Nearly Half The Nifty 50 Firms Are Fighting 30-Year Old Tax Cases

India is notorious for its slow pace of judicial process but this beats it—a tiny tax claim involving the nation’s largest consumer goods maker is pending for about five decades.Hindustan Unilever Ltd.’s matter relates to income earned in financial year 1963-64. The amount demanded is Rs 6 lakh. That’s a paltry sum by current corporate standards as in 2018-19, HUL paid Rs 2,610 crore in income tax.It’s not an isolated instance. Nearly half the Nifty 50 companies are fighting tax cases that are three decades old or more, BloombergQuint’s analysis of disclosures in their annual reports revealed.Such litigation is rampant in India. According to the Economic Survey of 2018—direct and indirect tax claims worth 4.7 percent of India’s $2.5 trillion gross domestic product are under litigation as of March 2017. No surprise then that the country ranks 121 among 190 nations on ‘paying tax’ even as the overall East of Doing Business ranking leaped to 63 from 130 in 2016.To be sure, not all pending tax cases involve tiny amounts, BloombergQuint found in its analysis of Nifty 50 companies—seven banks haven’t disclosed this data.State-run refiner Bharat Petroleum Corporation Ltd. has the biggest dispute worth Rs 8,190 crore pending since 1980-81 at the tax appellate authority. Sun Pharmaceuticals Ltd. follows with a Rs 1,705 crore in dispute since 1995-96 at the Income Tax Appellate Tribunal.A few notable old tax disputes include:Indian Oil Corporation Ltd. has a Rs 1,317.7-crore tax claim pending since 1978—the matter is now at the Customs Excise and Service Tax Appellate Tribunal.NTPC Ltd.’s Rs 45 lakh income tax case pending in the Supreme Court for income earned in 1978-79.HDFC Ltd.’s wealth tax dispute worth Rs 12 lakh pertaining to the financial year 1998-99 at the Assistant Commissioner of Wealth Tax. Wealth tax was abolished in February 2016.HCL Technologies Ltd.’s pending customs duty dispute of Rs 8 lakh for 1997-98. The matter is pending with the Assistant Commissioner of Customs..BloombergQuint’s emailed queries to BPCL, Sun Pharma and IOCL remains unanswered.NTPC, in response to BloombergQuint’s emailed queries, said the Supreme Court, on Nov. 15, dismissed an appeal filed by the income tax department against the company claiming tax liability of Rs 45 lakh.The power generator said that came after the Delhi High Court, in Oct. 2012, had ruled in its favour in the dispute. “Hence, corresponding amount on this account appearing in Annexure 1 of Independent auditor’s report as on date is Nil,” it said..Gautam Nayak, partner at CNK India chartered accountants, puts the blame on the tax department for “indiscriminately” filing appeals that have “clogged judicial system”. “It takes about four years for an appeal to be decided by the tribunal, and almost 20 years by a court like the Bombay High Court,” he said. “Till the matter is finally decided after at least 25 or 30 years, the issue gets raised year after year. This not only costs businesses, but also consumes valuable government resources in terms of judicial time.”More than 1.37 lakh direct tax cases are pending at appellate tribunals, high courts and the Supreme Court as of March 2017, according to the 2018 Economic Survey. Of these, 66 percent involved amount of less than Rs 10 lakh.Things are equally worse with indirect tax disputes. About 1.45 lakh appeals are pending with the commissioner (appeals) of the Income Tax Department, Central Excise and Service Tax tribunal, high courts and the Supreme Court, the survey said.As of March 2017, the total amount stuck in direct and indirect tax litigation was 7.58 lakh crore or around 4.7 percent of the GDP, it said.In the case of income tax, more than 80 percent of the petitions were filed by the tax department and the success ratio across forums has been below 30 percent. Things are a little better at the high court level for indirect tax appeals..Things Set to Change?To address the issue, the revenue department in September enhanced the monetary threshold for filing appeals by the Income Tax Department at various tribunals.The minimum claim amount to file an appeal before the Income Tax Appellate Tribunal increased to Rs 50 lakh from Rs 20 lakh, the Central Board of Direct Taxes said in a statement. In case of high courts, the limit was doubled to Rs 1 crore; and for taking a matter to the Supreme Court, the revised limit for filing appeal was again doubled to Rs 2 crore.With the increase, small appeals will no longer have to go through a torturous process, Nayak of CNK India said.In case of indirect taxation, Goods and Services Tax has subsumed most of levies, and one of its objectives is to reduce litigation.

Nearly Half The Nifty 50 Firms Are Fighting 30-Year Old Tax Cases

Half of the Nifty 50 companies are fighting taxes cases 30 or more years old.

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