Background of the case
In August 2021, Hinduja Global Solutions Ltd (“HGSL” or “the Company”) announced that it has entered into definitive agreements to divest its Healthcare Services business (“HS business”) to funds affiliated with Baring Private Equity Asia (BPEA), one of the largest private alternative investment firms in Asia. On January 6, 2022, the transaction was completed based on an enterprise value of USD 1,200 million (approx. INR 8,940 Cr). Further, the annual report of HGSL reported that the Company has recorded a gain on sale (net of tax) of HS business of INR 5,753.56 Crores and tax expense of INR 800.74 Crores.
In January 2022, HGSL filed a Scheme of Arrangement for the demerger of the Digital, Media & Communication (DMC) business of NXT DIGITAL Ltd (“NDL” or “Demerged undertaking”) into HGSL (“Resulting Company”) in accordance with the provisions of Sections 230–232 of the Companies Act, 2013 before the National Company Law Tribunal, Mumbai Bench. The Scheme was sanctioned on 11 November 2022 by the NCLT Mumbai Bench with an appointed date of 1 February 2022. The Purpose stated in the scheme was unlocking synergies, aligning businesses, strengthening the media vertical, and achieving shareholder value maximization.
Overview of GAAR Panel’s Findings
(Full text of the order dated 30 October 2025 is not publicly available. The summary is based on disclosures and filings made by the Company with the stock exchanges)
- The GAAR panel has passed a directive characterizing the treatment of tax losses under the demerger of NXT Digital’s business with the Company as an “Impermissible avoidance arrangement” and directed the Deputy Commissioner of Income-tax (DCIT-AO) to disregard the brought forward losses of the demerged undertaking with the income of HGSL.
- As per communication made by HGS to the stock exchange dated November 10, 2025, the total tax reduction of the Company was INR 281.59 crores pursuant to the demerger of Digital, Media & communication business of NXT Digital into HGSL.
- Post evaluation of the directive and believing that the treatment of the tax position under the demerger is tenable, HGSL has filed a writ petition before the Hon’ble Bombay High Court on November 7, 2025.
Kretha Comments
This development is particularly notable as it marks one of the first major instances where an NCLT-approved restructuring scheme has been scrutinised under GAAR and the Panel has passed an order.
While the latest developments in the matter are still awaited, the case presents an interesting point of view for tax professionals, particularly because it underscores the significance of demonstrating genuine commercial intent when merging or demerging a loss-making undertaking into a profit-generating entity.
The approach taken by the Panel highlights that, even in formally compliant schemes, the commercial-substance test remains a central consideration in evaluating the permissibility of tax attributes transferred through such reorganisations.
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