The government will look into more cross-border mergers involving Indian assets, like the Vodafone-Hutchison deal, after the Bombay High Court rejected the UK-based Vodafone’s petition against the imposition of tax by authorities here.
“This (Vodafone case) is a test case, we will look at similar cases,” Central Board of Direct Taxes (CBDT) acting chairman Sudhir Chandra said.
Although he did not name the companies or deals that could be investigated, Chandra said, “There are already some cases under investigation.”
Sources, however, said the court order may have bearing on the deals like SABMiller-Foster and Sanofi Aventis-Shanta Biotech transactions.
The second-largest brewer in the world SABMiller had acquired 100 per cent shares in the Indian arm of Australia-based Foster.
Similarly, French drug maker Sanofi Aventis had picked up majority stake in Indian vaccine company Shantha Biotech in 2009 for around 770 million dollars.
Also, Mitsui Company of Japan had sold 51 per cent interest in Sesa Goa to UK-based Vedanta group for 981 million dollars in 2007.
Recently, London listed Vedanta Group has signed a deal to acquire UK-based Carin Energy’s Indian arm for USD 8.43 billion.
Chandra said, “(Income Tax) Department’s position stands vindicated. It is a clear cut case of deliberate non-compliance to law on misplaced legal advice.”
Tax authorities had slapped a notice on Vodafone over its acquisition of Hong Kong’s Hutchison Telecommunications, involving its Indian telecom JV Hutch Essar, for over USD 11 billion in 2007.
They said that in this case the buyer, Vodafone, was liable to pay capital gains tax even if it failed to deduct it at source, that is, while making payment to Hutch for the deal that happened overseas. Vodafone challenged the notice.
This report carried an incorrect picture, which was removed on Sept. 10, 2010