Hindustan Unilever to appeal Rs 962 crore tax demand linked to GSK deal

Hindustan Unilever Limited (HUL) has been served with a tax demand notice of Rs 962.75 crore by the Income Tax Department.

The notice includes Rs 329.33 crore in interest and was issued by the Office of the Deputy Commissioner of Income Tax in Mumbai. The company announced the receipt of this order on August 23 in a regulatory filing on Monday.

This issue arose during HUL's Rs 3,045 crore payment to acquire intellectual property rights (IPR) of the India Health Food Drink (HFD) business from GlaxoSmithKline (GSK) Group entities.

HUL, in its filing, expressed confidence in its position and stated that it plans to appeal the tax demand.

The company assured stakeholders that there would be no major financial impact at this stage. It believes it has a strong case based on existing judicial precedents, which suggest that the situs (location) of an intangible asset, such as IPR, is tied to the situs of the owner. This precedent could mean that income from the sale of such intangible assets may not be taxable in India.

HUL further clarified that it intends to take all necessary steps to contest the demand. The company also mentioned its right to indemnification, allowing it to recover the tax demand raised by the Income Tax Department, and that it would take appropriate action in this regard.

On the stock market, HUL shares were trading flat at Rs 2,819 during early trading hours on the Bombay Stock Exchange (BSE) today. The company's market capitalisation stood at Rs 6.61 lakh crore, reflecting its significant presence in the FMCG sector.

HUL received the tax order on Friday, August 23, and made the required disclosure to the exchanges on the next working day, which was Monday. The company has assured that it will comply with all legal processes as it moves forward with the appeal against the tax demand