The decision of the Bombay High Court in Vodafone’s challenge to a $1.7-billion tax notice served on the company related with the acquisition of majority stake in Hutchison Essar Limited has wide ramifications for large, cross-border transactions. The ruling states that the Income Tax Department has the jurisdiction to send notice to Vodafone to pay Rs 12,297 crore as tax liability for its 2007 Hutch- Vodafone deal. It based its ruling on the reason that Vodafone’s transaction with Hutchison Telecommunications International has a nexus with India which is enough to hold its payments subject to withholding tax under § 195 of the Income Tax Act, 1961. It is the aim of this article to analyze the ruling of the Court with regard to § 195. The article seeks to prove, firstly, how the Vodafone transaction did not have any nexus with India enough in the eyes of law to tax it under the Act. Subsequently, the authors will attempt to draw attention towards the much ignored test of nationality which should be utilized in interpreting § 195 and its provisions dealing with withholding tax on payments made to non-residents.