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Shell goes Vodafone way, gets Bombay HC relief in tax case

In a major relief to global petrochemical and energy giant Shell, the Bombay High Court on Friday ruled that the company is not liable to pay tax in a transfer pricing case of 2009.

The News International Team

In a major relief to global petrochemical and energy giant Shell, the Bombay High Court on Friday ruled that the company is not liable to pay tax in a transfer pricing case of 2009.

Income-tax authorities in Mumbai had been contesting Shell India’s claims that it issued 87 crore shares to an overseas group entity, Shell Gas BV, in March 2009 at Rs 10/share. The I-T department had assessed the value at Rs 180/share and alleged under-pricing of Rs 15,000 crore in the said transaction.

The Bombay HC now says those shares are not taxable.

Speaking to CNBC-TV18, eminent corporate lawyer HP Ranina said “This case is on the same lines as Vodafone case where they had issued shares to the parent company at a premium and the tax department had taken the stand that this was subject to transfer pricing regulations. Bombay High Court rightly held that when shares are issued at a premium that is a capital receipt and a capital receipt is not covered by the provisions of the Income Tax Act and if the provisions of Income Tax Act do not apply because this is not in nature of income, then the question of transfer pricing regulations being brought to bear would also not be right.”

In a landmark judgment last month, the Supreme Court had ruled that the UK-based mobile services provider, Vodafone, which was embroiled  in a transfer pricing case since 2009-10, was not liable to pay tax of Rs 3,200 crore . This judgment paved way for number of companies engaged in ugly spat between multinational corporations and Indian revenue authorities.

Ranina strongly feels the government should aceept the verdict and take the opportunity to instill confidence among foreign investor community.

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