Royal Dutch Shell Plc’ share price down, wins a $1.4-billion tax dispute after India court rules in favour of its local unit

Royal Dutch Shell Plc won a $1.4-billion tax dispute against the Indian authorities after the Bombay High Court ruled in favour of the companys unit located in the country. The Indian division of the London-based company was accused of transferring under-pricing shares to its patent firm at the amount of $2.5bn (£1.6bn) in February 2013.

The company said in an official statement, cited by the Guardian: “This is a positive outcome which should provide a further boost to the Indian governments initiatives to improve the countrys investment climate.”

The courts decision is a large victory for Shell as it comes at a moment when a number of companies have been faced with similar tax disputes. Companies such as IBM, AT&T and Nokia have been put under a lot of pressure by Indias tax authorities, especially at a time when the country has been increasingly luring foreign investments.

Shell was pressed by the claim, considered to have been the largest one the company has ever faced. An order by the tax authorities in the country, which amounted to $160 million, was annulled by the court. In 2009 the company invested 10 rupees (16 cents) per share, but however, the tax authorities in the country shred their belief there was an underpricing and revalued the share at 183 rupees a piece.

The Mumbai court found that the Indian tax department “clearly exceeded its jurisdiction” and posed a verdict, which was in favour to Shells appeal.

The senior partner at Khaitan & Co. law firm, Rabindra Jhunjhunwala, said in a telephone interview, cited by Bloomberg: “The court ruling along with the government’s efforts to woo foreign investors will help in attracting more investments from overseas. This provides the necessary certainty to investors looking at India.”

The tax department official representatives in Mumbai were not immediately reached in order to make a comment on the courts ruling. It was also not immediately announced, if the authorities would seek a higher court in order to appeal the ruling.

Royal Dutch Shell Plc lost 0.45% to trade at GBX 2 226 per share as of 12:02 GMT, marking a one-year increase of 6.33%. The company is valued at €179.19 billion.