India’s complex and unpredictable tax regime continues to spook investors. Rebecca Abraham recalls some of the nightmares and asks how domestic and foreign companies can reduce the uncertainties surrounding taxation

In November 2006, Mérieux Alliance, a French company that traces its roots to an entity set up in 1897 by a student of Louis Pasteur, acquired a 61.4% share in Shantha Biotechnics, a 13-year-old biotechnology company based in Hyderabad. The acquisition was made through ShanH, a company registered and resident in France that Mérieux Alliance had recently set up for the purpose. Subsequently, Groupe Industriel Marcel Dassault, a French conglomerate with interests ranging from aviation and newspapers to wine, took on a 20% interest in ShanH.

In August 2009, Sanofi Pasteur acquired the entire share capital of ShanH, which by that time held a little over 80% of the share capital and voting rights of Shantha Biotechnics. As a result, majority ownership of the Indian company moved from one French company to another.

As far as the French entities were concerned, there was little that could attract the attention of the Indian tax authorities, more so as there is a double tax avoidance agreement (DTAA) between France and India. However, this was not to be.

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