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India's highest court has ruled that Vodafone is not liable for taxes and penalties of up to $4.4bn (£2.8bn).

The judgement could relieve pressure on other foreign companies facing similar tax investigations in India.

The case centred on Vodafone's $11bn acquisition of the Indian assets of China's Hutchison Telecommunications in 2007.

Vodafone said it did not owe tax on the deal, as the assets were held by a firm based in the Cayman Islands.

In May 2007, Vodafone's Dutch subsidiary acquired a 67% stake in CGP Investments Ltd, a Cayman Islands registered company which held the Indian telecom assets of Hutchison.

It was presented with a tax demand of 112 billion rupees, currently worth $2.2bn. The Indian government subsequently sought penalties of up to 100% of the original bill.

"The court has concluded that Vodafone had no liability to account for withholding tax on its acquisition of interests in Hutchison Essar Limited (now Vodafone India Limited) in 2007," the company said in a statement.

Analysts say about eight other foreign companies are facing similar litigation from Indian authorities, as the country tries to increase corporate tax revenues.

"This settles a prolonged litigation which had created a lot of uncertainty for multinationals," said Sandeep Ladda, executive director at PricewaterhouseCoopers in India.

GE, SAB Miller, Cadbury, AT&T, Sanofi, and Vedanta are among the firms which may be affected by the ruling.

"This should provide much needed respite to other litigants in other cases," he added.

Advocates of higher corporate taxation, however, were disappointed by the judgement.

"This is deeply harmful," said John Christensen, Director of the Tax Justice Network and author of a book on offshore tax havens.

"It will simply encourage all other companies around the world to use offshore structures to avoid tax," he added.

However, the legal precedent may be short-lived.

India's new tax code, due to be implemented in 2013, contains provisions designed to make transactions similar to Vodafone's liable to tax.

Developing markets such as India are increasingly important to the UK-based telecoms giant.

The firm lost £9m in India in the six months to 30 September, but saw revenue increase by 18.4%.

The country accounted for 9% of the firm's total revenues during the period.