Transfer Pricing - Shell wins huge Revenue Battle in Bombay High Court - Will Modi Government go in appeal?
THIS was a case gleefully reported all over the world. The Income Tax Department slapped a demand of nearly Rs. 18,000 crores - YES 18,000 CRORES, alleging undervaluation of shares by the Indian unit of Royal Dutch Shell Plc. The Bombay High Court yesterday struck down the demand.
Shell in its website quoted, "Royal Dutch Shell has won a significant victory in its long-running $3bn battle with India's revenue authorities, in a judgment with implications for dozens of tax disputes involving multinational companies in Asia's third-largest economy.
The Narendra Modi government may appeal the decision to the supreme court of India."
Reuters reported;
The Bombay High Court on Tuesday ruled in favor of the Indian unit of Royal Dutch Shell Plc in a multi-million dollar tax dispute, the latest verdict against the tax department that has been vigorously pursing claims against foreign firms in India.
A rash of high-value tax claims on foreign firms including IBM Corp (IBM) and Nokia in the past year has sparked criticism that overly zealous tax authorities could undermine foreign investment in India .
For a fresh injection of Rs. 867 crores, the Income Tax Department wanted a tax of Rs.15,200 crores.
Shell pleaded that issue of shares by an Indian Company to its foreign parent is not liable to transfer pricing provisions as there is no income.
The general feeling abroad seems to be that Indian Tax administration is highly adversarial that puts off foreign investors. Modi has to work hard to dispel this impression. He should be advised to do this during his foreign trips.
I heard a Revenue Secretary saying in a public meeting that foreign companies don't come to India for love, they come to make profits.