Global

Details

  • Service: Tax, International Corporate Tax, Mergers & Acquisitions, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 8/27/2012

India - Demergers, head office expenditures, reinvested capital gains, other 

August 27: The KPMG member firm in India has prepared reports on the following developments (read the August 2012 reports by clicking on the hyperlinks provided below):
  • Compliance with tax provision not a pre-condition for approval of a demerger under the Companies Act, 1956: The Delhi High Court concluded that compliance with section 2 (19AA) of the Income-tax Act, 1961, is not a mandatory requirement for all demerger plans under provisions of India’s Companies Act, 1956.

    The case is: Indo Rama Textile Ltd. Read an August 2012 report [PDF 201 KB]


  • Expenditure incurred by head office for Indian branch is allowable: The Mumbai Bench of the Income-tax Appellate Tribunal held an expenditure exclusively incurred by the head office for the Indian branch is allowable under section 37(1) of the Income-tax Act, 1961, without “clubbing” it with head office expenditures subject to section 44C. However, an expenditure related to earning exempt income is not allowable even if that income is earned on securities held as “stock in trade.”

    The case is: American Express Bank. Read an August 2012 report [PDF 210 KB]


  • Tax exemption for capital gains when proceeds are invested both in residential housing and eligible bonds: The Mumbai bench of the Income-tax Appellate Tribunal allowed a taxpayer’s simultaneous claims for an exemption for certain capital gains with respect to both the acquisition of residential housing and eligible bonds. India’s tax laws permit an exemption from tax for investments of net sale consideration arising from the transfer of a long-term capital asset, when invested in the acquisition of a residence, within a stipulated period of time. An exemption is also allowed with respect to the investment of the gain in the purchase of certain eligible bonds.

    Read an August 2012 report [PDF 448 KB]


  • Requirement to withhold taxes when individual investors do not have a “permanent account number” (PAN): The High Court of Karnataka held that provisions requiring withholding of tax when an individual is not required otherwise to obtain a PAN (a registration number issued by the Indian revenue authorities) may cause undue hardship to small investors and are discriminatory in nature. The mandatory withholding provision in the absence of a PAN therefore is not to be applicable when applied to persons whose income is less than the taxable limit.

    Read an August 2012 report [PDF 443 KB]


  • Amount received on dissolution of a trust is not received “without consideration” and thus is not subject to tax: The Mumbai bench of the Income Tax Appellate Tribunal held that an amount received by beneficiaries of a trust on dissolution of the trust is not received by the beneficiaries “without consideration” and thus is not subject to tax as income from other sources.

    The case is: Ashok Pratap. Read an August 2012 report [PDF 203 KB]


  • Accounting Standard-14 (AS-14) applies only to amalgamations and not to demergers: The Delhi High Court, while approving an arrangement, clarified that AS-14 of the accounting standards issued by the Institute of Chartered Accountants applies only to amalgamations and not to demergers.

    Read an August 2012 report [PDF 191 KB]


  • Reimbursement of employee-related costs to overseas companies not subject to tax withholding if no element of income is embedded in the payment: The Bangalore Bench of the Income-tax Appellate Tribunal held that a reimbursement of an expenditure in relation to employee relocation, employee awards, etc., incurred on behalf of the taxpayer by overseas companies, did not contain any element of “income” and thus, the taxpayer was not required to withhold tax while making such payments.

    The case is: Global E-Business Operations Pvt. Ltd. Read an August 2012 report [PDF 200 KB]


  • Seismic data services provided in connection with exploration and extraction of mineral oil: The Authority for Advance Rulings determined that a party that merely gathers seismic data for a mining contractor has not itself undertaken a mining project but has rendered technical services or services “in connection with” the mining activity undertaken by the contractor. The AAR continued by noting that the seismic services were rendered in connection with the extraction of mineral oil, and that fees for technical services received for rendering services in connection with prospecting for or extraction / production of mineral oil are not subject to tax pursuant to the tax relief under section 44BB.

    The case is: C.A.T. Geondata GmbH. Read an August 2012 report [PDF 204 KB]

    See also TaxNewsFlash-Asia Pacific: India - “Freebies” offered to doctors, seismic data-processing services


©2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.


The KPMG logo and name are trademarks of KPMG International.


KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.


The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


Direct comments, including requests for subscriptions, to go-fmtaxnewsflash@kpmg.com.
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.
 

Share this

Share this

Subscribe

Subscribe to receive the latest TaxNewsFlash email alerts (you must select the option for TaxNewsFlash)


Already a Subscriber? Login


Not a member? Subscribe now

Contact us

TaxNewsFlash by region


TaxNewsFlash home

TaxNewsFlash-Asia Pacific by country


TaxNewsFlash-Asia Pacific home