The income tax department has issued notices to the US-based telecom major AT&T, asking it to file returns in India, giving details of its sale of shares in Idea Cellular to the Aditya Birla group. This notice sent last week is the latest in a series of notices sent by the income tax department exploring the possibility of claiming tax on the recently concluded cross-border acquisitions of Indian entities.

Similar notices have been sent to Vodafone-Essar, which had acquired Hong Kong-based telecom major Hutchisons stake in Hutch-Essar, and Fosters India, which was acquired by global beer major SABMiller.

The tax notice gains extraordinary significance in view of the fact that the Aditya Birla group which bought the AT&T stake in Idea Cellular at $160 million had already secured a no-objection certificate (NOC) from the income tax department before making payment to the US company.

The notice asking AT&T to file returns has two implications. The income tax department can levy a penalty on AT&T for not filing returns which can go up to 100-200% of the tax involved. Secondly, the notice to AT&T can be seen as a prelude to bring the Aditya Birla group and AT &T deal under the tax net.

The tax authorities think it has a locus standi on such deals as long as the business and profit is generated in India. Any deal struck overseas, even if it is between two parties based abroad if it resulted in change of ownership of Indian companies is liable to be taxed here.

A source in the income tax department said: The NOC given to Birla group at best was provisional. That would not deter the department from issuing notices on the deal. The source said There is not going to be a double taxation on this issue. Let them (AT&T and the Birla group) decide between themselves who should pay the tax.

The income tax department got a shot in the arm in this years budget that incorporated an amendment, which stipulated that tax is liable to be paid even by the buyer of the shares of the Indian company. The amendment was made retrospectively effective from 2002.

Tata Industries, which had sold its shares to the Birla group in 2006, was sent a demand notice following which it paid Rs 45 crore as tax. The income-tax department thinks it has a strong case to demand tax on the capital gains generated by the sale of shares. Senior chartered accountant TP Ostwal said: Tax cannot be recovered from AV Birla group. And the departments stand on this issue is in tune with its stand on the Vodafone case.