Withdrawal of tax department’s cases ends long-pending dispute over disallowance of general licensing fees amounting to Rs 101.21 crore
FMCG major Nestle India on Wednesday informed that the Supreme Court of India has dismissed, as withdrawn, the income tax department’s appeals concerning the disallowance of general licensing fees across multiple financial years, bringing an end to a long-standing tax dispute involving Rs 101.21 crore.
In a regulatory filing, the company said the matter related to the disallowance of general licensing fees for the financial years 1996–1998, 1999–2001 and 2004–2008. The income tax authorities had, through multiple assessment orders, alleged that the licensing fee payments made during these periods were excessive and unreasonable.
Appeals Withdrawn By Tax Department
Nestle India had challenged the disallowance orders, with the dispute moving through various judicial forums. The company had secured favourable rulings up to the Delhi High Court, following which the income tax department escalated the matter to the Supreme Court by filing a series of consolidated civil appeals.
According to the filing, the apex court, through an order dated 13 January 2026 received by the company on 21 January 2026, dismissed the appeals filed by the income tax authorities as withdrawn. The total amount under dispute across the litigations was Rs 101.21 crore.
The appeals were withdrawn after the Additional Solicitor General, appearing for the income tax department, submitted before the apex court that she had instructions to withdraw the cases. The bench comprising Justice B.V. Nagarathna and Justice Ujjal Bhuyan accepted the submissions and dismissed all pending applications, bringing the matter to a definitive close.
Nature Of The Tax Dispute
The dispute centred on general licensing fees, also referred to as royalty payments, paid by Nestle India to its Swiss parent entity, 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 common within multinational corporations, with payments typically benchmarked under transfer pricing regulations.
The income tax department had contended that Nestlé India had overpaid its parent company for these services across multiple assessment years, questioning whether the payments met the arm’s-length principle prescribed under international taxation norms. At the same time, the currently approved royalty rate stands at 4.5 per cent net of taxes on net sales; the dispute related to historical periods when the structure and rates of the arrangement differed.
No Settlement
Nestle India also clarified in the filing that there was no litigation against its key managerial personnel, promoters or persons in control of the company, and that no settlement had been entered into with the tax authorities in relation to the matter.
