Shell India has moved dispute resolution panel (DRP) challenging a notice by the income tax department alleging tax evasion by underpricing share transfer between member companies on the ground that the order was based on incorrect interpretation of regulations, NDTV has learned.
The income tax department has charged Shell India of underpricing a share transfer within the group by Rs. 15,220 crore, and consequently evading taxes.
"Shell confirms that it has filed a writ petition in the Bombay High Court & moved to DRP today challenging the draft tax order. Shell has always maintained that it will continue to evaluate all options for redress available to resolve this tax dispute," the company told NDTV.
The order relates to the issue of 8.7 crore shares by Shell India to an overseas company Shell Gas BV in March 2009. The shares were issued at Rs. 10 a share, which the income-tax authorities contest and peg higher at Rs. 183 a share instead.
At the centre is a 2009 equity injection involving Shell India and parent Shell Gas in which Rs. 87 crore worth of shares were issued at a value of Rs. 10 per share, stock which taxmen now claim was in fact worth Rs. 183 per share.
Shell Gas BV was the only parent of Shell India before this equity issue and continued to be so after the issue.
The company had said the share issuances were in accordance with the terms of the foreign investment policy, the prevailing exchange control regulation, the applicable corporate and related laws.
Against a fresh equity injection of Rs. 87 crore ($160 million) shares aggregating to 8.7 crore, were issued at a value of Rs. 10 per share.
The company had earlier said the valuation of the shares was undertaken by a certified independent valuer who assessed the value (in line with the foreign investment and exchange control laws) to be below Rs. 10 per share and the issue was made at Rs. 10 per share. The valuation certificates were filed with the regulatory authorities.
The tax evasion notice on Shell comes after a more than $2 billion tax notice on Vodafone on its acquisition of Hutchison Whampoa's local mobile business in 2007.
Transfer pricing refers to the practice of arm's-length pricing of transactions among companies, which are part of a group and spread across different countries. The law seeks to ensure that fair prices are levied in cross-border transactions. (PTI)
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