Central Board of Direct Taxes

CBDT exempts GIFT City aircraft leasing cos from withholding on dividend distributed inter se  , but is it enough?

Despite India being the third[1] largest domestic aviation market in the world, a majority of the aircrafts in the country (more than 70% approximately) are procured through lease arrangements, with most of them being provided by overseas lessors. Airline companies do not have the financial wherewithal to purchase aircrafts and hence, are forced to take them on lease. However, since the aircraft financing industry is at a nascent stage in India and considering the risks involved, new players are unwilling to enter the business. While leasing aircrafts helps to manage the liquidity position of aircraft operating companies, it comes at a heavy cost and significant financial risks for aircraft operating companies and creates huge trade imbalance for the country.Continue Reading CBDT exempts GIFT City aircraft leasing cos from withholding on dividend distributed inter se, but is it enough?

Supreme Court Overturns Several High Court Decisions Quashing Reassessment Notices

In a recent decision of Union of India vs. Ashish Agarwal[1], the Supreme Court (“SC”) effectively overturned several High Court decisions which had quashed reassessment notices issued under Section 148 (as it existed prior to the amendments introduced through the Finance Act, 2021). The decision has a significant impact for pending reassessments, notices for which have been issued after April 1, 2021. This blog shall briefly explain the background to the appeal as well as the decision of the SC, and analyse the reasoning and impact of the decision.Continue Reading Supreme Court Overturns Several High Court Decisions Quashing Reassessment Notices

Faceless assessment Is this the right cure

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?

Taxing Times Ahead for Slump Sale Transactions

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.
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CBDT notifies thresholds to determine ‘significance’ of significant economic presence

Non-resident taxpayers may now have to watch out for a new nexus norm that will require enterprises with no physical presence in India to pay taxes in India on their business profits attributable to transactions or activities that constitute a ‘significant economic presence’ (“SEP”) of the non-resident in India.
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Rules for minimum remuneration notified for Indian managers of offshore funds to qualify for exemption from taxable presence in India

Background

Section 9A of the Income-tax Act, 1961 (“IT Act”) carves out a special taxation regime to exempt eligible offshore funds from being regarded as having a business presence in India and hence subject to taxation in India, despite their fund managers being located in India. If the offshore funds as well as

Indian Tax measures to counter COVID-19 impact - How do they compare with OECD’s suggestions

At a time when economic activities have come to a standstill on account of the lockdown imposed by the government to tackle the Covid-19 pandemic, some leeway in tax laws will provide much needed relief to taxpayers. Many countries, including India, have announced various economic relief measures, ranging from financial aid and provision of free/ subsidised food and water to debt repayment deferrals. The idea essentially is to help people cope with the substantial reduction in their cash flows to meet their daily and business needs, especially for businesses with permanent employees whose rights may be protected legally, meeting their working capital requirements for maintaining the supply-chain, transporting goods, meeting their other contractual commitments, including those related to debt and so on. Businessmen have no control over tax payouts since the amount or percentage to be paid is fixed by the government, unless governments provide tax relief to ease cash flows.

In this context, the Organisation for Economic Co-operation and Development (“OECD”) has sprung into action to make a compilation of: (i) measures contemplated by tax administrations; (ii) constraints pertaining to those measures; (iii) recommendations to deal with the impact under tax treaties due to travel restrictions and ensuing possible tax exposures, which arise unintentionally and temporarily; and (iv) some recommendations on ‘good to have’ practices by businesses for their business continuity. The stated purpose of the compilation and these guidelines is to assist tax administrations and businesses in formulating their own possible measures. The compilations and guidelines are not recommendations with regard to any particular measures and they recognise that circumstances and considerations will vary for every country.
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cbdt direct tax

In the Chamber of Tax consultants & ors v. CBDT and Union of India)[1], the Hon’ble Bombay High Court (HC) set aside a portion of the Central Board of Direct Taxes’ (CBDT) action plan that sought to incentivise commissioners of income tax (Appeals) (CIT(A)) whose orders have led to enhanced tax demand from the tax payers. The HC noted that the proviso to the section 119 of the Income tax Act, 1961 (IT Act) specifically prohibits it from issuing any such directions to make a specific assessment or dispose a case in a particular manner.

Facts

Sometime back, the CBDT issued a Central Action Plan for the financial year 2018-19 (CAP) inter alia for the purposes of setting out targets for tax collection, fixing timelines for disposal of cases by income tax authorities and for awarding certain reward points for such disposals. However, since the said CAP proposed to incentivise CIT(A)s who were passing orders favouring the Government, it raised a huge issue and there were widespread protests against such a move.
Continue Reading Bombay High Court Sets Aside CBDT’s Proposal to Reward CIT(A)s for Pro Revenue Orders