The Andhra Pradesh High Court today ruled that French drug maker Sanofi Aventis will not have to pay taxes in India for its buyout of Hyderabad-based vaccine firm Shantha Biotech in 2009.
Sanofi Aventis had acquired Shantha Biotech for around Rs 3,800 crore in 2009. However, the income tax department had in 2010 raised a tax demand on the French drug maker as it held that the transfer of capital assets resulted in capital gains and the stakeholders therefore came under the jurisdiction of Indian income tax norms.
Sanofi Pasteur, the vaccine division of Sanofi-aventis, had in July 2009, acquired 80 per cent stake in Shantha Biotechnics for about Rs 3,000 crore.
It had acquired ShanH, which held majority stake in Shantha Biotechnics — a privately held maker of vaccines against Hepatitis B, Diphteria and Tetanus, among others. ShanH, the French subsidiary of Merieux Alliance, had bought majority stake in Shantha Biotechnics in November 2008.
According to the income tax department, Sanofi had gained new market and platform for its products through the acquisition Shantha Biotech. The IT Department said that Sanofi had up a separate company ShanH six days before the deal was signed as a shell company in order to evade taxes.
However, Sanofi had challenged I-T department’s claims in 2010 as the tax for the acquisition of Shantha Biotech was paid in France under French law and paying tax again in India implied double taxation.
The Andhra high court has now ruled that Sanofi-Shantha Biotechnic deal is not taxable under the India-France treaty.