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India – Taxation Updates.

9 February, 2015

  • In a landmark decision in the case of Vodafone India Services (P.) Ltd.1, the Bombay HC has held that TP provisions cannot apply where the transaction itself is not taxable. Since the issuance of shares by an Indian company is not a taxable transaction under the Income-tax Act, 1961 (‘IT Act’), issuance of shares by an Indian company, even though at a premium, will not invite the Indian TP regulation for determining the arm’s length price. Following the above ruling, the Bombay HC also allowed Shell India Markets (P.) Ltd.’s2 writ petition on similar issue.

 

  • In continuation of amendments made by Finance (No. 2) Act, 2014 to Section 245N of the IT Act permitting a resident taxpayer also (other than “public sector companies” that were in any case allowed to approach the AAR even earlier) to approach the Authority for Advance Ruling (‘AAR’) for determination of its tax liability, the Central Board of Direct Taxes (‘CBDT’) has now notified3 that any resident taxpayer whose aggregate value of transactions, undertaken or proposed to be undertaken, is INR 1bn or more may approach the AAR for determination of its tax liability.

 

By way of a separate notification4 , the CBDT, while prescribing that an application to the AAR by such resident applicant has to be made in Form No. 34DA, has also revised the fee payable by resident and non-resident applicants while making application before the AAR.

 

  • The CBDT by way of letter dated December 23, 2014 has issued guidelines5 for compounding of offences under Chapter XXII of the IT Act. These guidelines are effective January 01, 2015 (i.e. apply to applications made on or after January 01, 2015) and supersede all previous compounding guidelines. These guidelines set out the offences in Category “A” and Category “B”. The criteria for compounding of offences under each category, related procedure, application formats and the manner in which such applications are to be dealt with, have also been notified.

 

End Notes:

 

1 Vodafone India Services (P.) Ltd. v. Union of India, [2014] 50 taxmann.com 300 (Bombay).


2 Shell India Markets (P.) Ltd. v Assistant Commissioner of Income-tax , [2014] 51 taxmann.com 519 (Bombay).


3 Notification No.73/2014/ F. No. 142/6/2014-TPL, dated November 28, 2014 .


4 Notification No. 74/2014/ F. No. 142/6/2014-TPL, dated November 28, 2014.


5 Guidelines issued by way of F.No. 285/35/ 2013 IT (Inv.V)/108

 

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For further information, please contact:

 

Zia Mody, AZB & Partners
zia.mody@azbpartners.com

 

Abhijit Joshi, AZB & Partners 
abhijit.joshi@azbpartners.com


Shuva Mandal, AZB & Partners 
shuva.mandal@azbpartners.com

 

Samir Gandhi, AZB & Partners
samir.gandhi@azbpartners.com


Percy Billimoria, AZB & Partners 
percy.billimoria@azbpartners.com

 

Aditya Bhat, AZB & Partners 
aditya.bhat@azbpartners.com

 

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