HUL Pays ₹192.55 Crore in Tax Demand Dispute

2 Dec 2024 , 08:19 PM

Hindustan Unilever Ltd (HUL) has recently made a payment of ₹192.55 crore in compliance with a directive from the Income Tax assessing officer. This amount represents 20% of the total outstanding demand of ₹962.75 crore related to a tax dispute.

The dispute stems from an issue surrounding tax deduction at source (TDS) for a ₹3,045 crore payment HUL made to acquire intellectual property rights related to its India HFD business from GlaxoSmithKline (GSK). The tax authorities claimed that TDS was not deducted correctly during this transaction, which triggered the demand.

To comply with the directive, HUL made the payment on November 28, 2024. This payment was part of an agreement where the company had received funds under an indemnification claim. Because of this, HUL has stated that this payment does not have any immediate financial impact on the company at this stage.

The outstanding demand of ₹962.75 crore includes ₹329.33 crore in interest. This charge was made under the provisions of the Income Tax Act, 1961, citing alleged non-deduction of TDS during the payment.

HUL had earlier appealed the assessment order with the Commissioner of Income-tax (Appeals) in Mumbai, seeking to stay the demand and penalty proceedings. In response, the Income Tax assessing officer issued an order on November 6, 2024, which instructed HUL to pay 20% of the total demand by November 30, 2024, while keeping recovery proceedings on the remaining balance in abeyance.

HUL successfully made the partial payment within the specified deadline using funds received under the indemnification claim from the relevant Sale and Purchase Agreement.

Although the payment has been made, it does not yet have any financial consequences for the company, as the indemnification claim offsets the liability. The remaining amount is still under dispute, and HUL is continuing to appeal and contest the full demand through ongoing legal proceedings.