Comments
The Bombay High Court has asked the Assistant Commissioner of Income-Tax (I-T) Department to respond to arguments by the Indian units of Vodafone Group Plc and Royal Dutch Shell Plc against transfer pricing issues, according to Taxsutra.com, a portal that provides tax case-related information.
The court adjourned till September 30 the hearing of the writ petition filed by both the entities. However, the I-T department had sought eight weeks adjournment as it was yet to appoint a special counsel in the case of Vodafone. It has, meanwhile, appointed Girish Dave to represent the Revenue Department in the Shell India case.
Energy and petrochemical company Shell India had filed a petition against the I-T Department on allegations of tax evasion through the transfer pricing mechanism, the practice of arm’s length pricing for transactions between group companies in different countries. Vodafone also filed a writ petition in the high court on a similar issue.
‘Bad in law’
Shell India’s considered view is that the transfer pricing order is based on an incorrect interpretation of the Indian-tax regulations and is bad in law as this is a capital receipt on which income tax cannot be levied. Funding of a subsidiary through issue of shares is common in India and globally.
In the Shell India case, the tax department had challenged the valuation methodology on the 87 crore shares issued by the Indian unit and pegged the value of shares of Rs 180 instead of Rs 10. According to Shell India, the I-T Department has accused it of under-pricing an intra-group share transfer by Rs 15,000 crore, leading to tax evasion.
Meanwhile, senior advocate Harish Salve, while arguing on behalf of both the companies, said there is no merit in transfer pricing addition as there is no income assessable under the Income-Tax Act when it comes to money received on issue of shares.
He said the actual amount received by the Indian entity as share premium on issue of shares had not been taxed nor assessed in the hands of the holding company. Hence, the assessing officer’s action of seeking to tax the amount not received by the Indian entity from the foreign associated enterprise on account of alleged undervaluation of shares is absurd.
priyanka.pani@thehindu.co.in
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.