HUL Files Appeal Against Rs 963 Crore Income Tax Demand After High Court Order

The issue stems from allegations that Hindustan Unilever failed to comply with the income tax provisions, which mandate tax deducted at source for purchasing a trademark registered in India. The company acquired the rights to the health food drink brand Horlicks from GlaxoSmithKline Plc. for over Rs 3,000 crore in 2020.

Following this, several notices were issued to HUL between October 2022 and January 2023, seeking detailed explanations about the nature of the foreign remittance. In response, Hindustan Unilever provided the requested information and sought extensions for compliance.

On Feb. 28, 2023, the Deputy Commissioner issued another notice requesting a valuation report from EY regarding the trademark, questioning whether it should be considered a capital asset situated in India. Hindustan Unilever addressed this notice and submitted further clarifications by March 22, 2024.

Despite Hindustan Unilever's efforts to comply with tax regulations, the Deputy Commissioner of Income Tax determined that the company's payment for acquiring India-specific intellectual property rights was effectively the purchase of assets located in India. This led to the imposition of a substantial tax demand.

The Bombay High Court then permitted Hindustan Unilever to appeal this tax demand before the relevant revenue authorities. Also, it allowed the company to seek a stay on the related penalty proceedings under the Income Tax Act provisions which address failures to deduct tax at source.

HUL share price closed 0.3% higher at Rs 2,792 apiece on Monday, compared to a 0.6% advance in the benchmark Nifty 50.