An earlier post highlighted the implications of the decision of the Supreme Court in Dharmendra Textiles (306 ITR) on penalty proceedings under the revenue laws, including the Income Tax Act. The Court there overruled its earlier decision in Dilip Shroff, and concluded that there is no requirement of mens rea in the case of penalty proceedings. Thus, it does not need to be shown that the assessee...
Further watering down of section 14A, Income Tax Act
Close on the heels of the decision of the Bombay High Court in Reliance Utilities & Power, which possibly has significant implications on the interpretation of section 14A of the Income Tax Act, the Bombay ITAT has, in a recent decision, taken a further step with the potential of limiting the inequity resulting from the current interpretation of the provision. The current position with regard...
A Way around Daga Capital?
An earlier post had discussed a decision of a Special Bench of the Mumbai Income Tax Appellate Tribunal (ITAT) in Daga Capital [26 SOT 603], highlighting its far-reaching implications on expenditures incurred ‘in relation to’ the earning of tax-free income under the Income Tax Act (Act). The Special Bench, following the Supreme Court decision in Doypack Systems [(1988) 2 SCC 299], held that the...
Further Spill-Over Effects Of Satyam
An article in today’s Business Standard mentions the renewed interest the Income Tax Department is taking the compliance of Chartered Accountants with their due diligence obligations. In the case of transactions involving remission of money outside India, the Income Tax Act permits the production of a certificate from the CA stating that the transaction is not taxable in India, as a basis for...
Decision in the Vodafone Tax Case
An earlier post mentioned that the decision of the Bombay High Court in the Vodafone case had gone against the petitioners, i.e. Vodafone. However, the text of the judgment which was not available as on the date of that post has become available since, and throws up some interesting issues for discussion. The issues before the Court were (a) the constitutionality of the certain amendments...
Daga Capital – A decision with implications for trade in shares and securities
In a case decided less than a month back, a special (3 member) bench of the Bombay ITAT considered and decided a number of tax issues arising with respect to entities dealing in shares and securities. Given the considerable attention devoted on late to financial institutions and mutual funds, this decision is one of enormous significance. The Bench considered three appeals together, one by the...
Bill for Overhauling the Insurance Sector
When debates raged as to the pros and cons of the 123 Agreement on nuclear fuel between India and the U.S., little was it known that its conclusion would benefit the unlikeliest of sectors in the Indian industry. While attention focussed on the fillip it would provide to the Indian energy sector, the political ramifications of the deal, with the departure of the Left, have led to benefits far...
The Tax Evasion Debate Revisited
An earlier post here had looked at the interrelation between the ratios of Azadi Bachao Andolan and McDowell on the issue of tax evasion, and concluded that the stricture against tax evasion laid down in McDowell hadn’t been completely laid to rest by Azadi, and that there still was scope for challenging a proposed transaction as being motivated purely by tax avoidance. A recent decision of the...
FII Participation in Indian Depository Receipts
A recent post on this blog examined changes to the SEBI DIP Guidelines made with a view to promoting qualified institutional placements [“QIPs”], as a measure to address domestic economic concerns, by enabling greater access to funds. While this shortage continues to be a cause for concern for domestic companies, given the interest rate hikes and the global financial crisis; the Finance Ministry...
Revenue Department Issues Guidelines to Prevent Tax Evasion
Recently, the Revenue Department issued a guideline to the Foreign Revenue Investment Board [hereinafter “FIPB”], instructing them to reject foreign direct investment in the telecom sector from companies based in tax havens. The issue arose when Daltotrade Ltd., a Cyprus-based company, tried to raise its stake in Meta Telecomm, an Indian company. Under the India-Cyprus DTAA, Cyprus residents are...
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