Monthly Archives: August 2014

  • Shadows over the meaning of the word “substantially” w.r.t Indirect Share Transfers lifted???

    August 21 2014

    As part of the group restructuring policies & commercial deliberations, share transfers do take place between holding entities of foreign companies. As a result of which, the share holding of the Indian subsidiary of the foreign holding company is also indirectly transferred to a new foreign entity. In effect the transactions results into share transfer between two non-resident entities whereby simultaneously shareholding in the Indian entity also gets transferred. This reminds of one of the most discussed & debated deal between Hutch & Vodafone, where the Supreme Court of India held that the Indirect transfer of shares in Indian entity is not taxable in India.  Pursuant to which, the Indian Income Tax Act  was amended so as to levy income tax on capital gains as a result of transfer of a capital asset being any share or interest in a company outside India,  if the share or interest derives, directly or indirectly, its value substantially from the assets located in India.[insertion of explanation 5 to section 9(1)(i)]

    It is in this background there was no clarity on the interpretation of the word substantially as it can be a subjective term and there is no concrete number to decide the substantiation of the transaction.

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  • Indian Budget’s amendments to Transfer Pricing provisions – a further step towards a predictable tax environment

    August 6 2014

    India's Transfer Pricing Regime has been the subject of significant criticism. Whether the July's Union Budget proposals to amend the current transfer pricing regime, would simplify the tax regime and restore confidence among the tax payers especially foreign investors?

    Article: "Indian Budget's amendments to Transfer Pricing provisions - A further step towards a predictable tax environment" published by Bloomberg BNA in their Transfer Pricing International Journal for the month of July.


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