Zaheer Mauritius v DDIT (Intl Taxation) (W.P.(C) NO. 1648 OF 2013 dated 30.07.2014) – Delhi High Court Background: The petitioner is a company incorporated in Mauritius and is engaged in the business of investment into Indian companies engaged in construction and development business in India. The petitioner entered into a Securities Subscription Agreement (‘SSA’) and a Shareholder’s Agreement (‘SHA’) with Vatika and its JV Company. As per the SSA, the petitioner agreed to acquire 35% ownership interest in the JV Company by making a total investment of Rs. 100 crores in five tranches. The petitioner agreed to subscribe to 46,307 equity shares having a par value of Rs. 10/- each and 88,25,85,590 zero percent CCDs having a par value of Rs. 1/- each in a planned and phased manner. The SHA provided for a call option given to Vatika by the petitioner to acquire all the aforementioned securities during the call period and likewise, a put option given by Vatika to the petitioner to sell to Vatika all the aforementioned securities during the determined period. On 08.04.2010, Vatika partly exercised the call option and purchased 22,924 equity shares and 43,69,24,490 CCDs from the petitioner for a total consideration of Rs. 80 crores. The Petitioner filed an application before the AAR for advance ruling on the taxability of the consideration received with respect to CCDs. AAR held that gains received/receivable by the petitioner resulting from transfer of the investments held by the petitioner in the JV company, was interest under Section 2(28A) of the Act.
Monthly Archives: July 2014
Redington (India) Limited v JCIT (ITA No.513/Mds/2014 dated 07.07.2014) – Chennai ITAT Background: The assessee, M/s. Redington (India) Limited provides end-to-end supply chain solutions for all categories of Information Technology(IT) products. The assessee has a wholly owned subsidiary company M/s. Redington Gulf FZE(‘RGF Gulf’) in Dubai. In 2008, a Private Equity Fund(PE fund)- IVC evinced interest to invest in the overseas operations of the assessee group. The assessee company set up another wholly owned subsidiary company in Mauritius in July, 2008 (‘RIML Mauritius’). The assessee made an initial investment of US$ 25000 equivalent of ` 10.78 lakhs. The said newly set up subsidiary M/s. RIML Mauritius, in turn, set up its own wholly owned subsidiary in Cayman Islands (‘RIHL Cayman’). IVC has infused a sum of US$ 65 millions into M/s. RIHL Cayman for fresh allotment of shares. After the above incorporation exercises, the assessee company transferred its entire shareholding in M/s. RGF Gulf to M/s. RIHL Cayman on 13th November, 2008. The transfer was made without any consideration. Once this transfer of shareholding was made, RGF Gulf became a step down subsidiary of RIML Mauritius and the assessee company. As the shares were transferred without consideration, the assessee company took the stand that it is a gift within the meaning of section 47(iii) and therefore, not chargeable to tax as capital gains. Further, it is also not an international transaction. It stated that in order to come under the purview of an international transaction, the transaction must generate income. The TPO held that the transfer of shares made by the assessee is an international transaction. In computing the value of shares transferred by the assessee, the TPO has adopted the price paid by IVC, the PE fund on allotment of shares in RIHL Cayman, as the comparable. The fresh infusion of funds by M/s. IVC and allotment of shares in M/s. RIHL Cayman, resulted in M/s. IVC, holding a stake of 27.17%. The TPO extrapolated the said shareholding and determined an amount of US$ 174.23 millions, as representing 100% of the value of M/s. RIHL Cayman and on that basis determined the ALP of RGF Gulf shares transferred by the assessee. Accordingly, the TPO determined the ALP of M/s. RGF Gulf shares at Rs 865,40,04,100. The Assessing Officer modified the above gross amount by setting off the indexed cost of acquisition and determined the long term capital gains adjustment at Rs 610,15,75,820. The DRP stated that a gift as generally understood is made out of love and affection by natural persons; that corporate entities cannot make gifts, as the term “gift” in sec.47(iii) is used in conjunction with the word “will”. It directed to give a marginal relief in the capital gains addition proposed against the transfer of shares. They accepted the argument that in view of the buy-back agreement between the Venture capital fund (PE fund) and the assessee, the PE investment was relatively risk-free. Consequently, the DRP agreed that to the extent of the risk premium, the […]
Company gifting shares to a foreign company is exempt u/s 47(iii) and also not an ...
