No capital gains tax on Sanofi for Shantha deal: HC
In what showed the limitation of India’s recent retrospective amendments in tax laws concerning indirect transfers abroad of Indian assets, the Andhra Pradesh High Court on Friday ruled that notwithstanding the bolstered law, French drug multinational Sanofi need not pay capital gains tax in India for its acquisition of Hyderabad-based vaccine manufacturer Shantha Biotech in 2009.
The court said Sanofi, which is liable to pay tax in France for the Rs 3,800-crore deal, won’t have to pay tax in India also thanks to the protection afforded by the India-French double taxation avoidance agreement (DTAA). Indian tax authorities had asked Sanofi to pay over Rs 650 crore as capital gains tax.
Sanofi Aventis, as it was then known, had bought out Shantha Biotechnics through acquisition of ShanH, which held a majority stake in Shantha. ShanH, the French subsidiary of Merieux Alliance, had earlier bought out Shantha in November 2008. The court held that ShanH was a company with commercial substance and so the deal was eligible for treaty protection.
The government is likely to challenge the order in the Supreme Court.
The HC ruling have positive implications for at least a couple of similar cross-border deals where the buyers face Indian tax demands, including British brewing giant SAB Miller, which bought out Foster’s Group for $10.2 billion in September 2011. SAB Miller claims that the transaction enjoyed protection of the India-Australia DTAA.
Rajiv Chug, partner, direct tax, Ernst & Young said: “As long as the entity in the treaty-partner country has commercial substance and is
Be the first to comment.
