MUMBAI: The Tokyo based arm of leading music label Universal Music has been accused of tax avoidance on $113.6 million of taxable income for the last three years.

Universal Music Japan (UMJ) had borrowed $1 billion from an affiliate in France during its restructure in 2008 and declared $113.6 million it paid in interest to the French company as an expense. But the Tokyo Regional Taxation Bureau believes the interest payment was an attempt to avoid taxes.

According to reports, the bureau has ordered UMJ to pay $37.9 million in back taxes and penalties while UMJ has further appealed to the National Tax Tribunal.

A statement released by Universal Music Japan said, “It is true that Universal Music Japan was investigated by the Tokyo Regional Taxation Bureau over its organizational restructuring in 2008 and was ordered to make a corrective tax filing. As we believe that there was no problem in the procedures related to the reorganization under tax laws, however, we applied to the National Tax Tribunal to examine whether the order is appropriate. It was very regrettable that there has been a gap of opinion between the taxation bureau and UMJ, but there is no change in our stance that the reorganization procedures were correct under tax laws, and we hope our argument will be accepted in the tribunal’s investigation.”