The Andhra Pradesh High Court has ruled that French drug multinational Sanofi Aventis will not have to pay taxes in India for a deal with Hyderabad-based vaccine firm Shantha Biotechnics.
Sanofi Aventis had acquired Shantha Biotechnics for around Rs 3,800 crore through a complex transaction in 2009. Sanofi had acquired ShanH, which held majority stake in Shantha Biotechnics. ShanH, the French subsidiary of Merieux Alliance, had bought majority stake in Shantha Biotechnics in November 2008.
Sanofi had claimed that the transaction was subject to taxation in France, under the French law. However, income tax authorities found Sanofi liable to pay Rs 1,000 crore in tax for the deal. The IT department said Sanofi created a puppet company to evade taxes. ShanH was incorporated by Sanofi six days before the deal was signed.
The Court cited Article 14 of the Indo-France DTAA (Double Taxation Avoidance Treaty), according to which the right to taxation is with France and not with India. Since the deal was done under Indo-France DTAA, the retrospective amendments to the Finance Bill will not apply.
Reacting to the judgement, TP Ostwal of TP Ostwal & Associates said the ruling meant retrospectively is not relevant.
Former Finance Minister Pranab Mukherjee had introduced a proposal to amend income tax laws with retrospective effect to cover cross border deals involving Indian assets in 2012-13.