After Vodafone, Shell Wins $240m Tax Case Against I-T

  • In a major relief for Shell, the Bombay high court on Friday ruled that the global energy and petrochemical giant Shell was not liable to pay tax in a 2009-10 transfer pricing case.
  •  The potential tax demand on Shell by income tax authorities was $240 million.
  • I-T authorities in Mumbai had alleged there was underpricing of shares which the company had issued to an overseas group entity , Shell Gas BV , in March 2009.
  • The company said it had issued 87 crore shares at Rs 10 per share.
  • But the IT department assessed the value at Rs 180 per share and said there was thus a Rs 15,000-crore underpricing in the transaction, an amount on which tax could be levied.
  • The HC has now held that these share premiums are not taxable.
  •  The ruling in favour of Shell comes after a recent victory for Vodafone's in the high court in a similar transfer pricing matter.
  • The high court had then held that the issuance of shares in a capital financial transaction did not amount to taxable income.
  • Several global giants are involved in transfer pricing litigation with the government, whose stand has been criticized.
  • Shell spokesperson said: Shell has always maintained that equity infusion by a foreign parent company into an Indian subsidiary cannot be taxed as income,this is a positive outcome which should provide a further boost to the initiatives to improve the country's investment climate.