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  • Service: Tax, International Corporate Tax, Mergers & Acquisitions, International Executive Services, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 7/26/2012

India - Post-merger deductions; treatment of sweat-equity shares; stock options 

July 26:  The KPMG member firm in India has prepared reports on the following developments (read the July 2012 reports by clicking on the hyperlinks provided below):
  • Section 10B tax benefit survives and is available after merger: The Madras High Court held that a merger does not result in formation of new business and, thus, does not result in the loss of a tax deduction under section 10B of the Income-tax Act, 1961. Noting that a CBDT Circular (1963) provides that the benefit of the deduction attaches to the undertaking—and not to the taxpayer / owner—the successor-in-merger would be able to claim the remaining balance of the deduction under section 10B for the unexpired period.

    The case is: Renuga Textiles Mills Ltd. Read a July 2012 report [PDF 199 KB]


  • Motion to reopen assessment denied; no new documents: The Bombay High Court denied the tax authorities’ motion to reopen an assessment because the motion was based only on a mere difference of opinion, and not on the basis of any new material or the existence of any provision of law or judgment that had not been considered during the initial assessment.

    The case is: Rabo India Finance Ltd. Read a July 2012 report [PDF 203 KB]


  • New guidance for provident fund members: Employees’ Provident Fund Organization (EPFO) launched the Electronic Challan cum Return (ECR) facility for use by employers in promoting a prompt and transparent service. The EPFO also introduced an e-passbook to provident fund members.

    Read a July 2012 report [PDF 314 KB]


  • Value of “sweat equity” shares, allotted free of cost to employees, is deductible: The Chandigarh Bench of the Income-tax Appellate Tribunal held that the value of sweat equity shares is an allowable deduction.

    The case is: Spray Engineering Devices Ltd. Read a July 2012 report [PDF 200 KB]


  • Difference between market price and issue price of shares offered under stock option plan is deductible expense: The Madras High Court held that the difference between the market price and the issue price of shares under an employee stock option plan is treated as a staff welfare expenditure and, hence, a deductible expenditure under the Income-tax Act, 1961.

    The case is: PVP Ventures Ltd. Read a July 2012 report [PDF 196 KB]


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