Vodafone International Holdings BV and the Indian government will have to finish arguing their case in the Bombay High Court by Wednesday, a lawyer for Vodafone said Friday.

Vodafone International, which is a Dutch firm owned by U.K.'s Vodafone Group PLC (VOD.LN), has been arguing against the Indian state's move to tax the telecom company up to $2 billion as capital gains on its purchase of Hutchison Essar Ltd. since June 23, saying it was being made liable for taxation despite it being the buyer and not the seller in the transaction.

The development is likely to result in a sooner-than-expected judgment on the case, which is being closely watched as it could set the benchmark for foreign investments in India.

"It is a good development. The idea is that both the parties will have to finish their respective arguments in three days (Monday to Wednesday)," Hitesh S. Jain, a partner with ALMT Legal, lawyers to Vodafone, told Dow Jones Newswires.

Vodafone International said since it has paid $11 billion to CPG Ltd., owned by Hutchison Telecommunications International Ltd. (HTX) and registered in the Cayman Islands, Vodafone isn't liable to be taxed in India as the deal took place on foreign land.

Hutchison Telecommunications is the mobile-phone services unit of Hong Kong-based Hutchison Whampoa Ltd. (0013.HK). Hutchison Essar was renamed Vodafone Essar Ltd. after the stake sale.

The Indian income-tax department's contention is that Vodafone should be liable to pay the tax as the transaction involved the transfer of an Indian asset, in this case, the Hutchison Essar stake.

The tax body also contends that Vodafone should have withheld tax on behalf of the Indian government.