Looking at the daily charts of Hero MotoCorp, the stock shows a Cup and Handle pattern. This suggests that after breaking through the resistance zone, the upward rally is likely to keep going in the next trading sessions. For traders, Rs 4,510 is an important support level, while Rs 4,950 is seen as a significant resistance level for short-term trading. If the price falls below Rs 4,510, it could weaken the uptrend pattern.
Tax Tribunal Upholds Hero Moto’s Appeal, Sets Aside Rs 2,337 Crore Tax Demand
The ITAT quashed Hero MotoCorp’s Rs.2,337 crore tax demand, resolving a major dispute and emphasizing the need for solid evidence in tax reassessment cases.
In a landmark decision, the Income Tax Appellate Tribunal (ITAT) has upheld Hero MotoCorp’s appeal, setting aside a solid tax demand of Rs.2,337 crore. This verdict marks a notable victory for the motorcycle giant, resolving a long-standing dispute with tax authorities.
Background of the Dispute
The conflict originated from Hero MotoCorp’s acquisition of a 26% stake in Hero Honda Motors Ltd. (HHML) from Honda. On March 22, 2011, Hero Group purchased 5.19 crore equity shares at Rs.739 per share, amounting to Rs.3,841.83 crore, in an off-market deal. The transaction complied with tax deduction and deposition requirements as per section 195 of the Income Tax Act.
Initial Assessment & Reassessment
The assessing officers selected Hero MotoCorp’s income tax return for scrutiny, initially assessing an income of Rs.6,11,79,857. After adjustments, this amount was revised to Rs.6,02,96,513, which the CIT(A) Ludhiana upheld in favor of Hero MotoCorp.
In March 2018, a survey at Hero MotoCorp’s Delhi premises uncovered documents related to the share purchase, prompting reassessment proceedings. Authorities alleged a benefit of Rs.3,644.85 crore accrued to Hero MotoCorp under section 28(iv) of the Act, treating the purchase price as lower than market value. The reassessment order added Rs.3,650.88 crore to Hero MotoCorp’s income, which was upheld by the CIT(A) New Delhi.
ITAT Ruling
Hero MotoCorp contested the reassessment, leading to an appeal at the ITAT. The Tribunal found no substantial grounds for the reassessment and ruled in favor of Hero MotoCorp, highlighting the absence of valid ‘reason to believe’ for income escapement. The addition under section 28(iv) was dismissed, quashing the enormous tax demand.
Conclusion
The ITAT ruling not only nullifies the Rs.2,337 crore tax demand but also brings out the necessity for good evidence in tax reassessment cases. This decision allows Hero MotoCorp to focus on its business operations without the looming burden of a multi-crore tax dispute. Hero MotoCorp also faces separate tax demands totaling Rs.605 crore for assessment years 2013-14 to 2017-18 and FY19-20. Therefore, this verdict is a huge relief for Hero MotoCorp, reinforcing the importance of proper tax reassessment procedures.
Disclaimer: This post has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.