Colgate-Palmolive (India) Limited (CPIL) announced on Thursday that it received an income tax demand of Rs 267.64 crore for the financial year 2021-22, mainly linked to transfer pricing adjustments and disallowance of certain expenses. The leading player in India’s oral and personal care market plans to challenge the order in appeal.
CPIL shares have been marginally traded up 0.7-0.8 per cent on the NSE post the announcement versus Dec 24 close of Rs 2,093.30 apiece.
According to the regulatory announcement, the Income Tax Department passed a final assessment order under sections 143(3), 144C(13), read with 144B of the Income Tax Act for FY 2021-22 (AY 2022-23).
Along with this order, the IT Department has issued a demand notice under section 156, asking CPIL to pay Rs 267.64 crore.
The company stated that the tax demand arose mainly from transfer pricing adjustments on its international or related-party transactions and from the disallowance of some expenses claimed in its tax return.
It also noted that the company received the order on the evening of December 24, and the company informed the bourses on December 26 since December 25 was a public holiday.
Colgate-Palmolive’s response
CPIL has said in its disclosure that there will be no impact on its financials, operations or other business activities due to this order.
The FMCG giant has also clarified that the order does not record any regulatory non-compliance or impose any penalty or operational restriction; it is purely a tax demand.
The company plans to file an appeal before the Income Tax Appellate Tribunal (ITAT) to contest the assessment.
CPIL has taken a similar approach in earlier tax disputes, where transfer pricing-related demands were challenged while assuring investors that business remains unaffected. For now, CPIL is treating this as a disputed tax matter and not as an immediate cash outflow, since it is going to appeal.
