• Service: Tax, Mergers & Acquisitions, International Tax
  • Type: Regulatory update
  • Date: 10/9/2013

India - Treatment of transfer of undertaking for non-monetary consideration 

October 9:  The KPMG member firm in India prepared reports on the following developments (read the October 2013 reports by clicking on the hyperlinks provided below):
  • Transfer of an undertaking for non-monetary consideration is not “slump sale” - The Hyderabad Bench of the Income-tax Appellate Tribunal held that the transfer of an undertaking, pursuant to a court-approved plan of amalgamation, against an allotment of shares and transfer of certain other investments as consideration, is not subject to tax as a “slump sale” as that term is defined under section 2(47) of the Income-tax Act, 1961. The tribunal noted that the presence of monetary consideration is an essential element to a “sale” and that this condition was not satisfied in this case.

    The case is: Zinger Investments Ltd. Read an October 2013 report [PDF 338 KB]

  • Interest received because of delay in completion of open-offer process is “capital gain” - The Mumbai Bench of the Income-tax Appellate Tribunal held that interest received by the taxpayer, due to delay in completion of open-offer process, is a part of the sales consideration and is thus subject to tax as capital gain, and not as interest income. The tribunal distinguished between the interest paid for a delay in making the payment and interest paid for a delay in the open-offer process.

    The case is: Genesis Indian Investment Co. Ltd. Read an October 2013 report [PDF 323 KB]

  • Pre-emptive rights and put-call options in shareholders agreements -India’s Securities and Exchange Board of India relaxed certain provisions under Securities Contracts (Regulation) Act, 1956, to boost the interest of investors by allowing them to include preferential clauses (e.g., the right of first refusal, tag-along, drag-along and call-put option) in the share purchase agreements / articles of association, but subject to certain conditions.

    Read an October 2013 report [PDF 401 KB]

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