3 days ago
Delhi High Court Orders ₹783 Crore Teva Tax Refund
Teva and Ranbaxy once disagreed about selling a cholesterol medicine in the United States.
They settled the disagreement in 2011, and Ranbaxy agreed to share some profits with Teva.
Teva USA later transferred the right to receive those payments to Teva’s Israeli company.
Ranbaxy paid about ₹1,851 crore to the Israeli company and deducted tax in India.
India’s tax department questioned why the money went to Israel instead of Teva USA.
It said the arrangement might have been designed to reduce taxes under a treaty between India and Israel.
Teva challenged the tax case in court.
The Delhi High Court ruled that the proceedings against Teva USA were too late and lacked legal authority.
The court ordered a refund of about ₹783 crore to Teva Israel, with interest, if Teva meets specified conditions.
The Delhi High Court quashed tax proceedings against Teva Pharmaceuticals USA and Teva Pharmaceutical Industries Ltd.
It ordered India’s income-tax department to refund approximately ₹783 crore to Teva Israel, plus applicable interest.
The court found the proceedings against Teva USA were time-barred and lacked jurisdiction.
The dispute followed payments of about ₹1,851 crore from Ranbaxy to Teva Israel under a 2011 settlement involving atorvastatin sales.
The tax department had alleged that transferring payment rights to Israel was structured to gain an advantage under the India-Israel tax treaty.
- Who
- Teva Pharmaceutical Industries Ltd, Teva Pharmaceuticals USA, Ranbaxy Laboratories, and India’s income-tax department.
- What
- The Delhi High Court quashed tax proceedings and ordered a refund of approximately ₹783 crore plus applicable interest to Teva Israel.
- Where
- The case was heard by the Delhi High Court and concerned payments made in India in connection with a United States drug business.
- When
- The ruling was issued on Tuesday; the underlying settlement was reached in December 2011, and Teva challenged the proceedings in 2017.
- Why
- The court found the proceedings against Teva USA were time-barred and without jurisdiction, while the tax department had alleged the payment-right transfer sought a tax advantage under the India-Israel tax treaty.
Teva’s Position
Tax Department’s Position
Validity of reassessment
Teva’s Position
Teva challenged the reopening of its tax assessments and argued that the department could not proceed in the manner it had used.
Tax Department’s Position
The tax department initiated proceedings under Section 148 after questioning whether income connected to the payments had been properly taxed.
Transfer of payment rights
Teva’s Position
Teva received the payments through its Israeli company after Teva USA transferred its contractual right to receive them.
Tax Department’s Position
The department questioned why payments under an agreement originally involving Teva USA were ultimately made to Teva Israel.
Tax motivation
Teva’s Position
The court allowed Teva Israel’s refund claim and quashed the proceedings against Teva USA as time-barred and without jurisdiction.
Tax Department’s Position
The revenue department alleged that moving the payment rights to Israel was structured to obtain a tax advantage under the India-Israel tax treaty.
Key facts
- Refund ordered
- Approximately ₹783 crore, plus applicable interest
- Refund recipient
- Teva Pharmaceutical Industries Ltd, referred to as Teva Israel
- Refund deadline
- Within two months, subject to corporate guarantee or solvent surety conditions
- Payments at issue
- About ₹1,851 crore paid by Ranbaxy to Teva Israel
- Relevant assessment years
- 2012-13, 2013-14, and 2014-15
- Legal provision
- Section 148 of the Income-tax Act, 1961
- Drug involved
- A generic version of atorvastatin
Quotes
Delhi High Court
The court bench comprising Justices Dinesh Mehta and Vinod Kumar
“Respondent is directed to refund the said amount of approximately ₹783 crore, along with the applicable interest, within two months, subject to and upon compliance with the conditions of corporate guarantee/solvent surety recorded in paragraph 231. All pending applications, if any, stand disposed of accordingly.”
livemint.com
Sources
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