• Shell wins transfer-pricing tax dispute in Bombay HC

The Bombay High Court ruled in favour of Shell in a transfer-pricing order that sought to tax the energy giant’s 2009 investment in its Indian subsidiary. The order will have an impact on other multinationals fighting the tax department on similar grounds.

“As reported in different sources, in a recent development in the transfer pricing dispute in relation to the share issue transactions, the Hon’ble Bombay High Court has ruled in the favor of Shell India Markets Pvt. Ltd. (“Shell India” or “Company”). The Hon’ble High Court has set aside the orders of the dispute resolution panel (“DRP”) passed in the case of Shell India making additions of INR 15000 crores and INR 3000 crores approximately to the income of the company for two different years alleging issue of company’s shares at a price lesser than the fair market value of the shares. A similar judgement was rendered by a division bench of the Hon’ble Bombay High Court in the case of Vodafone India Services Private Limited two months back. In the said ruling the Hon’ble High Court had ruled that the transfer pricing provisions are machinery in nature and have no applicability in the instances where no income is generated. The ruling in the case of Shell India was expected on the similar lines and to the surprise of nobody; the Hon’ble High Court has once again ruled in favor of the taxpayer and has once again instilled the confidence of the foreign investors in the Indian judicial system. The revenue while arguing the present case tried to present its case differentiating its facts from that of Vodafone judgement. The division bench pronouncing the judgement dismissed revenue’s plea that facts in the company’s case are different from those of the Vodafone case. The detailed copy of the pronouncement is not yet available and it will be very interesting to read the complete text of the ruling once available. The pronouncement by the Hon’ble Bombay High court would be a huge confidence booster to the foreign investors and most likely would go a long way in bringing a definitive conclusion to one of the most high profile controversy the Indian tax legislation has witnessed to date.” – Rajiv Jain, Director, Tax and Regulatory Services, Grant Thornton India LLP.