Sanofi's case is different from Vodafone: Counsel

The Andhra Pradesh High Court (AP 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.

Porus Kaka, lead counsel of Sanofi told CNBC-TV18 that unlike the Vodafone case, their involves tax treaties and most of the company's investment comes from tax treaties. "When you have a tax treaty in focus and a country where you have signed an agreement with different considerations, it should apply and that's what the High Court has agreed with," adds Kaka.

Further, Kaka believes that finance minister is making efforts to try and rectify the wrongs that were brought in the last Budget with regards to the indirect transfer and the retrospective amendment.

"The court's judgment comes at an opportune time for him to take this process forward and ensure that these retrospectives are not applied across the board and certainly not applied in our treaty partners cases. It is very useful in the process what the FM has initiated and I hope it is carried to its logical conclusion and not undone again," adds Kaka.

Below is the verbatim transcript of Porus kaka's interview on CNBC-TV18

Q: Is the big takeaway, as far as this verdict is concerned, is that the Andhra Pradesh High Court has upheld the supremacy of the double tax avoidance agreement?

A: I think so. Unlike Vodafone, this is a case which involves tax treaty and we have 81 tax treaties and most of our investment does come through tax treaties. When you have a tax treaty in focus and a country where you have signed an agreement with different considerations, it should apply and that's what the High Court has agreed with.

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Q: The court also said that it doesn't matter if we have the retrospective amendment which is law today, if you have a double taxation agreement (DTA) is the retrospective amendment not applicable?

A: That has always been our law in India. It is good to see the court applied it even in an context of a retrospective amendment that when there is a provision of a treaty which is signed that will have supremacy despite what your domestic law provides and that is a part of our statute also. So that is a good decision and will help us in this entire indirect transfer retrospective battle that is continuing year after year.

Q: It will put additional pressure on the Finance Minister (FM) to try and rectify the wrongs that were brought in the last Budget with regards to the indirect transfer and the retrospective amendment. Do you believe that we are perhaps closer to see those wrongs being corrected?

A: Yes, the FM is making his efforts. The court's judgment comes at an opportune time for him to take this process forward and ensure that these retrospectives are not applied across the board and certainly not applied in our treaty partners cases. So, it is very useful in the process what the FM has initiated and I hope it is carried to its logical conclusion and not undone again.

Q: The finance ministry will decide its next course of action and whether the IT department will move the Supreme Court or not in this matter. The decision will be taken in the next few days. But going back again to the Vodafone issue because again the IT department sources are stressing on the fact that don't confuse this transaction with the Vodafone transaction it is different. Is it as different as chalk and cheese?

A: I do believe there is a significant difference and ultimately this was a case where there was a whole interpretation of a tax treaty, no question of any third country being involved and therefore there are factual differences. There are some similarities on corporate structure but otherwise, factually, there are significant differences. Legally interpretation issues are vastly different.