The Supreme Court dismissed Income Tax appeals against Nestlé India, upholding allowance of general licensing fees and ending a long-running Rs 101.21 crore tax dispute. The controversy concerned alleged excessive licence fees for financial years 1996–98, 1999–2001, and 2004–2008.
NEW DELHI: The Supreme Court of India has dismissed the income tax department’s appeals against FMCG giant Nestlé India regarding the “disallowance of general licensing fees” for several financial years, effectively concluding a prolonged tax dispute amounting to Rs 101.21 crore.
The company revealed the development in a regulatory filing submitted to the stock exchange on January 21, 2026. It clarified that the dispute pertains to the financial periods 1996–1998, 1999–2001, and 2004–2008, during which the Income Tax Department alleged the fixation of disproportionate and unreasonable licence fee payments.
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Nestlé India contested these disallowance orders, navigating through various judicial avenues. The company had obtained favorable judgments up to the Delhi High Court, after which the income tax department escalated the case to the Supreme Court through a series of consolidated civil appeals.
According to the filing, the apex court dismissed the income tax authorities’ appeals as withdrawn in an order dated January 13, 2026, which the company received on January 21, 2026. The total amount in dispute across the litigations was Rs 101.21 crore.
The withdrawal of the appeals followed a submission by the Additional Solicitor General, representing the income tax department, who indicated to the court that she had instructions to withdraw the cases. The bench, comprising Justice B.V. Nagarathna and Justice Ujjal Bhuyan, accepted this submission and dismissed all pending applications, effectively closing the matter.
Nestlé India also clarified in its filing that there were no ongoing litigations against its key managerial personnel, promoters, or individuals in control of the company, and no settlement had been reached with the tax authorities regarding this issue.
Factual Background of the Case:
The dispute revolved around general licensing fees, also known as royalty payments, made by Nestlé India to its Swiss parent company, Société des Produits Nestlé S.A., for the use of intellectual property, brands, patents, manufacturing processes, technical know-how, and operational support. Such arrangements are typical among multinational corporations, with payments generally aligned with transfer pricing regulations.
The income tax department argued that Nestlé India had overcompensated its parent company for these services across several assessment years, questioning the adherence of the payments to the arm’s-length principle as dictated by international taxation standards.
Currently, the approved royalty rate is set at 4.5 percent net of taxes on net sales; however, the dispute concerns historical periods when the structure and rates of the arrangement were different.