Shell's victory in India signals end of tax terrorism

The Indian unit of Royal Dutch Shell has won a billion dollar dispute against the taxman at the Bombay High Court – a signal that is good news for Narendra Modi's government. Last year India's tax authorities alleged that Shell's Indian arm had under-priced 87 million shares that it transferred to the parent company. These were issued in 2009 at Rs.10 per share, but the tax department instead pegged their worth at Rs.183 per share. This gave rise to a $1.4 billion tax dispute. Now the Bombay High Court has ruled against the tax department because in its view, shares issued by an Indian firm to its overseas parent company are not taxable under transfer pricing provisions and the court felt that the tax department had exceeded its jurisdiction. The government still has 90 days to appeal at the Supreme Court. Experts say Shell's victory may help signal to foreign investors that India's days of tax terrorism, (PM Modi's description of aggressive taxmen targeting businesses,) are now over. With this it may become easier for PM Modi to induce large multinationals to invest in India.