Aditya Birla Group challenges Rs 3900 crore tax bill

The Aditya Birla Group has hit back at the revenue authorities attempts to tax a demerger struck in 2009, wherein Aditya Birla Telecom Limited (ABTL) transferred its telecom licences for the Bihar circle, along with other assets and liabilities, to its parent, Idea Cellular. Idea Cellular and ABTL have both moved the first appellate authority i.e CIT (Commissioner of Income Tax), Appeals and challenged the demand orders seeking a total of Rs 3900 crores in taxes, two sources familiar with the development told ET NOW. The CIT (Commissioner of Income Tax), Appeals is an independent judicial authority that can either confirm, enhance or reduce the quantum of the tax demand under appeal. ET NOW was the first to report the development.

" The appeals were filed last week and seek a stay on the demand orders. The ABTL appeal says the de-merger was done at nil consideration and hence no capital gains arose on the transfer. Idea has argued that it acquired a capital asset as part of a demerger scheme approved by the high court and therefore there was no additional income," said one of the two individuals cited above. When contacted, an AV Birla group spokesperson declined to comment on the development.

The I-T department has treated the transfer of licence, assets and liabilities from ABTL to Idea Cellular as a slump sale, which is subject to capital gains tax and subsequently ABTL was served with a tax demand of Rs2,400 crore. Idea Cellular was issued a tax demand order of Rs1,500 crore on business income arising out of the transfer of telecom licences and other assets from ABTL as part of the demerger.

In an earlier email response to ET NOW's queries on the demand orders being issued, the company said "The transaction involves a scheme of restructuring between a wholly owned subsidiary and a parent company with the sole objective of administrative consolidation of a telecom licence of one service area in the parent company, without any financial transaction or transfer of funds."

Tax experts feel attempts by the income tax department to bring such corporate demergers under the tax net could make internal restructuring risky and increase transaction costs.