Corporate Tax Planning

Hindustan Unilever Ltd.

Presented By:
19F10 Ashwiniben Tank
19F40 Sapna Joshi
19F51 Vedant Prajapati
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Flow of Presentation

1.About the Company

2.Current Case
3.Tax Benefits of HUL
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About the company

⊸ Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer
Goods company with a heritage of over 80 years in India.
⊸ On any given day, nine out of ten Indian households use their products.
⊸ With over 35 brands spanning 20 distinct categories such as soaps,
detergents, shampoos, skin care, toothpastes, deodorants, cosmetics, tea,
coffee, packaged foods, ice cream, and water purifiers, the Company is a part
of the everyday life of millions of consumers across India.
⊸ Its portfolio includes leading household brands such as Lux, Lifebuoy, Surf
Excel, Rin, Wheel, Glow & Lovely, Pond’s, Vaseline, Lakmé, Dove, Clinic
Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan,
Kwality Wall’s and Pureit.
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⊸ The Company has about 21,000 employees and has sales of INR 38,273
crores (the financial year 2019-20)
⊸ HUL is a subsidiary of Unilever, one of the world’s leading suppliers of
Food, Home Care, Personal Care and Refreshment products with sales in
over 190 countries and an annual sales turnover of €52 billion in 2019.
Unilever has over 67% shareholding in HUL.
⊸ Hindustan Unilever's corporate headquarters are located at Andheri (E).
Mumbai.
⊸ The campus is spread over 12.5 acres of land and houses over 1,600
employees.
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1.
HISTORY AND
BACKGROUND
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⊸ Hindustan Unilever Limited was established in 1933 as

Lever Brothers India Limited by Lever Brothers. In 1956,
it became known as Hindustan Lever Limited, as a result
of a merger between Lever Brothers, Hindustan Vanaspati
Mfg. Co. Ltd. and United Traders Ltd.
⊸ The company was renamed in June 2007 as "Hindustan
Unilever Limited".
⊸ Lever Brothers first commenced operations in India in
the summer of 1888, when crates full of Sunlight soap
bars, embossed with the words "Made in England by
Lever Brothers" were shipped to the Kolkata harbour and
it began an era of marketing branded Fast Moving
Consumer Goods (FMCG).
⊸ Ranked No 1 in India on the Forbes list of The World’s
Most Innovative Companies 2017
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Details about the company

⊸ Founded - 1933; 87 years ago
⊸ Headquarters - Mumbai,India
⊸ Key people - Sanjiv Mehta (CEO)
⊸ Revenue – Rs. 38,785 crore (US$5.4 billion) (2019-20)[2]
⊸ Operating income – Rs. 6,743 crore (US$950 million)(2019-20)
⊸ Net income – Rs. 6,738 crore (US$940 million) (2019-20)

⊸ Share price NSE - 2,256.15 INR +3.40 (0.16%)

7 Dec, 10:08 am
⊸ Share price BSE - 2,255.75 INR +0.75 (0.035%)
7 Dec, 10:15 am
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2.
FINANCIAL DETAILS OF
THE COMPANY
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Particulars Rs. in lakhs

1. Paid up Capital 21,648

2. Total Turnover 38,27,313

3. Total profit after taxes: 6,73,799

4. Total Spending on Corporate 2.02%

Social Responsibility (CSR) as 14,374
percentage of average Net profit of
the Company for last 3 financial
Years
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PRINCIPAL BUSINESS ACTIVITIES OF THE
COMPANY (Activities contributing 10% or more of
the turnover)

Name and % to total turnover

Description of of the Company
Products

Soaps 27.00%
Detergents 22.50%
Cosmetics AND 16.90%
Toiletries
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Categories of shareholders
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want big impact?

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want big impact?

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3.
Current Case
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 The tax treatment of the transfer of a ‘brand’ between two foreign

companies is contentious and would primarily depend on the ‘situs’
(location) of the brand and related aspects.

 According to section 9 of Indian Income Tax Act, 1961, all income accruing
or arising, directly or indirectly, through the transfer of a capital asset
(brands, trademarks etc) situated in India are deemed to accrue or arise
(earned) in India for tax purposes.

 GSK Consumer Healthcare India is in process of merging with Hindustan

Unilever Ltd in the biggest deal in India’s consumer packaged goods
space. The proposed all-stock deal values GSK India at around Rs 31,700
crore. Each shareholder of GSK India is likely to get 4.39 shares of HUL for
each share of GSK India held by them.

 Given the size of the deal, the Indian income-tax authorities have already
begun dissecting the deal structure and its mechanics to identify or assess
any tax obligations of the proposed merger.
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 while the merger may be ‘tax neutral’ subject to fulfilment of prescribed

conditions under the Income Tax Act, 1961, the shareholders of GSK India
who will receive shares of HUL after the merger, may be exposed to 10
percent long-term capital gains tax liability if they were to sell these shares.