CIT v Chittorgarh Kendriya Sahakari Bank Ltd (SLP – CC No(s). 8127/2014 dated 02.07.2014) Supreme Court dismissed the SLP filed by Tax Authorities against the Rajasthan High Court ruling in the case of Chittorgarh Kendriya Sahakari Bank Ltd [2014] 41 taxmann.com 11 wherein it was held penalty under section 271(1)(c) levied upon the assessee on incorrect claim for deduction was not justifiable as the same was on account of change of law and therefore, a matter of bona fide mistake.
Penalty u/s 271(1)(c) not applicable in case of bonafide mistake on account of change in ...
The Union Budget for the year 2014-15 was tabled by the Finance Minister Mr Arun Jaitley on 10 July 2014. Certain significant tax proposals contained in the Finance (No.2) Bill, 2014 were made by the Finance Minister during the Budget 2014-15 speech. In relation to the retrospective amendments made in earlier Budgets, the Finance Minister recognized the harsh implications in the international business community. The Finance Minister proposed that all fresh cases of indirect transfer taxation arising will be scrutinized by a high level committee. Unfortunately, contrary to expectations, the budget does not contain any proposal to provide relief to taxpayers who are already in litigation on this matter. Most of the direct tax proposals in the Finance Bill, 2014 are effective from the financial year commencing on 1 April 2014, unless otherwise specified. Click here to download an analysis of the key Direct Tax Proposals in the Budget
BUDGET 2014 – Analysis of the key Direct Tax Proposals
GE Energy Parts Inc v Addl DIT ITA No. 671/Del/2011 dated 04.07.2014 (Delhi ITAT’s interim order) Decision: Whether Re-assessment proceedings are valid: In the reasons recorded by assessing officer it was categorically stated that the information regarding the employees of GE in India prior to the present expats was not given by GE group. Assessing officer had recorded a finding that there had been the persons working for such sales through out the period 1-4-2000 to till date. This factual finding recorded by assessing officer was not objected to by the assessee while filing objections before assessing officer. It cannot be said that assessing officer had not made inquiries regarding the employees of GEIPL who were working for other GE entities. The assessee did not provide this information. In the back drop of these facts, now the department is seeking admission of Linkedin profiles of various employees which has been down loaded from the website and is available in public domain. On Admissibility of additional evidence: Section 254(1) provides that the Tribunal may, after giving both parties to the appeal an opportunity of being heard, “pass such orders therein as it thinks fit”. Section 255 deals with the procedure before the Appellate Tribunal in discharge of its powers and functions. On perusal of the above section, Tribunal has all the powers vested in it which are vested in the income-tax authorities with reference to section 131. The basic ingredient for exercising powers under Rule 29 for admission of additional evidence is that Tribunal should come to the conclusion that a particular document would be necessary for consideration to enable it to pass orders or for any other substantial cause. The document can be brought to the notice of Tribunal by either party. The Tribunal is final fact finding body and, therefore, the powers have been conferred on it u/s 131 and Rule 29 to enable it to record a factual finding after considering the entire evidence. For dispensation of justice wide powers have been given to Tribunal. On LInkedIN profiles: Ld. Sr. Counsel has submitted that Linkedin profiles is an hearsay evidence and has no probative value. In this regard ld. Sr. counsel has relied on two decisions of US courts. Further, Linkedin profiles is self appraisal of employees and, therefore, it is hearsay evidence. We are unable to accept this contention. Linkedin profiles is not in the nature of hearsay because it is the employee who himself has given all the relevant details and the same relate to him. These detalis are akin to admission made by a person. No third party is involved in creating of this Linkedin profiles and, therefore, it cannot be said to be an hearsay evidence. The Linkedin profiles are in the nature of admissions of persons on their job profile. The data is in pubic domain.