In a recent decision of M/s Apex Laboratories vs. Deputy Commissioner of Income Tax[1], the Supreme Court yesterday held that expenditure incurred by a pharmaceutical company towards distribution of incentives (freebies) to doctors cannot be claimed as expenditure under Section 37(1) of the Income Tax Act, 1961 (“IT Act”), since the same is illegal in nature.Continue Reading Pharma companies cannot claim freebies given to doctors as expenditure
The government had introduced the faceless assessment regime from 2018, thereby eliminating the physical interface between the Assessing Officer (“AO”) and the assessee. Suitable amendments were made in the Income Tax Act, 1961 (“IT Act”), authorising the government to notify a suitable scheme for this purpose, which led to the setting up of a Centralised Communication Centre i.e. an internet-based, independent, centralised communication centre for issuance of e-notices to taxpayers, thus doing away with the need for the traditional face to face appearance by an assessee before the designated income tax authority. These preliminary steps finally culminated in the launch of the Faceless Assessment Scheme, 2019.Continue Reading Faceless appeals, CBDT extends faceless assessments to the second level
The government has over the years strived to modernize the taxation system in our country to remove the discretions and unnecessary harassments experienced by the taxpayers. It has continuously integrated new technologies with the various tax compliances and other proceedings under the IT Act. With continuous planning and efforts, the Indian Revenue Authorities (“IRA”) have enabled electronic filing of several applications and returns under the Income Tax Act, 1961 (“IT Act”) and have even intimated their approvals or objections directly through the e-filing portal.Continue Reading Faceless assessment: Is this the right cure?
With re-opening of offices post the second wave of COVID-19, various employers have re-initiated providing canteen, cab, health insurance and many other services to their employees as part of welfare programme as well as obligations under various labour law regulations. The employer may choose to recover the cost of providing such services in full or offer a concession or deduct it from the concerned employees’ salaries or supply them free of cost. Surprisingly, the Goods and Services Tax (“GST”) legislation neither provides for any exemption nor declares that services rendered by the employer to its employees would not be in the nature of goods or services.Continue Reading GST obligations of employer on services rendered to its own employees
With the ongoing pandemic, the odds of invocation of clauses such as liquidated damages, price variation clause, compensation clause or forfeiture of deposits for the delay in adhering to contractual timelines, etc. have become very high. Such additional payments could also bring out an exposure on account of taxability under Goods and Services Tax (“GST”) legislations.Continue Reading The conundrum created by AAR regarding GST on damages
Inauguration of India’s first International Financial Services Centre (“IFSC”) at the Gujarat International Finance Tec-City (“Gift City”) in Gujarat is a positive development to invigorate our financial sector. If everything that is being attempted to achieve is accomplished, it will mark our entry on the global stage. When IFSC was being set up, our then Finance Minister, Late Mr. Arun Jaitley, had envisioned an IFSC at par with other global financial hubs like London, Singapore, Hong Kong, Dubai, etc. An IFSC encourages all major global players to operate in such facility, which in turn would facilitate a two way flow of finance, financial products, financial services, etc.. It would also attract the best talent pool because of access to multiple career opportunities as well as ability to work with the market leaders and world class products. For India, despite being one of the fastest-growing economies in the world, having one of the best talent pools that has created a name for itself in the global scene, having a significantly young population and emerging as one of the most sought after jurisdictions for start-ups, to not have an IFSC of its own and to not offer financial services to businesses across the world, would have been a great travesty.Continue Reading International Financial Services Centre, an idea whose time has come – Part I: Banking Sector
Slump sale transactions are a preferred method of transferring a business as a going concern. They are often used for internal restructuring purposes and for sale of a whole or part of a business undertaking to a third party. Several global transactions also comprise of a slump sale element to execute the transfer of the Indian business to the buyer’s affiliate in India. In a slump sale, a business undertaking is transferred by one party to another as a going concern for a lumpsum consideration, without attributing specific values to assets and liabilities.
Continue Reading Taxing Times Ahead for Slump Sale Transactions
The Finance Minister (“FM”) introduced her promised ‘never like before Budget’, with the objective of stimulating economic growth through higher spending on healthcare and infrastructure, against the backdrop of the economic slowdown caused by the Covid-19 pandemic. The FM has also proposed a slew of reforms under the Finance Bill, 2021 (“Bill”), to rationalize the extant provisions of the Income-tax Act, 1961 (“IT Act”). Certain proposals introduced in the Bill could significantly impact M&A deals and change the traditional modus operandi of M&A transactions in India. The ensuing paragraphs will focus on a few such significant amendments proposed in the Bill, which may require close consideration by stakeholders before entering an M&A transaction, be it amalgamation, share acquisition or an acquisition of business as a going concern.
Continue Reading Bumpy Road Ahead for M&A Transaction: Budget 2021
Rewarding employees through share-based benefit schemes has been an effective tool for the companies to not just recognise their contribution to the company, but also retain them by imbibing a sense of belonging and ownership. One such scheme, popular among the companies for almost last two decades, has been grant of Employee Stock Option Plans (“ESOPs”). In simple terms, an ESOP is an option and not an obligation, provided by a company to its employees, to purchase its shares at a future date at a pre-determined price, which is ordinarily less than the market price, on satisfaction of certain prescribed conditions. While the issuance of ESOPs entail various tax implications for both the employer and the employees, the scope of this blog is limited to ascertaining the validity of an employer’s right to claim the perceived discount granted on the issue of shares as a tax deductible business expenditure. Recently, the Karnataka High Court (“HC”) affirmed the ruling of the special bench of the Bangalore Income Tax Appellate Tribunal (“ITAT SB”) in the case of Biocon Ltd.[1], wherein it was held that discount on issuance of ESOPs is an allowable business expenditure under Section 37(1) of the Income-tax Act, 1961 (“IT Act”) for the employer.
Continue Reading Karnataka HC affirms discount on issue of ESOPs is a tax-deductible business expenditure
We have seen in the blog dated September 14, titled ‘Using SPAC Vehicles as a Means of Listing Outside India’, that special purpose acquisition companies (“SPAC”) are making a comeback for the purposes of listing of companies outside India.
As a follow up to the earlier blog, we will examine some feasible structures for offshore listing and their Indian tax considerations. This examination is intended to identify the relevant tax considerations and ensure that such a listing takes place with due regard to them.
Shares of Indian companies and of foreign companies, deriving substantial value from Indian assets, are regarded as capital assets situated in India. Any gains derived by any person, including a non-resident, from transfer of an Indian capital asset is regarded as income taxable in India. The term ‘transfer’ in this context is given a very wide meaning and it includes within its purview sale, exchange, relinquishment of the asset, extinguishment of any right in the capital asset, conversion of the capital asset into stock in trade, maturity or redemption of zero coupon bond, etc. We will limit ourselves here to the meaning of transfer in relation to shares and securities. The law also provides how the gains are to be computed when there is a transfer of shares. It is a settled law that where the mechanism to compute gains is not available, it is presumed that the legislature did not intend such a transfer to be subjected to tax.
Continue Reading Assessing Indian tax considerations for successful offshore listing of Indian companies