Vodafone is facing a hefty tax bill on its acquisition of a majority stake in Indian wireless carrier Hutchison Essar after the Mumbai High Court decided last week to uphold US $2 billion in capital gains taxes assessed on that transaction by the Indian Income Tax Department. Analysts have described the court’s ruling as significant and predict that the decision could impact as many as 400 other companies that have been involved in offshore transactions. Completed last year, Vodafone’s $11 billion purchase of a 67% stake in Hutchison Essar has given the British carrier an important foothold in India’s burgeoning mobile telephony sector, which recently surpassed the U.S. as the second largest wireless market on earth. Since Vodafone acquired its stake, Hutchison Essar has moved up from fourth place to third in India’s wireless market rankings with 56.7 million subscribers that are exceeded only by market leaders Bharti Airtel and Reliance Communications. Challenging the tax department ruling, Vodafone told the Mumbai High Court that the offshore transaction should be exempt from taxation as the $11 billion purchase price was paid by a Dutch Vodafone subsidiary to a Cayman Island entity controlled by Hutchison Telecommunications International, the Hong Kong-based parent of Hutchison Essar. Vodafone also disputed the constitutionality of retroactive changes this year to Indian law that held Vodafone liable for the tax bill in question. The court, however, turned down Vodafone’s appeal as it gave the British firm eight weeks to seek review before India’s Supreme Court. (The text of the court’s decision has yet to be released.) The tax department is also barred from acting against Vodafone for the next eight weeks or until the Supreme Court rules on Vodafone’s appeal. Maintaining that “the transaction is not subject to tax in India,” Vodafone vowed the pursuit of such an appeal as it expressed confidence in “a positive outcome ultimately.”