Here are the top 10 points in this big story:
"International arbitration decision is based on bilateral investment treaty that cannot curb the sovereign power of taxation," the government official, who declined to be named, told reporters, reported Reuters.
The tax dispute - involving Rs 12,000 crore in interest and Rs 7,900 crore in penalties - started after Vodafone's acquisition of Indian mobile assets from Hutchison Whampoa in 2007.
The government said Vodafone was liable to pay taxes on the acquisition, which the company contested.
In its ruling, the international tribunal said the government must stop seeking dues from Vodafone Instead, it should pay more than Rs 40 crore to the company as partial compensation for legal costs, the tribunal said.
"Vodafone has finally got justice. The government of India came with a retrospective amendment trying to recover the tax which the Supreme Court had struck down," Anuradha Dutt, managing partner of DMD Advocates, a New Delhi-based firm which argued for Vodafone, has told NDTV.
The Supreme Court had ruled in favour of Vodafone in 2012, but the government, later that year, changed rules which empowered it to tax deals concluded earlier.
In July, the Supreme Court asked the Income Tax department to refund taxes to the tune of 833 crore to Vodafone Idea. In September, the top court gave mobile carriers 10 years to pay back dues owed to the government, offering some respite for Vodafone Idea.
The cash-strapped telecom major has been struggling to pay its AGR (adjusted gross revenue) dues. So far, it has paid around Rs 7,854 crore of its AGR dues, it still owes roughly Rs 50,000 crore to the government.
The telecom providers owe the government nearly 3-5 per cent of their AGR in usage charges for airwaves and 8 per cent of AGR as licence fees.
The firms have long disputed the definition of AGR but last year the Supreme Court upheld the government's view that the AGR should include all revenue.
With inputs from Reuters