ITAT Said LTCG Tax will be not Imposed on Indirect Transfer of Indian Assets

The Income Tax Appellate Tribunal (ITAT) Delhi ruled that long-term capital gains tax The Income Tax Appellate Tribunal (ITAT), Jaipur, has ruled that the previous water and electricity bills can not be provided as proof of construction. read more will be not imposed on the Indirect transfer of Indian assets.

It came up in a matter of the sale of Singapore-based Accelyst Pte Ltd (Freecharge) by Singapore startup incubator Augustus Capital PTE Ltd to Jasper Infotech Pvt Ltd (JIPL) in the Financial Year 2016. JIPL is the holding company of Snapdeal. According to experts, this decision comes as a relief to foreign funds and institutions for the tax demands of earlier years.

The root of the problem is the imposed amount of ₹36.3 crores in the form of long-term capital gains (LTCG) by the Assessing Officer (AO), against the claim of zero or nil income by Augustus Capital, stating that the transaction was not taxable in India.

“Amendment in Section 9 of the Income Tax Act Get to know complete guide of TDS provisions under income tax act 1961 at here. Also, we include several topics as TDS returns, TDS due dates in 2012 clarifies that if a share or interest in a foreign entity is substantially derived from assets located in India, such share or interest is deemed to be located in India and any Income arises from the transfer of such shares or interest deemed to have arisen in India.”

“Explanation 6 was later included in the Finance Act, and it clarifies that the term ‘substantial’ means the fair market value (FMV) of assets located in India exceeds ₹10 crores and that the FMV of assets or property located in India is represented at least 50% of the FMV total assets of the foreign entity.”

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“Explanation 7 exempted from Section 9 small investors who do not own the management right or control of such an entity and hold less than 5% of the total voting power.”

The order stated that the Assessing Officer (AO) rejected the assessee’s claims stating that Explanations 6 and 7 were effective from Financial Year 2017 while the transaction was conducted in Financial Year 2016. With the new ruling, the tribunal directed the income tax department to remove the addition of LTCG.

Amit Maheshwari, tax partner at AKM Global. Said that “This would provide a breather to foreign funds and entities which are being subjected to tax demands for earlier years where substantial investments otherwise may not have been made by them,”.