Tata Steel has achieved a notable triumph in a transfer pricing dispute against India's Income Tax Department, with the Mumbai branch of the Income Tax Appellate Tribunal ruling decisively in favor of the multinational company. The case, valued at ₹1 billion ($12 million), revolved around the adjustment of electricity costs associated with Tata Steel's steel power plant in India. The tribunal not only sided with Tata Steel on this matter but also reversed a prior decision by the revenue's assessing officer concerning the deduction of interest paid on various debentures.
The assessing officer had initially deducted the interest, amounting to around ₹3.2 billion, treating the debentures as issued equity rather than borrowings. However, the tribunal contested this interpretation, emphasizing that the debentures in question had been duly certified by an auditor. This victory holds significant financial implications for Tata Steel, a major player in the global steel industry headquartered in Mumbai, operating in 26 countries and employing approximately 80,500 individuals.
The success of Tata Steel in this transfer pricing dispute adds to a growing trend where companies are prevailing against India's revenue department in various cases. Earlier this month, the BBC, the United Kingdom's national broadcaster, secured a similar win in a transfer pricing case against India's revenue authority. The Delhi bench of the Income Tax Appellate Tribunal upheld a ruling considering advertisement expenses between group entities as pass-through costs for the 2004-05 assessment year.
Against this backdrop, Colgate-Palmolive's Indian unit is currently contending with a comparable transfer pricing dispute. In October, the company faced a ₹1.7 billion transfer pricing order from India's income tax authority. Colgate-Palmolive has indicated its intent to address the order through alternative dispute resolution, highlighting the ongoing complexities that multinational corporations navigate within the Indian transfer pricing landscape. These legal outcomes not only impact the financial standing of these companies but also carry broader implications for the regulatory framework and practices surrounding transfer pricing in India.
By fLEXI tEAM