Hindustan Unilever receives Rs.963 Crore Income Tax Demand Notice over TDS Dispute

The Hindustan Unilever Ltd. (HUL), a leading FMCG company, said it received a demand notice from the Income Tax Department for Rs.962.75 crore and will file an appeal against the order.

In accordance with a recent exchange filing, the notice relates to the non-deduction of TDS on payment of Rs.3,045 crore to GlaxoSmithKline Consumer Healthcare (GSKCH) for its acquisition of Intellectual Property Rights of the Health Foods Drinks (HFD) business, which includes brands such as Horlicks, Boost, Maltova, and Viva.

The Filing said, “The tax demand of Rs.962.75 crore (including interest of Rs.329.33 crore) has been imposed on the company on account of non-deduction of TDS as per provisions of Income Tax Act, 1961 while making remittance of Rs.3,045 crore (EUR 375.6 million) for payment towards the acquisition of India HFD IPR from GlaxoSmithKline ‘GSK’ Group entities.”

As stated by HUL, the demand order is “appealable” and the company would take “necessary actions” in compliance with Indian law.

HUL mentioned that it believes it “has a strong case on merits on tax not withheld” based on available judicial precedents, which have held that the location of an intangible asset is linked to the place of the owner of the intangible asset, and thus income arising from the sale of such intangible assets is not subject to tax in India.

The demand notice was issued by the Deputy Commissioner of Income Tax, Int Tax Circle 2, Mumbai, and received on 23rd August 2024 by the company. HUL informed that there should not be any major financial consequences at this stage.

The FMCG major concluded the merger with GSKCH in 2020 after a mega deal of Rs.31,700 crore. According to the agreement, it paid an additional Rs 3,045 crore to buy GSKCH’s brands, including Horlicks, Boost, and Maltova.