The government?s decision to amend the income tax law to retrospectively tax all cross-border deals where underlying assets lie in India has sent shivers down the spine of India Inc. While Vodafone?s $11-billion acquisition of Hutch?s stake in Hutch-Essar in 2007 is at the centre of this decision, the bigger concern is that in the last six years, there have been several deals which have faced similar tax demands and landed up in court. The Supreme Court?s January judgment rejecting the tax claim on Vodafone had raised hopes for other companies, which now find their cases weakened. Apart from Vodafone, the fate of the following tax disputes would be watched carefully:

Idea Cellular-AT&T $150-million deal; tax dispute in Supreme Court:

In January, the Supreme Court admitted petitions filed by Tata Industries, Aditya Birla Nuvo (ABNL) and US-based New Cingular Wireless Services (NCWS) against the government?s international taxation division?s tax notice in the $150-million deal where AT&T sold stakes to the Tatas and the Aditya Birla Group in 2005. AT&T sold its 16% in Idea Cellular to ABNL through its holding company AT&T Mauritius (New Cingular Wireless). Later on, Tata Industries acquired AT&T?s balance 16% in Idea from AT&T Mauritius. The tax demand came even though ABNL had a certificate under Section 197 of the Income Tax Act that tax was not required to be withheld since the India-Mauritius treaty granted tax exemption on capital gains. The Tatas have paid tax under protest and all the parties are challenging it in the Supreme Court.

SABMiller?s Foster?s India acquisition; tax dispute in Bombay HC:

In 2006, UK-based brewer SABMiller’s Indian arm acquired the Indian assets of Australia?s Foster. The deal was between two international firms outside India but the assets were within the country. The income tax department demanded $39.5 million tax on the $120-million deal. The dispute is currently before the Bombay High Court, with SABMiller arguing that tax is not liable on a transaction between two non-resident parties. It has maintained that the company faced no liability from India?s tax authorities and the responsibility for any claims lay with Foster?s. Meanwhile, in a separate case, Foster approached the Authority for Advance Ruling on the question of whether sale of brand and patent attracts tax in India with the latter answering in the affirmative.

GE-Genpact $500-million deal; HC stayed tax notice:

US-based GE in 2005 sold its 60% stake in GECIS to two US-based private equity firms, Oak Hill Capital Partners and General Atlantic Partners. Since then, the company has changed its name to Genpact and GE is now a Genpact client. The I-T department had demanded payment of capital gains tax for the sale of GECIS Global shares in 2007 seeking details of this $500-million deal. The tax department claimed that though the share sale was outside India, capital gains were generated from the business in India and, hence, the department was entitled to demand capital gains tax on the deal. The Delhi High Court stayed the tax notice and disposed of the petition in favour of GE. No appeal has yet been filed by the tax department in the Supreme Court but now, the government can demand tax through its latest amendment.

Mitsui-Vedanta?s $981-m Sesa Goa deal; case pending in HC:

In April 2007, Mitsui of Japan sold its 51% in miner Sesa Goa to the UK?s Vedanta Group for $981 million. The deal was routed through Finsider International, a company incorporated in the UK, which held Sesa Goa shares. Vedanta bought 100% in Finsider. The dispute on whether tax is payable in the deal in India is currently pending before the Bombay High Court.

Sanofi Aventis-Shantha Biotech $770-m deal; AAR affirmed I-T view:

French drug-maker Sanofi Aventis had bought a majority stake in Indian vaccine company Shantha Biotech in 2009 for around $770 million. The deal was routed through an SPV created by Merieux Alliance of France, which held 90% in the Indian company.

The tax department says Sanofi is liable to pay withholding tax on the gains made by Merieux. The AAR has affirmed the view. The appeal on the matter is yet to be filed.

Kraft-Cadbury $19-billion deal: I-T notice served:

In 2011, the I-T department served a notice on Cadbury India and its overseas parent Kraft Foods Inc seeking details of its $19-billion global takeover of Cadbury. This followed after the Delhi High Court had asked the department to respond to a public interest litigation which had sought action against Kraft for not paying taxes over takeover of the UK-based Cadbury Plc in early 2010. However, Kraft Foods Inc, the US-based foods major, has submitted that it owes no taxes to India?s revenue authorities over the takeover of Cadbury Plc?s India business.