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Vodafone, Essar Said to Split $785 Million Tax Bill in India

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July 1 (Bloomberg) -- Vodafone Group Plc and Essar Group Ltd. are working on an agreement to split a tax bill following the U.K. company’s purchase of Essar’s stake in their Indian unit, according to two people with knowledge of the matter.

The companies are working on the structure of a deal after Vodafone withdrew a tax-dispute case over the holding, the people said, declining to be identified as the matter is confidential. India’s tax tribunal expects to receive about 35 billion rupees ($785 million), it said today.

Vodafone, the world’s largest mobile-phone company, agreed in May to buy Essar’s stake after the partner exercised an option to sell its holding in the venture for $5 billion. An agreement on the outstanding tax would increase the amount which Vodafone will pay for Essar’s stake.

The transaction will raise Newbury, England-based Vodafone’s stake to 75 percent. The tax is on Vodafone’s $3.8 billion purchase of a 22 percent stake in Vodafone Essar Ltd.

To contact the reporters on this story: George Smith Alexander in Mumbai at galexander11@bloomberg.net Jonathan Browning in London jbrowning9@bloomberg.net.

To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net Kenneth Wong at kwong11@bloomberg.net