Thus, this tax outgo will have to be taken into account at the time of subsequent
monetisation by GSK India’s shareholders. This is, effectively, how mergers are
taxed -- exemption at the merger stage, and taxation when shareholders
subsequently sell the shares they receive.
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4.
Tax Benefits of HUL
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Section: 115JB (Minimum Alternate Tax)

Corporations take advantage of various provisions of the Income Tax Act by

claiming exemptions, deductions, depreciation, etc. to reduce their tax liability.
One such provision available to companies for deducting their corporate tax
burden is their Minimum Alternate Tax (MAT).

MAT is calculated as 15% of the book profit of the tax assesse. Under existing
rules, book profit is calculated as per Section 115JB of the Income Tax Act, 1961.

As per Section 115JB (2), book profit means net profit in the statement of profit
and loss prepared in accordance with Schedule III of the Companies Act, 2013.

A number of costs/income are considered along with the profit and loss statement
when calculating the book profit of a company. 
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Section 32AC
Investment Allowance for Acquisition and Installation of New Plant and Machinery

 Investment allowance under section 32AC is available only for the assessment years 2014-
15 to 2017-18.

 Many plants are acquired by TATA Powers in these years.

Amount of Deduction:

 15% of actual cost of new assets is deducted

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Section 35D
Amortization of Certain Preliminary Expenses

 An Indian company or a resident non-corporate assessee can claim

deduction under section 35D in respect of preliminary expenses. Such
expenditure may be incurred before commencement of the business or
after commencement of the business in connection with extension of an
undertaking or in connection with setting up a new unit.

Amount of Deduction:

 1/5th of the Qualifying Expenditure is Allowable as Deduction in each of the

five successive years beginning with the year in which the business
commences, or as the case may be, the previous year in which extension
of the undertaking is completed or the new unit commences production or
operation.
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The following expenses qualify for deduction:

1. Expenditure incurred in connection with:

•preparation of a feasibility report;

•preparation of a project report;

•conducting market survey or any other survey necessary for the

business of the assessee;

•engineering services relating to the business of the assessee;

2. legal charges for drafting any agreement between the assessee and
any other person relating to the setting up or conduct of the business
of the assessee;
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3. where the assessee is company, also, expenditure -

I. by way of legal charges for drafting the Memorandum and Articles of
Association of the company;

ii. on printing of the Memorandum and Articles of Association;

a. by way of fees for registering the company under the provisions of
the Companies Act, 1956;

b. in connection with the issue, for public subscription, of shares in or

debentures of the company, being underwriting commission,
brokerage and charges for drafting, typing, printing and
advertisement of the prospectus;

4. such other items of expenditure (not being expenditure eligible for any
allowance or deduction under any other provisions of this Act) as may be
prescribed.
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Section 35DDA
Amortization of Expenditure incurred under Voluntary Retirement
Scheme

 Where an assessee incurs any expenditure in any previous year by way

of payment of any sum to an employee at the time of his voluntary
retirement, in accordance with any scheme or schemes of voluntary
retirement, one-fifth of the amount so paid shall be deducted in
computing the profits and gains of the business for that previous year,
and the balance shall be deducted in equal installments for each of the
four immediately succeeding previous years.

 No deduction shall be allowed in respect of the expenditure mentioned in

sub-section (1) under any other provision of this Act.
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Section 36
 Insurance premium

 Premium for insurance on health of employees

 Bonus or commission to employees

 Interest on borrower

Amount of Deduction:

 8.5% of gross total income + 10% of aggregate average advances by rural

branches shall be allowed as a deduction
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Section 37 (1)
General Or Allowable Deductions under Business or Professions

 Any expenditure (not being expenditure of the nature described in sections

30 to 36) and not being in the nature of capital expenditure or personal
expenditure of the assessee, laid out or expended wholly and exclusively for
the purposes of the business or profession, shall be allowed as deduction in
computing the income chargeable under the Head "Profits and Gains of
Business or Profession".

 Examples of Expenditure Allowable as a Deduction u/s 37(1) :

Remuneration to Employees, Payment of Penalty/Damages, Legal Expenses,
Expenditure on Raising Loans, Interest, Expenditure on Advertisement,
Expenses Allowable under Specific Instructions of CBDT (Central Board of
Direct Taxes)
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Section: 115O (Dividend Distribution Tax)

 Dividends paid by a domestic company are subject

to Dividend Distribution Tax (DDT) at 15% of the
aggregate dividend declared, distributed or paid. The DDT
payable is required to be grossed up.

 The effective rate is 20.3576%, including a 12% surcharge

and a 3% education cess. DDT comes out to 17.65% on
the amount of dividend excluding surcharge and cess.
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Thanks!
Any questions?