World Economy

Shell Wins India Tax Case

Shell Wins India Tax CaseShell Wins India Tax Case

The Bombay High Court 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 pursuing claims against foreign firms in India.

Shell had challenged the largest ever claim in an Indian tax case related to transfer pricing – the value at which companies trade products, services or assets between units across borders, a regular part of doing business for a multinational, Reuters reported.

A rash of high-value tax claims on foreign firms including IBM Corp and Nokia Oyj in the past year has sparked criticism that overly zealous tax authorities could undermine foreign investment in India.

In the Shell case, the tax office alleged in February last year that the company’s Indian unit under-priced shares transferred to the parent by about $2.5 billion, demanding tax on the interest the Anglo-Dutch oil company would have earned. It did not disclose the value of the claim.

The Bombay High Court favored Shell on the grounds that issuance of shares by an Indian company to its foreign parent was not taxable under the transfer pricing provisions, said Mukesh Butani, a lawyer for Shell India in the case.

The court felt the tax department “clearly exceeded its jurisdiction”, Butani, who is managing partner of Indian law firm BMR Legal, said in a statement.

Last month, an Indian court ruled in favor of Vodafone Group Plc, the biggest foreign corporate investor in India, in a long-running transfer pricing dispute with the local tax department.