Tata Sons has contested a tax settlement of 1,500 crore related to the bankrupt Docomo telco. According to The Economic Times, Tata Sons allegedly contested a tax demand of 1,500 crore rupees on its $1.27 million settlement with NTT Docomo from 2017 during an appearance before the Goods and Services Tax authority.
The Tatas’ suit will now be heard at a later date, and the Directorate General of GST Intelligence has petitioned the Bombay High Court to request an extension. Since authorities need time to review the lengthy documents, the DGGI has requested a three-month delay.
According to ET, Tata Sons argued during a hearing on June 16 that the tax claim was baseless since GST is not responsible for liquidity problems. In the first week of July, the court is anticipated to evaluate the plea.
According to a manager, the holding company’s payments to Docomo for obligations are not subjected to GST. When Tata Teleservices created a joint venture with the Japanese business, it paid Docomo the settlement sum. The GST official, on the other hand, asserted that Tata Sons provided a loan to its subsidiary in order to resolve the issue, and as a result, was required to pay taxes on the loan amount.
In October 2022, the GST department notified Tata Sons and also called for a pre-show notice regarding the tax. In its argument before the Bombay High Court, Tata Sons used a circular published on August 3, 2022, by the Central Board of Indirect Taxes and Customs to support its contention that liquidated damages were exempt from GST. a similar circular on February 20, 2023, is mentioned.
In the past, Tata Group has claimed that GST was not applicable since the sum paid to the Japanese partner was the result of arbitration procedures in a London Court.
The Japanese telecom behemoth spent almost $2.6 billion in 2009 to acquire a 26.5% interest in Tata Teleservices (TTSL).
A “put option” was included in the investment agreement, giving NTT the choice of selling its ownership for “fair value” or half of the “acquisition price” (in this case, $2.6 billion), whichever was higher, when it decided to do so. After investing in TTSL for five years, in 2014 NTT took the decision to sell the company, executing its put option. Docomo opted to end its relationship with Tatas because it had trouble gaining subscribers rapidly. The Japanese company demanded from Tatas 58 per share, or 7,200 crore.
However, by 2014 the Reserve Bank of India had issued a new set of regulations that specified that foreign businesses (like NTT Docomo) may only leave assets “at valuations based on return on equity”.
The Japanese company then forced Tatas into international arbitration.
But in 2017, NTT DoCoMo said it had earned more than $1.2 billion (144.9 billion yen) from Tata Sons following years of conflict. The money obtained by DoCoMo is related to the arbitration award and consists of interest that was earned and other costs that were granted. Additionally, DoCoMo transferred all of its shares in TTSL to Tata Sons and Companies.
READ ALSO – Google Appeals To The Supreme Court To Contest A ₹1,338 Crore Antitrust Fine
In a crucial milestone in the Google antitrust case, the internet giant has appealed the National corporation Law Appellate Tribunal’s (NCLAT) decision upholding the ₹1,338 crore antitrust fine against the corporation to the Supreme Court (SC).
