The Supreme Court on Monday asked Vodafone to deposit Rs 2,500 crore and a bank guarantee of Rs 8500 crore in its ongoing case in New Delhi in which the UK based telecom giant has challenged capital gains tax of Rs 11,000 crore from its acquisition of Hutchison shares.

The bench headed by Chief Justice S.H. Kapadia directed Vodafone to deposit Rs 2500 crore within three weeks and a bank guarantee of Rs 8500 crore within 8 weeks.

The bench, which also comprised justices K.S. Radhakrishnan and Swatanter Kumar, also held that if the case goes in favour of Vodafone then the government will have to return the amount to the telecom giant along with interest.

The apex court would start its final hearing in this matter from 5th February, 2011.

The apex court also directed the Director General of international taxation to file an undertaking before the court that the government would refund the amount along with the interest to Vodafone if the UK based telecom giant succeeds in the case.

The Supreme Court had on 25th October adjourned the hearing after Vodafone sought time to go through its tax notice sent by the IT department and to file its reply.

Following the instructions of the apex court, the TDS (tax deducted at source) officials of the Income Tax department had fixed Vodafone’s liability on the overseas transaction.

The department held Vodafone liable for not deducting tax at source on capital gains accruing to Hutchison and claimed over Rs 11,000 crore in tax and as a penalty on the 2007 deal.

Hutchison’s telecom business in India comprised a substantial chunk of its overall business and the deal enabled Vodafone to enter the Indian market in a big way.