Hindustan Unilever (HUL) announced on Monday that it received a tax demand of ₹962.75 crore from the Income Tax Department, which includes ₹329.33 crore in interest.
The notice arises from the failure to deduct Tax Deducted at Source (TDS) on a remittance of ₹3,045 crore made for acquiring the intellectual property rights (IPR) of India Health Food Drink (HFD) from the GlaxoSmithKline (GSK) Group.
The notice specifically concerns the acquisition of the Horlicks brand in India from GSK for ₹3,045 crore. Additionally, other GSKCH brands such as Boost, Maltova, and Viva were also added to HUL’s portfolio through this merger.
Although there is strong demand, the company has stated that it does not anticipate any major financial impact at this time.
Will appeal against tax notice
“The Company has strong case on merits on tax not withheld, basis available judicial precedents, which have held that the situs of an intangible asset is linked to the situs of the owner of the intangible asset and hence, income arising on sale of such intangible assets are not subject to tax in India,” HUL said.
In response to the demand, the FMCG giant intends to challenge the order, pursuing all necessary legal measures under Indian law.
Moreover, HUL has stated that it holds an indemnification right, enabling it to recover the tax demand issued by the Income Tax Department from the appropriate parties.
HUL finalized its merger with GlaxoSmithKline Consumer Healthcare Limited (GSKCH) in 2020, after receiving the required approvals.
The consumer goods giant posted a 3 per cent year-on-year (YoY) increase in net profit, reaching ₹2,538 crore for Q1 of FY25, closely aligning with the Street estimate of ₹2,541 crore.
HUL’s revenue from operations for the quarter was ₹15,166 crore, marking a 2 per cent year-on-year growth compared to ₹14,931 crore in the June 2023 quarter.
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