5000 corer tax blow enraged and astounding fully shell and vodafone

In a huge blow to global energy giant Shell's domestic operations, the income tax department has slapped a draft assessment order on an inter-group issue of shares which pegs Shell India's tax liability at nearly Rs 5000 crores. "The draft order has added Rs 15,000 crores to the taxable income of shell India and the consequent tax liability for the company would be 30% of the additional income. Shell India has a time frame of 30 days to raise objections or appeal against the order, "said one of the sources mentioned above. 

The draft order was issued following a transfer pricing order which alleged under-pricing of Rs 15,000 crores by Shell India in January. The transfer pricing order related to the issue of 87 crore shares by Shell India to an overseas group entity, in March 2009. The shares were issued at Rs 10/share, which was contested by the income tax authorities in Mumbai. The income tax department challenged the valuation methodology of Shell India and pegged the value of the shares at Rs 180/share instead. According to transfer pricing rules, transfer pricing orders are binding on assessment officers and draft orders should be issued to tax payers before the end of the fiscal after which it becomes time-barred like British giant Vodafone had a tough time from several days.