Skip to main content

CBDT Withdraws Circular on Share Valuation After Cong Claims ‘Win’

Days after issuing a circular that sought to clarify taxes on valuations, the Central Board of Direct Taxes (CBDT) withdrew it following a Congress party press conference at which it said the move would exonerate Rahul and Sonia Gandhi over income-tax liabilities in the Associated Journals Ltd (AJL) case. The withdrawal means that the taxman will again start challenging valuations in cases where there was a fresh issuance of shares. Experts said the withdrawal of the circular has created confusion for several companies that had received tax demands on valuations.
“I don’t know why the government is creating so much confusion in the investing space. Just a simple clarification was required so that genuine investments from listed companies, Sebi-registered AIFs (Alternative Investment Funds), holding companies into subsidiaries, angel funds into DIPP-registered startups, other similar investments should have been made exempt,” said Jeenendra Bhandari, partner, MGB, a chartered accountancy firm. “This process of issuing circulars and then withdrawal is confusing to the investment climate.” Experts said tax regulations had been modified in 2010 to prevent money laundering. The government had inserted a regulation — Section 56(2)(viia) — in the income tax Act to tackle black money transactions in investment situations.
“The section under the income tax Act was originally brought in to curb black money transactions and tax was in the hands of the recipient,” said Girish Vanvari, founder of tax advisory firm Transaction Square. “The withdrawal of the clarification would mean all those who have received tax demands will have to litigate and apply for a stay on the demand.” ET had on January 3 reported that several companies that had received tax notices and faced tax outgo over valuations would get relief thanks to the clarification issued on December 31. It was withdrawn through another circular issued on the night of January 4. Experts said the original clarification only dealt with unintended implications of income tax rules. “The unintended consequence of the income tax provision was that it could have been invoked even in case of fresh issue of shares,” said Amit Maheshwari, partner, Ashok Maheshwary and Associates LLP. “This clarification would have been binding on the tax department and hence would have resolved pending litigation under this clause.”
Many experts said the shift on the valuation issue was mainly due to the press conference by Congress. Party leader Ahmed Patel and Vivek Tankha, head of Congress’ legal cell, had said that the December 31 clarification had vindicated the party’s stand. Tax demands raised on party chief Rahul Gandhi and Sonia Gandhi for receiving shares of AJL’s National Herald were not justifiable, it said. “This vindicates our position that there never was an issue about issuance of such shares as a taxable event as it was being projected by way of harassment. We thank CBDT for this clarification,” the party member had said.

The Economic Times, 7th January 2019

Comments

Popular posts from this blog

RBI rushes in to prop up falling rupee

RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…