While Sanofi, like many other multinationals, settled this with the tax authorities as part of India’s plan to cancel the Indirect Asset Transfer Amendment or Retroactive Tax Amendment in December, the appeal before the Supreme Court has not yet been removed. In a May 6 order, the Supreme Court dismissed all appeals. “With respect to the application made in court, the appeals are dismissed as withdrawn,” the court said.
“The controversy over the indirect share transfer is now closed as the government withdrew its appeal to the Supreme Court. Although the settlement plan was accepted in December, pending appeals to the SC meant the case was technically in progress,” said Rohan Shah, a lawyer.
In 2009, French drugmaker Sanofi took a stake in Hyderabad-based vaccine maker Shanta Biotech. The transaction was carried out in France because the buyer – Sanofi – as well as the sellers – Institut Mérieux (IM) and Groupe Industriel Marcel Dassault (GIMD) – were French companies.
The tax department had demanded ₹2,000 crore in the case, including taxes and penalties. The Andhra Pradesh High Court quashed the tax claim after which the Revenue Department approached the Supreme Court.
“ Back to recommendation stories
According to Ashish K Singh, managing partner at law firm Capstone Legal, this shows the Department of Revenue’s commitment to ending litigation for matters on which a policy decision has been made by the government.
“It is pertinent to note that more than 50% of cases pending before the Supreme Court and High Court are against the government and such proactive measures go a long way in setting a precedent in other similar cases before various courts across the country. said Singh.
Besides Vodafone and Cairn Energy, companies such as Sanofi, Mitsui, WNS, Tata Group and Genpact that were in litigation or had initiated arbitration proceedings against the tax authorities have settled the tax issue with the government.
The government promised it would refund taxes already collected and withdraw any litigation and arbitration if the companies waived litigation, arbitration and waived damages, interest or any other costs.
In most cases, mergers, acquisitions or restructurings carried out by these companies were taxed in India.
The government’s rationale was that most of the valuation (more than 50%) of the assets or businesses being sold came from India or from Indian clients.