Two-wheeler giant Hero MotoCorp finds itself embroiled in a tax dispute with the Income Tax Department. On April 3, 2024, the company received assessment orders and demand notices totaling Rs 605 crore, including interest, for alleged tax discrepancies across six assessment years (AYs) between 2013-14 and 2019-20.expand_more
Breaking Down the Tax Demand
The Income Tax Department claims discrepancies of Rs 308.65 crore in tax dues, along with Rs 296.22 crore in interest, for a total demand of Rs 604.87 crore (as reported by Hero MotoCorp). The notice pertains to certain “disallowances” during the mentioned assessment years. Hero MotoCorp vehemently disagrees with the assessment and plans to contest the notice by filing appeals with the relevant appellate authorities and submitting rectification applications.
Financial Impact Deemed Unlikely
Despite the significant sum involved, Hero MotoCorp maintains that the demand is “unsustainable” and will not have a material impact on the company’s financial health, operations, or other activities. This assurance comes on the heels of the company reporting a healthy 5.5% year-on-year rise in total sales for FY24, reaching a record 56.21 lakh units.expand_more
Hero MotoCorp Gears Up for Legal Battle
The company has expressed strong disagreement with the tax department’s assessment and is prepared to take legal recourse. Hero MotoCorp’s management believes the demand is unfounded and will not significantly affect the company’s performance. This development comes at a time when the Indian auto industry is experiencing a revival. Hero MotoCorp’s positive sales figures suggest that the company might be able to navigate this tax hurdle. However, the final outcome of the tax dispute remains to be seen.
Industry Implications
This case highlights the potential challenges faced by major corporations in navigating India’s complex tax environment. A swift resolution would be beneficial not only for Hero MotoCorp but also for the broader auto industry sentiment. Investors will be closely following the developments in this case, as it could set a precedent for similar tax disputes in the future.
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