Shell to challenge I-T notice

Shell India, on Monday, said it would challenge the notice issued by the Income Tax Department, which charged the company with under pricing of share transfer within member companies by Rs. 15.220 crore and thereby allegedly evading taxes. In a statement issued here, Shell India said the order was based on incorrect interpretation of regulations. The notice pertains to issue of 8.7 crore shares by the company 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.

“Recent media reports on tax evasion are baseless, and Shell India will challenge this order strongly and is evaluating all options for redress. Shell globally and in India complies with all applicable local regulations and laws and has also done so in this instance - in full compliance with the Shell Group Business Principles,” said Yasmine Hilton, Chairman, Shell Group of companies in India.

“Funding of a subsidiary through issue of shares is common in India and globally. Taxing the money received by Shell India is in effect a tax on foreign direct investment (FDI), which is contrary not only to law but also to the spirit of the recent global trip by the Finance Minister to attract further FDI into India,” Dr. Hilton added.

The company said the share issuances were in accordance with the terms of the foreign investment policy, the prevailing exchange control regulation and applicable corporate and related laws. “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 statement added. “The transfer pricing order has valued these at Rs. 183 per share even though there are no provisions under the income tax law for such revaluation. As such, the Royal Dutch Shell group intends challenging the order and will be evaluating all options for redress,” Dr. Hilton said.

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