Taxpayer’s Choice for Valuation of Shares at Premium Upheld

The Income Tax Appellate Tribunal (ITAT) in the case of M/s. Rameshwaram Strong Glass (P) Ltd. v The Income Tax Officer[1] has upheld the right of the company issuing shares to choose the valuation methodology under the provisions of the Income Tax Act, 1961 (IT Act) read with the rules framed thereunder (Tax Law) for the purposes of determining the ‘fair market value’ (FMV) of such shares at premium. Continue Reading Taxpayer’s Choice for Valuation of Shares at Premium Upheld

The Income Tax Act, 1961 (IT Act) contains several special beneficial provisions that allow for deductions in order to promote certain activities. One such provision is Section 10A of the IT Act, which seeks to promote and boost new business undertakings situated in free trade zones by providing suitable deductions. It provides for a 100 percent deduction of profits and gains derived by undertakings engaged in export of articles or computer software. The deduction is available for ten assessment years from the year in which the entity commences operations. These profits are to be determined based on the ratio of export turnover to the total turnover of the undertaking.

Over the years, there have been several disputes over the manner in which this ratio is to be determined. This is largely because while the term ‘export turnover’ has been defined under Section 10A of the IT Act, “total turnover” has not. In other words, there is no explicit provision that allows the taxpayer to exclude amounts from total turnover in case such amounts have already been excluded from export turnover.

In the recent case of CIT v HCL Technologies Limited[1], the Supreme Court of India dealt with this issue and provided much needed clarity on the subject.

Continue Reading Expenses Excluded from Export Turnover, also to be Excluded from Total Turnover

This is the fourth post in the our new blog series on the Budget 2018. Following our earlier posts (here, herehere and here) on the impact of the Budget on the Direct, Indirect Tax regimes and the Healthcare sector, this piece focuses on the amendments to the advance ruling system under the Customs Act. We hope you enjoy reading this as much as we have enjoyed putting this together.


The Finance Act, 2017 consolidated the Authority for Advance Rulings (AAR) for customs law and direct taxes, to promote the ease of doing business in India. In continuation to that, as well as the introduction of the Goods and Service Tax (GST), the Union Budget 2018 (Budget) proposes various amendments to the Customs Act, 1962 (Customs Act). Such amendments not only include enhancement in the scope of the advance ruling system in India, but also entail revamping of its procedural aspects.

Scope of AAR

The regulatory environment is proposed to be made more conducive by enlarging the ambit of the eligible persons entitled to make an application for advance ruling. Presently, only a joint venture in India, a non-resident person setting up a joint venture in collaboration with a non-resident/ resident, a wholly owned subsidiary of a foreign company, or certain other notified persons (i.e. PSU’s, resident companies and firms, residents importing from Singapore) can apply for an advance ruling.

The amendments proposed in the Budget would allow any person holding a valid Importer-Exporter Code, exporting any goods to India, or having a justifiable cause to the satisfaction of the AAR, to make an application for advance ruling. The said proposal grants wide discretionary powers to the proposed AAR to be constituted under the Customs Act (Customs AAR) to entertain any applicant having a justifiable cause to its satisfaction. This potentially extends the said facility to all persons, including foreign individuals, looking to independently set up business in India or export to India. Additionally, in line with the intent of ensuring the ease of doing of business in India, the proposals include amendments to allow foreign persons intending to export goods to India to be represented by an authorised Indian resident for advance ruling purposes. Interestingly, it is also proposed that the ambit of Customs law be expanded to include persons out of India. This would facilitate the effective regulation of import-export transactions undertaken by foreign suppliers.

Continue Reading Authority for Advance Rulings under Customs Law: A Metamorphosis

This is the first post in the our new blog series on the Budget 2018. This is a two-part piece on the amendments proposed under this Budget to the Income Tax Act; published here is Part I. We hope you enjoy reading this as much as we have enjoyed putting this together.


On 1st February, 2018, the Finance Minister Mr. Arun Jaitley presented the last full-year Union Budget before the 2019 Lok Sabha elections. It was delivered against a backdrop of economic slowdown caused by demonetisation in November, 2016 and the implementation of Goods and Services Tax (GST) legislations. The Budget focuses on strengthening agriculture and the rural economy, providing social security benefits and infrastructure creation.

The Finance Minister stated that the Indian economy is reviving and predicted that its Gross Domestic Product will rise to 7-7.5% in 2018-19, and that India is expected to become one of the world’s fastest and largest economies.

In the paragraphs below, we present a snapshot of some of the proposed amendments to the Income Tax Act, 1961 (IT Act) presented in this Budget:

Continue Reading First Impressions of the Budget 2018: Income Tax Act – Part I