october2012 march 2013 -...
TRANSCRIPT
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October 2012
March 2013
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Contents INCOME TAX..................................................................................................................... 3
DOMESTIC TAXATION ................................................................................................... 3
Circulars/ Notifications/Press Release ..................................................................... 3
Case laws .................................................................................................................. 8
INTERNATIONAL TAXATION ....................................................................................... 13
Circulars/ Notifications/Press Release ................................................................... 13
Case laws ................................................................................................................ 14
SERVICE TAX ............................................................................................................... 17
Circulars/ Notification ............................................................................................ 17
DISCLAIMER AND STATUTORY NOTICE .......................................................................... 18
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INCOME TAX DOMESTIC TAXATION
Circulars/ Notifications/Press Release
Section 194A –Deduction of tax at source-Interest other than Interest on securities -Notified Institution Section 194A(3)(iii)(f) provides that in respect of interest other than interest on securities, tax shall not be deducted at source where such income is credited to such other Institution , association or body or class of institutions, association of bodies which the Central Government may for reasons to be recorded in writing, notify in this behalf in the Official Gazatte. Accordingly, in exercise of the powers conferred by section 194(3)(iii)(f) of the Income‐tax Act, 1961, the Central Government has through this notification, notified “National Skill Development Fund for the purpose of this section.
Notification No. 04/2013 dated 24‐01‐2013
Insertion of Rule 17CA and Form No. 10BC Section 13B of the Income‐tax Act, 1961 provides for special provisions relating to voluntary contributions received by electoral trusts. One of the conditions to exclude the voluntary contributions from the total income is that the electoral trust should function in accordance with the rules made by the Central Government. In exercise of the powers conferred by section 13B(b) read with section 295 of the Income‐tax Act, 1961, the Central Government, has through this notification, notified Rule 17CA which provides for Functions of the electoral trusts. These Income‐tax (First Amendment) Rules, 2013 shall come into force on the date of its publication in the Official Gazette. The said Rule also provides every such electoral trust to get its accounts audited by an accountant as defined in the Explanation below section 288(2) and furnish the audit report in Form No.10BC along with particulars forming part of its Annexures on or before the due date specified for furnishing the return of income by a company under section 139. Accordingly, Form No. 10BC i.e the format of audit report under Rule 17CA(12) of the Income‐tax Rules, 1962 has also been inserted along with annexures thereto.
Notification No. 8/2013, dated 31‐01‐2013
Electoral Trusts Scheme, 2013 Section 2(22AAA) defines ‘Electoral Trusts’ to mean a trust so approved by the Board in accordance with the scheme made in this regard by the Central Government. In exercise of the powers conferred by section 2(22AAA) of the Income‐tax Act, 1961, the
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Central Government, has through this notification, notified the Electoral Trusts Scheme, 2013 to lay down procedure for grant of approval to an electoral trust which will receive voluntary contributions and distribute the same to political parties. The salient features of the scheme covers Short title, commencement and application, Objective of the scheme, Definitions, Eligibility, Procedure for approval, Criteria for approval and Form A i.e Format of application for approval of an Electoral trust under this scheme.
Notification No. 9/2013, dated 31‐01‐2013
Exemptions ‐ Interest on Bonds/debentures ‐ Specified companies authorized to issue tax‐free, secured, redeemable, non‐convertible bonds during F.Y. 2012‐13 – Amendment in Notification No. 46/2012, dated 6‐2|Page 11‐2012 as amended by Notification No. 50/2012, dated 15‐11‐2012 Section 10(15)(iv)(h) exempts interest on bonds/debentures issued by any public sector company and notified by the Central Government in the Official Gazette. Accordingly, in exercise of the powers conferred by section 10(15)(iv)(h) of the Income tax Act, 1961, the Central Government has, through this notification authorized “The Indian Renewable Energy Development Agency Limited” to issue, during the financial year 2012‐13 tax free, secured, redeemable, non‐convertible bonds, aggregating to amounts mentioned therein the notification.
