Dutch oil giant Royal Dutch Shell on Tuesday won a crucial court battle against Indian authorities related to a tax dispute.
The Bombay High Court passed the order in favour of Shell's Indian unit, which was accused of under-pricing shares transferred to its parent firm by $2.5bn in February 2013.
The officials had asked the company to tax on the interest that the firm would have earned. But the court ruled that the stock transfers were not taxable.
[The tax department] "clearly exceeded its jurisdiction", said Shell's India lawyer Mukesh Butani in a statement, referring to the share transfer provisions of the country which allows exempt taxation.
Experts maintain that the order is quite significant for Shell and other international companies operating in India as many foreign firms have been targeted in tax disputes by the Indian government.
"This is a positive outcome which should provide a further boost to the Indian government's initiatives to improve the country's investment climate," Shell's Indian unit said in a statement on Wednesday.
It may be recalled that a court also ruled in favour of Vodafone in October in a similar transfer pricing battle with a tax department. The victory of Shell will definitely boost the morale of the other multinationals including HSBC and AT&T, who are involved in similar tax fights.
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