UK's Cameron may fly in to Shell India tax row

By Andrew Callus

LONDON (Reuters) - Oil company Royal Dutch/Shell has asked the British government to raise the subject of a tax dispute with India during Prime Minister David Cameron's visit there next week, according to a source familiar with the request.

The dispute blew up earlier this month when tax authorities revalued by $2.7 billion a 2009 transaction by Shell with a wholly-owned subsidiary, and claimed a tax payment was due.

It comes as India faces a potential seeks to balance the need to shore up its finances by raising tax receipts with its desire to encourage foreign investment.

The Anglo-Dutch oil group's run-in with tax officials follows a long-running $2 billion Indian tax claim on British mobile telecoms group Vodafone which has dented foreign investor confidence in the country.

Finnish phone maker Nokia earlier this week became the latest international company to protest against an Indian tax investigation.

The amount claimed from Shell was not specified, and an Indian tax official told Reuters it would be confined to interest on that amount.

Shell has responded vigorously to the tax claim, which was revealed initially in press reports.

"Taxing the money received by Shell India is, in effect, a tax on foreign direct investment, which is contrary not only to law but also to the spirit of the recent global trip by the finance minister," Shell India Chairman Yasmine Hilton said on February 4.

Shell's Indian presence goes back 80 years and, like other big oil companies, it has its eye on the country's growing market for natural gas and fuels.

Shell also has bitumen and lubricant operations in India and is the only one of the big-name international oil companies with a fuel retail licence in the country. It employs over 1,600 people at a business services centre in Chennai.

The source, who spoke on condition of anonymity, said Shell had not been invited to join a business delegation that will accompany Cameron on the trip, but hoped he would raise the issue on their behalf.

A spokeswoman for Cameron declined to discuss issues he was likely to raise, and would not say which companies were accompanying him. A Shell spokesman also declined to comment.

(Editing by Jeremy Gaunt.)