Interglobe Aviation to Contest Substantial Tax Demand
Interglobe Aviation to Contest Tax Demand
Interglobe Aviation, the parent company of IndiGo airlines, is gearing up to challenge a significant tax demand from India’s income tax appellate authority. The Commissioner of Income Tax-Appeals (CIT-A) has upheld a demand totaling Rs 1,666 crore for Assessment Years (AY) 2016-17 and 2017-18. The company is disputing recovery claims of Rs 740 crore and Rs 927 crore for these years, citing denial of a fair hearing and questioning the merit-based judgment.
Revised Tax Demands and Disputed Claims
The tax demands are based on revised calculations of taxable income that include incentives from aircraft and engine transactions, as well as disallowed expenses. Interglobe’s contention lies in the characterization of certain receipts and the rejection of depreciation claims on leased-back assets. This method of leaseback is commonly used by airlines to free up capital.
Past Tax Dispute and Legal Action
This is not the first time Interglobe has been at odds with the CIT-A over tax assessments. In a past incident dating back to 2015, the authority reclassified aircraft purchase discounts as commission income, leading to an increase in taxable income for AY 2008-11 by more than Rs 400 crore. Interglobe had argued that these discounts should be treated as capital receipts, which are not subject to tax. Backed by legal counsel, Interglobe Aviation is preparing to contest the latest ruling from CIT-A vigorously. The company believes that the demands lack a merit-based judgment and has expressed its intent to seek justice through appropriate legal channels.
InvestingPro Insights
As Interglobe Aviation navigates through its latest tax dispute, insights from InvestingPro provide a broader financial context. The company, known for operating IndiGo airlines, has demonstrated a pattern of consistently increasing earnings per share, which is a promising sign for investors looking at the company’s profitability. Moreover, InvestingPro Tips indicate that net income is expected to grow this year, providing a potential upside despite the current tax challenges.
Market Position and Investor Confidence
InvestingPro Data further reveals that Interglobe Aviation is a prominent player in the Passenger Airlines industry and has been profitable over the last twelve months. These metrics underscore the company’s solid standing in the market, which may be a factor in its resilience against fiscal pressures. Additionally, the company is recognized for trading near its 52-week high, suggesting robust investor confidence in its stock performance.
Accessing Comprehensive Insights
For investors seeking more detailed analysis and future projections, InvestingPro offers a suite of additional tips. Currently, there are 11 more InvestingPro Tips available for Interglobe Aviation, which can be accessed through an InvestingPro subscription.
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