A recent string of decisions by the Indian courts may herald a revised approach to tax and greater certainty for global investors, particularly in the energy, natural resources and infrastructure sectors.

On 18th November, India's High Court ruled in favour of Shell India, in a high-profile dispute with the country's tax authority over claims that it had under-priced shares issued to its parent company in 2009.

The victory follows on from a similar win for Vodafone last month.

And in the case of Copal Research Limited, in August of this year, the Indian court rejected the tax authority's attempt to tax a non-resident company on a gain realised through an indirect disposal of assets which derive their value (in part) from Indian property. This has been seen by some as a departure from an earlier trend, including the case law created by the original Vodafone case, which concerned the indirect disposal of the Hutchinson Indian telecom business in 2007. 

The Shell dispute focussed on Shell India's issue of 870 million shares to Shell Gas BV, in March 2009, at INR 10 per share. This common method of funding subsidiaries is typically viewed as a capital transaction, outside the scope of transfer pricing rules. However, India's tax authority disagreed, and further claimed that Shell India had undervalued the shares by a total of $2.5bn. It then sought to add this amount to Shell India's taxable income.

The Bombay high court sided with Shell, ruling that the transfer pricing rules do not apply to the issue of shares by an Indian company to a foreign parent. Hence, Shell was not deemed to have undervalued the shares, and was not liable for the tax claimed.

Around two dozen other international businesses are in similar disputes with the Indian tax authorities, including HSBC and AT&T, and should take some comfort from the decision in Shell, as well as the earlier, similar decision in the case of Vodafone's issue of shares to its Mauritius parent.

Over and above the technical aspects of the decision, the trend set by it and the earlier decisions in the cases of Vodafone and Copal Research appears to be one of retrenchment, away from the perceived activism of the Indian tax authorities and the Indian courts in the context of the taxation of multinationals operating in India. That approach has resulted in a prolonged period of uncertainty for foreign multinationals - according to some reports, Shell previously delayed investment decisions on Indian expansion, pending the outcome of its fight with the tax authority, and so have other significant energy and infrastructure players.

In the wider global context, the Vodafone Hutchinson saga, starting in 2007 and later on leading to the introduction of retrospective tax legislation going back to 1960s, drew attention globally to the notion that buyers and other parties may face a tax charge in respect of gains realised by a non-resident seller of Indian assets. The idea spread like wildfire to other jurisdictions, in particular in developing economies, resulting in increased uncertainty for sellers and buyers alike. The tax charge asserted by the Mozambique government on the disposal of Cove in 2012 is one example for this growing trend, and practitioners will be aware of many others.

Narendra Modi's new government, which came to power this year, has pledged to put an end to what Modi's party described as "tax terrorism". And while Mr Modi disappointed investors when his government failed to use the 2014 budget to repeal the retrospective Vodafone Hutchinson tax law, the overall sense within the business community has been that the Indian government has come to realise that the stability and predictability of the tax system is a key issue for multinationals when deciding on further investment in India. The recent decisions of the Indian courts are likely to add to that sentiment. Hope may be expressed that they will also help create a wider recognition of the importance of stability and consistency of the tax regime in many other jurisdictions.