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Indian arm of Royal Dutch Shell accused of tax evasion

The Indian arm of Royal Dutch Shell Plc, which has been accused by the income tax authorities of underpricing an intra-group share transfer by Rs15,000 crore and consequently evading taxes, has filed a writ petition in the Bombay high court challenging the income tax order.

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Thu, Apr 25 2013. 05 57 PM IST

Mumbai/ New Delhi: The Indian arm of Royal Dutch Shell Plc, which has been accused by the income tax authorities of underpricing an intra-group share transfer by Rs15,000 crore and consequently evading taxes, has filed a writ petition in the Bombay high court challenging the income tax order.

The petition filed on Wednesday will come up for hearing on 3 May.

Mint reported on 3 February that following the notice, which is one of the biggest transfer pricing orders by the income tax department, Shell India Pvt. Ltd plans to challenge the assessment.
“Shell confirms that it has filed a writ petition in the Bombay high court 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 in an emailed statement.

Transfer pricing refers to the practice of arm’s length pricing for transactions between group companies based in different countries to ensure that a fair price—one that would have been charged to an unrelated party—is levied.

India has seen a sharp increase in disputes relating to transfer pricing, with the tax department adopting an aggressive stand while arriving at a price for the transaction. The transfer pricing assessment by the tax department for the year ended March 2008 saw the government raising claims to the tune of $9.5 billion.

With multinational companies looking to expand their footprint in India, the issue of arm’s length pricing has come under increasing scrutiny of the transfer pricing wing of the income tax department. It also comes at a time when the government is struggling to meet its fiscal deficit targets on account of slowing revenue collections, especially on the corporate tax front.

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