Notification No. 10/2013, dated 05‐02‐2013
Amendments with regard to rules and forms in relation to TDS and TCS The CBDT has made rules to amend the Income‐tax Rules, 1962 namely Income‐tax (2nd Amendment) Rules, 2013 via Notification No.11/2013/F.No. 142/31/2012‐SO (TPL) dated 19 February 2013. These amendments are with regard to rules and forms in relation to tax deducted at source (‘TDS’) and tax collected at source (‘TCS’).
RULE NO. AMENDMENT
Rule 31A Statement of deduction of tax under sub‐section 3 of section 200:The person responsible for deduction of tax at source (deductor) now, has an option to file the TDS return electronically through a digital signature. In case the TDS return is not signed digitally, it is required to be filed electronically along with the verification of the return in Form 27A or verified through an electronic process as prescribed earlier. The deductor shall furnish the newly prescribed Form, Form No. 26B electronically under digital signature for claiming the refund of sum
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paid as tax deducted or collected at source
Rule 31AA Statement of collection of tax under proviso to sub‐section (3) of section 206C: The amendments made to Rules 31AA are similar to that of Rule 31A.The collector, at the time of preparing statements of tax collected shall additionally furnish particulars of amount received or debited on which tax was not collected in view of the declaration made by the buyer of the goods under section 206C(1A) of the Act.
Rule 31ACB Form for furnishing certificate of accountant under the first proviso to sub‐section (1) of section 201: The first proviso to section 201(1) by the Finance Act, 2012 provides that when the person responsible does not deduct tax at source, he shall not be considered as assessee in default if the payee furnishes his return of income under section 139 taking into account the sum received from the deductor while computing income and has paid the tax due on the said income. Also, the deductor is required to provide a certificate from an accountant in the form as may be prescribed. In light of the above proviso, the CBDT has prescribed Form No. 26A.
Rule 37J Form for furnishing certificate of accountant under the first proviso to sub‐section (6A) of Section 206C: The amendments made to Rules 37J are similar to that of Rule 31ACB. Herein, in light of the proviso to section 206C (6A) by the Finance Act, 2012, the CBDT has prescribed Form No. 27BA which is to be furnished by the collector as a certificate from an accountant along with his return of income.
Along with the amendments in the Rules certain forms have also been amended through the notification. It may be noted that presentation of the information in the forms have changed.
FORMS AMENDMENTS
Form No. 15G Declaration under section 197A (1) and 197A(1A) of the Act to be made by an individual or a person (not being a company or firm) claiming certain receipts without deduction of tax: Now, along with the details of sources of income, the details of the declarant are also required to be provided in a tabulated manner.
Form No. 15H Declaration under section 197A(1C) of the Act to be made by an individual who is of the age of sixty years or more claiming certain
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receipts without deduction of tax:This form is bought in line with Form 15G as mentioned above.
Form No. 16 Certificate under section 203 of the Act for tax deducted at source on salary: Information being provided in Annexure A and B to Form No. 16 earlier shall now be provided as part of the Form.
Form No.16A Certificate under section 203 of the Act for tax deducted at source:This form is bought in line with Form No. 16 as mentioned above.
Form No. 24Q Quarterly statement of deduction of tax under section 200(3) of the Act in respect of salary:
• In case the deductor is a Central/State Government, additional information with regard to details of Ministry/Department/State is required to be provided.
• Number of the certificate under section 197 issued by the Assessing Officer for non-deduction or lower deduction of tax is now required to be provided in Annexure I to the aforementioned forms.
Form No. 26Q Quarterly statement of deduction of tax under section 200(3) of the Act in respect of payments other than salary: This form is bought in line with Form No. 24Q as mentioned above.
Form No. 27EQ Quarterly statement of collection of tax at source under section 206C of the Act: This form is bought in line with Form No. 24Q as mentioned above.
Form No. 27Q Quarterly statement of deduction of tax under section 200(3) of the Act in respect of payments other than salary made to non‐residents:This form is bought in line with Form No. 24Q as mentioned above. Further, following additional information is required to be provided in Form 27Q - Whether the rate of TDS is as per the Act or Double Tax Avoidance
Agreement - Nature of remittance - Unique Acknowledgement of the corresponding Form 15CA, if
available - Country to which remittance is made
Form No. 27C Declaration under section 206C (1A) of the Act to be made by a buyer for obtaining goods without collection of tax: Along with the Assessing Officer’s details, details of the buyer of the goods are required to be provided in a tabulated manner.
