar. The case before India’s Supreme Court addresses a lower court decision that upheld the tax claim. Observers anticipate that the high court will issue its final ruling on the matter in February. Sources close to the Supreme Court confirmed that deposited funds will be paid back to Vodafone if the company wins its appeal. A three-judge panel of the high court has also asked India’s tax department to bear the interest on the deposit if Vodafone prevails in the case. In the meantime, officials of the Dutch government acting on Vodafone’s behalf have initiated a process under an existing treaty between the Dutch and Indian governments to consider an agreement that could settle the case. Reacting to Monday’s decision, a spokesman for Vodafone emphasized that his company “is confident there is no tax liability from this transaction.”