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HUL challenges Rs 962-crore tax demand for Rs 3,000-crore GSK deal
Hindustan Unilever Limited (HUL) has filed an appeal with the Commissioner of Income Tax to challenge the Rs 962 crore tax demand related to its acquisition of the ‘Horlicks’ brand from GlaxoSmithKline (GSK).
HUL completed the merger of GSK Consumer Healthcare with itself, and acquired Horlicks brand for India from GSK for Rs 3,045 crore, in April 2020.(Image source: Moneycontrol)
Within two months of receiving a tax notice of Rs 962.75 crore related to its acquisition of the ‘Horlicks’ brand from GlaxoSmithKline (GSK), Hindustan Unilever Limited (HUL) has filed an appeal with the Commissioner of Income Tax.
In August, HUL announced of received a tax notice of Rs 962.75 crore, including an interest of Rs 329.33 crore.
In its exchange filing then, the FMCG firm announced that the demand has been issued for the non-deduction of tax deducted at source for a remittance of Rs 3,045 crore for the payment towards the purchase of India Health Food Drink (HFD) Intellectual Property Rights (IPR) from GSK Group entities.
The company now has challenged the tax demand and has also applied for a stay of demand and requested a pause on penalty proceedings.
In its recent exchange filings, dated September 24, HUL mentioned initiating steps to invoke indemnification from GSK for the tax notices, stating it does not foresee any material financial implications at this stage.
HUL completed the merger of GSK Consumer Healthcare with itself, and acquired Horlicks brand for India from GSK for Rs 3,045 crore, in April 2020. With the same, HUL took ownership of the brands including Boost, Maltova and Viva.
It is to be noted that the tax department issued HUL a notice on October 7, 2022, seeking capital gains tax on the transaction.
Recently, on September 23, the Bombay High Court dismissed a writ petition filed by HUL seeking protection from these tax notices, on account of the company having statutory remedy of an appeal against the assessment order.
The HUL-GSK case mirrors the whole dispute and grey area in the Indian tax law on whether the sale of intellectual property (IP) should be taxed in the country where the IP is held or in the country where it is used.
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