Sanofi need not pay tax on Shantha Biotech buy: High Court
The Andhra Pradesh High Court (HC) today said that French drug giant Sanofi Aventis need not pay capital gain tax as demanded by Income Tax (I-T) department for acquisition of Shantha Biotech in 2009.
February 15, 2013 / 23:13 IST
Moneycontrol Bureau
The Andhra Pradesh High Court (HC) today said that French drug giant Sanofi Aventis need not pay capital gain tax as demanded by Income Tax (I-T) department for acquisition of Shantha Biotech in 2009. I-T department had demanded capital gain tax from Sanofi, claiming that the French company gained new market and platform for its products through acquisition of Shantha Biotech. However, Sanofi had challenged I-T department’s claims in 2010.Sanofi had also earlier sought assistance of French authorities to resolve tax issues with Indian I-T department. The pharmaceutical company had argued, in an official statement, that the tax for the acquisition of Shantha Biotech was paid in France under French law as the actual deal saw Sanofi’s vaccine unit buying French firm ShanH, which held 80% stake in the Indian company. Also Read: Vodafone to challenge IT dept's order in tax caseSanofi had further said that paying tax in India would potentially imply a double taxation for the transaction as India and France had an existing tax treaty. The high court ruling has clarified that that if there is an existing tax treaty then section 91 of Income Tax Laws will have no application, Dinesh Kanabar, deputy chief executive officer, KPMG told CNBC TV18 today."The judgment has made it clear that taxability of an overseas transfer will be governed by tax treaty and not by the retrospective amendment," Kanabar said.The finance minister’s proposal to bring retrospective amendments to tax laws especially in case of Vodafone-Hutchison last year, had led to massive outcry in India incorporation. However in Vodafone’s case tax treaty protection was not available. "…Otherwise the retrospective amendment will apply and those who are not protected by the tax treaty. For example if you have a US company which is holding an Indian company and its shares are transferred then treaty protection does not apply because the treaty provides taxing rights to India.," Kanabar added. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
