Recently, one of the FMCG company giants of India, Hindustan Unilever Limited or HUL disclosed that they received a hefty tax demand, amounting to Rs 962.75 crore, including Rs 329. 33 crore in interest. This notice applies to non-deduction of tax deducted at source (TDS) arising from a substantial transaction relating to the purchase of IPRs from the GSK Group.
The controversy is about a payment of Rs 3,045 crore relating to the acquisition/merger of GSK's Indian brands namely Horlicks, Boost, Maltova & Viva with HUL. This payment has raised an eyebrow of the Deputy Commissioner of Income Tax, Mumbai as indicated in the tax demand dated August 23.
HUL has stated that this tax demand is not expected to have major financial repercussions at this time. The company asserts that it has a robust case based on judicial precedents, which suggest that the tax liability on the sale of intangible assets is linked to the location of the asset's owner, and thus not subject to Indian tax laws.
The company plans to challenge the tax notice and highlighted its 'indemnification right' to recover the demand. HUL remains confident in its position and will proceed with an appeal against the notice.
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