Form No. 27D Certificate under section 206C of the Act for tax collected at source:Status of matching with the Form No. 24G (Book Adjustment Statement) has been considered in the new form.
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Conclusion: A significant amendment brought out by the CBDT by way of Income‐tax (2nd Amendment) Rules, 2013 is the option of filing of the e‐TDS returns through digital signature and e‐filing of TDS refunds. Further, new forms have been prescribed in light of the amendments made by the Finance Act, 2012.
Notification No. 11/2013, dated 19‐02‐2013
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Case laws Court on its own motion vs. CIT
STRICT GUIDELINES ISSUED TO END DEPARTMENT’S TDS CREDIT & REFUND ADJUSTMENT HARASSMENT
In the case of Court on its own motion vs. CIT, Anand Parkash, FCA, addressed a letter
to the High Court setting out the numerous problems being faced by the assessees
across the Country owing to the faulty processing of the Income Tax Returns and non‐
grant of TDS credit & refunds due to which the assessees were being harassed. The
High Court converted the letter into a public interest writ petition and directed the
CBDT to answer the allegations The department accepted that tax payers are facing
difficulties in receiving credit of TDS & refunds on account of adjustment towards
arrears. Hence, the Court passed an order by giving detailed directions as an interim
measure to provide immediate relief to the assessees, after further hearing, The Delhi
High Court held that:
• Re Uploading of wrong or fictitious demand: The CBDT has issued Circular No. 4 of
2012 in which the burden is put on the assessee to approach the AOs to get their
records updated and corrected by filing Section 154 applications. This should not be
a ground for the AO not to suo motu correct his records and upload correct data.
Each assessee has a right and can demand that correct and true data relating to the
past demands should be uploaded. Asking the assessee to file Section 154
applications entails substantial expenses and defeats the main purpose behind
computerization. Also, the AO’s do not adhere to the time limit prescribed for
disposal of the Section 154 applications. To ensure transparency (and
accountability), a register must be maintained with details and particulars of each
application made u/s 154, the date on which it was made, date of disposal and its
fate. The Section 154 application has to be disposed of by a speaking order and
communicated to the assessee. There must be full compliance of the said
requirements;
• Re Adjustment of refund contrary to Section 245: Section. 245 give a prior
intimation to the assessee and then, if warranted, outstanding demands were
adjusted against the refund due. This is not being followed by the CPC because the
computer itself adjusts the refund due against the existing demand. To prevent this
breach of the law, the department must follow the procedure prescribed u/s 245
and give the assessee an opportunity to file a reply which should be considered by
the AO before giving the direction for adjustment. In the cases where such (illegal)
adjustment has been made in the past, the cases must be transferred to the AOs
for issue of notice to the assessee seeking adjustment of refund. The assessees will
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be entitled to file a reply to the notice and the AO will then pass an order u/s 245
allowing the refund. The CBDT has to fix a time limit and schedule for completing
the said process. Though the process involves expenditure and paper work, the
situation has arisen due to the lapses on the part of the AOs and the assessees
cannot be made to suffer for the wrong uploading of arrears and wrong adjustment
of refund. The question of the assessee’s entitlement to interest on the Self
Assessment tax is left open though when the delay is due to the fault of the
Revenue, interest should be paid u/s 244A.
