The Bombay High Court on Wednesday reserved its order on the dispute between the Income Tax Department and Vodafone over capital gains tax to the tune of around $2 billion, arising out of the telecom major's acquisition of Hutchisson-Essar in 2006.

The division bench of Justices S Radhakrishnan and Anand Nirgude has asked Vodafone and the Income Tax Department to submit their written arguments in the matter within one week.

Vodafone is contesting IT Department's notice for capital gains tax to the tune of around $2 billion saying that transfer of shares between two foreign companies was not taxable in India.

Vodafone International (a Dutch company) picked up Hutchisson's (based in Cayman Islands) 66 per cent stake in Hutchisson-Essar to form the Vodafone-Essar here in $ 11.2 billion deal in 2006.

But IT Department has argued that Vodafone is chargeable for capital gains tax as the asset in question is in India even if the transfer of stakes took place between two foreign companies.