French drug maker Sanofi Pasteur Holding SA is not liable to pay any tax in India for its acquisition of pharmaceutical firm Shantha Biotech, the Andhra Pradesh High Court ruled on Friday.

Sanofi Pasteur had acquired 80 per cent stake in Hyderabad-based Shantha Biotech for nearly Rs 3,000 crore in July 2009. The income-tax (I-T) authorities of India claimed that the transfer of stake resulted in capital gains for the French firm, and therefore, came under the jurisdiction of I-T norms of the country.

The Indian tax authorities then ordered Sanofi Pasteur to pay a capital gains tax of Rs 700 crore, which prompted the French firm to challenge the order in the court.

On Friday, a division bench of Justices Goda Raghuram and M. S. Ramachandra Rao ruled in favour of Sanofi Pasteur.

Rohan Shah, managing partner of law firm ELP, which represented Sanofi in the case, welcomed the court's ruling, adding that the court had stepped in to protect investors.

Speaking on the topic, Shah said, "Our contention was that in the facts of our case, India had no right to tax us. Under the Indo-French tax treaty, the tax should only have been in France. The court has accepted that."

The court's ruling came on a day when French President Francois Hollande was in India. Sanofi India shares gained 3.7 per cent to close at Rs 2,323 apiece on the National Stock Exchange (NSE).