India's largest tax disputes involve foreign companies

In India, foreign companies have complained of tax uncertainty and long-running litigation over alleged duty evasion or levies payable in large M&A transactions.

These are the most high-profile tax cases that have been reported in India.

TIGER GLOBAL

India's highest court will convene on January 15, 2019.

Tiger Global is "subject to tax" on its $1.6 Billion sale of a stake (or 5%) in Indian ecommerce firm Flipkart in 2018 to Walmart.

This will be a landmark decision on how India taxes cross border deals and the use of tax treaties by companies.

Tiger Global claimed that it was exempt from tax under the India-Mauritius Tax Treaty. However, the Supreme Court found the transaction to be an "unlawful tax avoidance scheme".

KIA South Korea’s Kia is accused of avoiding $155 million dollars in taxes through misclassifying imports. The company, however, disputes the charge with officials privately.

Kia imports parts of a vehicle in separate shipments, assembling the cars?in India?, and paying a lower applicable tax, avoiding the higher tax when the parts are assembled as a CKD or a completely knocked down unit?of a automobile.

VOLKSWAGEN Similar to Kia, Volkswagen sued Indian authorities at a Mumbai court, after receiving a tax notice of $1.4 billion for importing parts related its 14 models including some Audis, rather than classifying them CKD.

In a court challenge, the German automaker claims that India's "impossibly large" tax demands will hurt its investment and foreign investor's sentiment.

VODAFONE

In one of the more controversial cases, Vodafone received a tax demand of $2 billion when it bought Indian assets from HutchisonWhampoa for $11 billion in 2007.

The dispute lasted for years, including a decision in favour of the company by India's highest court. This was followed by a law change that reimposed demand and international arbitration between the parties. Vodafone won the arbitration case in 2020.

CAIRN Energy, a British company, was hit with a tax bill of more than $1.4billion for the transfer shares in 2007 during reorganization.

Cairn Energy sold a majority stake in Cairn India to Vedanta Ltd in 2011, reducing the company's share to 10%. Cairn India and the Indian government settled their years-long dispute in 2021, by offering to reimburse the tax amount.

PERNOD-RICARD The Indian authorities have accused the French liquor giant Pernod Ricard of undervaluing some imports over a decade to avoid paying full duties.

India has demanded roughly $250 million of back taxes, but the maker of Absolut and Chivas Regal vodkas have disputed the findings. The dispute is still pending. Pernod warned the Narendra Modi administration in 2022 that its tax disputes with authorities over the valuation of liquor imports had inhibited its new investments and current business.

BYD The Indian authorities have accused the Chinese automaker BYD of not paying $8.37million for parts used in cars that it assembles and then sells in India.

BYD deposited the request later, but the investigation is still underway and could result in additional tax charges and penalty, according to a report. (Reporting and editing by Aditya Osmond and Ed Osmond; Arpan Chaturvedi and Dhwani Paandya)

(source: Reuters)