E*Trade Mauritius, an indirectly owned subsidiary of E*Trade Financial Corporation (E*Trade US), has been required to pay INR245m (USD50m) Capital Gains Tax (CGT) on the sale of shares in IL&FS Investmart Limited (IL&FS) to HSBC Violet Investments (Mauritius) Limited (HSBC Mauritius) after a tax adjudication by the High Court Mumbai. The tax monies had been deposited earlier with the High Court awaiting revision proceedings, and have been released now to the tax authority.
As with the earlier case involving USD11bn CGT assessed on Vodafone with regard to its purchase of Vodafone Essar for which it failed to withhold the CGT, the sale was routed through a company based in Mauritius with which India had a Double Taxation Avoidance Agreement. E*Trade appealed against the assessment on the basis of this Tax Treaty but the Indian Income-tax Department maintained successfully that the assets in question were located in India, so that tax is liable to be paid there.
Similar tax demands are in the pipeline on the acquisition of Fosters Australia’s Indian subsidiary, Foster’s India, by British brewer SABMiller, and the Idea-Cellular AT&T acquisition.
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