IntroductionTaxation Environment in a Country has also been and always remains a matter of concern for foreign investors. A foreign investor always looks for certainty and favorable taxation environment. There has been a lot of ambiguity in taxation atmosphere in India. Last year has seen a lot of developments in taxation scenario in India, starting from the Vodafone judgment, amendments in Income Tax Act, 1961 following the Vodafone judgment, revision and deferment of GAAR [General Antiavoidance rules ] till 2016. Recent judgment of Andhra Pradesh High Court in the case of Sanofi Pasteur Holding SA comes as a breather for foreign investors1. Brief facts of case In the present case, Sanofi Pastuer Holding (Sanofi), a company incorporated under the laws of France had purchased 80.37% of the share capital of another French company (i.e. ShanH) from Merieux Alliance (MA), a French company, and a balance 19.63 % share capital of ShanH from Groupe Industrial Marcel Dassault (GMID), another French company. ShanH held 82.5% of the share capital of Shantha Biotechnics Limited (SBL), a company incorporated under the Companies Act, 1956. The tax Department passed an order on Sanofi dated 25 May 2010 under Section 201(1)/(1A) of the Act, holding Sanofi as an 'Üassessee-in default'" for not withholding taxes n payments made to MA and GMID on acquisition of shares of Shanh. MA and GMID made an application to the Authority for Advance Ruling (the AAR) on the taxability of the transaction. The AAR in November 2011 ruled that the capital gain arising from sale of shares of ShanH by MA and GMID was taxable in India in terms of Article 14(5) of the tax treaty. Sunsequently, both the parties i.e. the Buyer (Sanofi) and Sellers (MA and GMID) filed writ petitions before Andhara Pradesh High Court (High Court). 1) Is ShanH not an entity with commercial substance; is a sham or illusory contrivance, a mere nominee of MA and/or MA/GIMD being the real, legal and beneficial owner(s) of SBL shares; and a device incorporated and pursued only for the purpose of avoiding capital gains liability under the Act ? 2) Was the investment, initially by MA and thereafter by MA and GIMD through ShanH in SBL, a colourable device designed for tax avoidance? If so, whether the corporate veil of ShanH must be lifted and the transaction (of the sale of the entirety of ShanH shares by MA/GIMD to Sanofi) treated as a sale of SBL shares? 3) Is the transaction (on a holistic and proper interpretation...
Sanofi Wins The Indirect Way - !!!!!!
|Author:||Mr Smeeksha Bhola|
|Profession:||Singh & Associates|
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