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Cloud over draft rules

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Tax consultantsand experts  have observed various irritants  in the draf trules on calculation of fair market value ( FMV) for indirect share transfers. Though the draft adds  some certainty to taxation of  Voda fone - like transactions, these flaws could lead to  anomalies,  they said.  One of the issues is the definition of  the term“ book value of liabilities”. The draft prescribes them anner in which FMV of  the foreign target company (FTC) shares and the underlying India company shares can be determined for the purpose of  indirect transfer taxation. Any transaction where the value of Indian assets exceeds 50 percent of the FTC would  attract taxes in India. Explanation6( b) requires such FMV to be determined without reduction of              the concerned company’s book value of liabilities.
Business Standard New Delhi,25th May 2016

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