MUMBAI: Anglo-Dutch oil major Royal Dutch Shell’s Indian unit is to challenge an order by local tax authorities that a share sale to its overseas parent in 2009 was undervalued by $2.7bn.
Shell India said yesterday that as part of its investment in the country Shell India Markets Pvt Ltd issued 87 million shares to parent Shell Gas BV at Rs10 apiece in 2009.
Tax authorities have valued those at Rs183, proposing an adjustment in the value of the deal of Rs152bn ($2.7bn), Shell said.
The company said the transfer pricing order by the tax authorities was based on an “incorrect interpretation” of tax rules and was “bad in law” as the amount is a capital receipt on which income tax cannot be levied.
“Taxing the money received by Shell India is, in effect, a tax on foreign direct investment, which is contrary not only to law but also to the spirit of the recent global trip by the finance minister,” Shell India Chairman Yasmine Hilton said.
News of the tax dispute with Shell came ahead of a visit to India later this month by British Prime Minister David Cameron. An Indian foreign office spokesman confirmed the trip yesterday.
Shell’s tax case also comes amid uncertainty about the outcome of a more than $2bn tax dispute between British group Vodafone and India’s tax office that has dented investor confidence in the country.
India expects to raise $70bn from corporate tax and $37bn from individual tax payers in its 2012/13 fiscal year to end-March, according to the finance ministry estimates.
Reuters
