M/S. SANOFI PASTEUR HOLDING SA V. THE DEPARTMENT OF REVENUE MINISTRY OF FINANCE FACTS OF THE CASE During 2009, Sanofi Pasteur Holding (hereinafter “Sanofi”) purchased 80.37% of the share capital of a French company, ShanH, with another French company called Mérieux Alliance. (hereinafter “Mérieux”). The balance of the capital, i.e. 19.67%, was acquired from the Groupe Industriel Marcel Dassault (hereinafter “GIMD”). GIMD was also a company incorporated under French law. At the time of purchase, ShanH held 82.5% of the share capital of Shantha Biotechnics Limited (hereinafter “SBL”), a company having its registered office at Hyderabad and incorporated under the Companies Act, 1956. On May 25, 2010, the Income Tax Department issued an order under section 201(1)/(1A) of the Act and deemed Sanofi as "assessed by default" for the very purpose of having withheld tax on certain payments made to GIMD and Mérieux upon the acquisition of ShanH shares. Following this order, the aggrieved parties filed an application with the Authority for Advance Ruling (“AAR”) challenging the taxability of the transaction. However, the AAR ruled against them by stating that, under Article 14(5) of the tax treaty, the capital gains arising from the ShanH share sale transaction were taxable . Therefore, GIMD and Mérieux filed petitions in the Andhra Pradesh High Court against this decision. ISSUES BEFORE THE HIGH COURT. The High Court had several issues to consider before delivering its judgment in this case. The Court had to determine whether the investment in SBL by GIMD and Mérieux via ShanH was intended to avoid tax. If that were the case, the life of ShanH's corporate veil...... middle of paper ......dia should conclusively establish that a DTAA would always prevail over domestic law. He also ruled in favor of the Azaadi Bachao Andolan case as he held that the retrospective application of the amendment to the DTAA was valid in law. We can say with certainty that the judgment established a very concrete precedent in terms of the interpretation of tax conventions in our country. country. The court addressed the existing ambiguity regarding not only the retrospective application of the amendments but also the piercing of the corporate veil to determine whether the purpose of forming a corporation was to evade tax. However, one gray area that the Supreme Court has yet to address is defining the fine line between the definitions of critical terms such as "tax evasion" and "tax evasion." We can only hope that the court will soon clarify its position on the same subject..