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Foster's gets a breather in tax dispute
September, 27th 2008

The Indian tax demand on Fosters Australia, a global beer major, has been stalled. On Wednesday, the Delhi High Court ruled that no tax demand be issued to the Australian company until the high court decides on the petition filed before it by the foreign firm. This is the latest judicial order on whether tax is payable in India when the ownership of an Indian company is changed due to cross-border acquisitions.

Atul Dua, senior partner of Seth Dua & Associates, who represented the Australian beer major, told ET: This order will have a bearing on similar cases in the country.

Fosters Australia has been facing a tax liability in India after it sold its Indian arm, Fosters India, to another global beer major SABMiller for $120 million two years ago. The Authority for Advance Ruling (AAR), a quasi-judicial body in India on tax matters, had asked Fosters Australia to pay tax on the profit from the sale. Of the deal size of $120 million, the intangible assets of Fosters India, namely trademark, goodwill and brewery licence, had been valued at about $90,000.

The AAR said the brand, trademark and goodwill of Fosters India are associated with the companys business and hence, the sale of these assets to SABMiller is liable to be taxed in India. The Australian company had approached the Supreme Court challenging the AAR order. But the apex court declined to entertain the companys petition and directed it to move the high court on September 8.

The order issued by a division bench of the Delhi High Court comprising Justice Badar Durrez Ahmed and Justice Rajiv Shakhder said, In the meanwhile, if assessment proceedings are commenced, no order be passed. The Supreme Court also directed the Income-tax department to suspend the proceedings to levy tax on for two weeks, to allow the latter time to move the High Court.

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