mumbai the supreme court has sent a notice to financial services company etrade mauritius seeking its response to the special leave petition filed by the incometax department challenging an earlier decision by the authority for advance ruling that exempt the mauritian company from paying tax in indiathe apex court will decide whether to admit the petition after a hearing that is expected to take place after a month the case will be closely followed by many others as it would give a clear indication of the stand india would take on taxation of crossborder transactions involving indian entities it would also be of interest to tax experts and tax regimes in many parts of the world that might consider this case as a precedentearlier india set a precedent by slapping a 2billion tax notice on ukbased telecom major vodafone that acquired hutch essar for 11 billion in this case the judiciary ruled in support of the revenue department a decision on etrade is expected to further clarify indias position on similar crossborder tax issuesetrade mauritius is an indirectly whollyowned subsidiary of usbased etrade financial corporation and is in the business of identifying opportunities for investment in the asian region the incometax department buoyed by the favourable order in the vodafone case had asked etrade to pay tax in india on its transaction with hsbcthe tax demand was on the transaction where etrade financial corporation sold its stake in ilfs investmart an indian company to hsbc violet investments also based in mauritius etrade mauritius sought to obtain a certificate from tax authorities under section 197 of the income tax act 1961 for exemption from paying tax the tax authorities however refused to grant the certificate etrade dragged the tax department to the bombay high court claiming that it could not be taxed in india under the indiamauritius double taxation avoidance agreement the bombay high court directed etrade to go back to the incometax department and present its case before the director international taxation the high court asked the departments director to give the order within three months the high court also directed the company to deposit rs 245 crore with the court the director eventually gave an order upholding the earlier order that raised a tax demand rs 245 crore thereafter the mauritian company moved the aar the aars order held that etrade was not required to pay tax in indiathe incometax department filed the special leave petition on the grounds that capital gains tax needed to be paid from the sale of etrades shares in ilfs investsmartthough the sale was routed through a company based in mauritius with which india has a double taxation avoidance agreement the incometax department has said that since profit was generated in india tax is liable to be paid in indiameanwhile the department has sent similar notices on the acquisition of beer major fosters india by sabmiller