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...
Supreme Court rejects Vodafone’s appeal
According to a report in the Economic Times, the Supreme Court has refused to admit Vodafone’s SLP against the order of the Bombay High Court in the Vodafone tax matter. The Court has asked Vodafone to respond to the show cause notice issued by the Revenue. It now appears that the battle will reach the Supreme Court – if at all – only after a long time. The judgment of the Bombay High Court has...
Clifford Chance v. DCIT: Territorial nexus in international taxation
A recent decision of the Bombay High Court in Clifford Chance v. DCIT revisits interesting legal issues connected to the taxation of non-residents under Section 9 of the Income Tax Act, 1961. Section 9(1) deals with “income deemed to accrue or arise in India”. The relevant part of the Section read – prior to 2007 – as follows: Section 9(1). The following incomes shall be deemed to accrue or arise...
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...
Bombay High Court Rules Against Vodafone in Tax Case
The much-awaited judgment of the Bombay High Court in the tax case involving Vodafone has now been delivered. Newspaper reports indicate that the court has decided against Vodafone, although the judgment itself is yet to be available. The Financial Times reports: The Mumbai High Court on Wednesday dismissed a challenge by Vodafone against a $2bn tax case in a blow to the UK group and a potential...
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...
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...
DTAA income now included in total income
The CBDT has notified that if a DTAA provides that the income of a resident “may be taxed” in the other country, such income will be considered to be part of the total income of the assessee (CBDT Notification No. 91/2008). The notification is available here. The implication is that such income will be part of total income, although relief can be claimed under the applicable...
Motive to Avoid and Transfer Pricing
Transfer pricing and arm’s length pricing have become increasingly important subjects over the past few years, with the growing importance of cross-border transactions between companies under the same umbrella organisation, or connected in other ways. Several questions have arisen – the definition of ‘associated enterprises’, the appropriate method of computing transfer pricing etc. One of these...
Tax Implications of Demergers
(The following post is contributed by Mihir Naniwadekar) Generally, the gains arising from a demerger are exempt from capital gains tax, while those arising from a slump sale are not. But, then, what exactly is a ‘demerger’ for the purposes of the exemption from capital gains tax? Can a demerger ever be characterized as a ‘slump sale’? Several sections of the Income Tax Act, 1961 deal with these...
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