• Re non‐communication of adjusted s. 143(1) intimations: When there is failure to
dispatch the intimation within a reasonable time to the assessee, the return shall
be deemed to have been accepted and the intimation will be treated as non est or
invalid for want of service. The onus to show that the order was served on the
assessee is on the Revenue and not upon the assessee. If a TDS or tax credit claim
has been rejected on a technicality but there is no communication to the assessee
of the order/intimation u/s 143(1), the AO cannot enforce the demand created by
the said order/intimation;
• Re non‐grant of credit for TDS: The problem regarding rejection of TDS credit is in
two categories. In the first category, cases are where the deductors fail to upload
the correct particulars of the TDS deducted and paid. In the second category, there
is a mismatch between the details uploaded by the deductor and the details
furnished by the assessee in the Return of income. As regards the first, the CBDT
had earlier directed the AOs to accept the TDS claims without verification where
the difference between the TDS claimed and the TDS as per form 26AS did not
exceed rupees one lakh. This figure has now been reduced to a mere Rs.5,000. The
CBDT must re‐examine this aspect and take suitable remedial steps if they feel that
unnecessary burden or harassment will be caused to the assessees. As regards
cases of mismatch because of different methods of accounting, or offering income
in different years, the department must take remedial steps and ensure that in
such cases TDS is not rejected on the ground that the amounts do not tally. The
department should also fix a time limit within which they shall verify and correct all
unmatched challans. Once payment has been received by the Revenue, credit
should be given to the assessee. The CBDT should issue suitable directions in this
regard. The department’s response on the action taken against deductors for non‐
compliance is unfortunate and unsatisfactory. Section 234E has now been inserted
by the Finance Act, 2012 to levy a fee of Rs.200 per day for default of the deductor
to file TDS statement within due date. The AO must use his power and authority to
ensure that the deductor complies with the law.
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DCIT vs. Gulshan Investment Co ltd
SECTION 14A: RULE 8D(2)(II) AND (III) DO NOT APPLY TO SHARES HELD AS STOCK‐IN‐
TRADE
In the case of DCIT vs. Gulshan Investment Co Ltd, the assessee, a dealer in shares,
received dividend of a certain sum but did not offer any disallowance u/s 14A and Rule
8D on the ground that they were not applicable to shares held as stock‐in‐trade. The
AO rejected the claim and computed the disallowance under Rule 8D. The Kolkata
Tribunal held that:
• Though Section 14A applies to shares held as stock-in-trade, Rule 8D (2)(ii) and (iii) cannot apply if the shares are held as stock-in-trade as one of the variables on the basis of which disallowance under Rule 8D(2)(ii) and (iii) is to be computed is the value of “investments, income from which does not or shall not form part of total income”. If there are no such “investments”, the rule cannot have any application.
• When no amount can be computed under the formula given in Rule 8 D(ii) and (iii), no disallowance can be made under Rule 8D (2)(ii) and (iii) either.
• It has been previously held that when the computation provisions fail, the charging provisions cannot be applied, and by the same logic, when the computation provisions under Rule 8 D (2) (ii) and (iii) fail, disallowance there under cannot be made as the said provision is rendered unworkable. However, the application of Rule 8 D(2)(i) which refers to the “amount of expenditure directly relating to income which does not form part of total income”. Accordingly, in a case where shares are held as stock-in-trade, the disallowance even under Rule 8 D is restricted to the expenditure directly relatable to earning of exempt income. Thus, the scope of disallowance under Rule 8D is narrower than that of Section 14A.
Siemens Limited vs. CIT
SECTION 9(1)(VII): SERVICES RENDERED BY MACHINES IS NOT “FEES FOR TECHNICAL
SERVICES”
In the case of Siemens Limited vs. CIT, the assessee made payment to a laboratory in
Germany for carrying out certain tests on circuit breakers manufactured by the
assessee and to certify that the said circuit breakers met with international standards.
The assessee claimed that since the said tests were carried out by sophisticated
machines without human intervention, the services were not “fees for technical
services” as defined in s. 9(1)(vii) of the Act. The Mumbai Tribunal held that:
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• As per Explanation 2 to Section 9(1)(vii), “fees for technical services” means “any consideration for the rendering of any managerial, technical or consultancy services”. The word “technical” is preceded by the word “managerial” and succeeded by the word “consultancy”. Applying the principle of noscitur a sociis, as the words “managerial and consultancy” have a definite involvement of a human element, the word “technical” has to be construed in the same sense; i.e. involving direct human involvement. If services are provided using an equipment or sophisticated machine or standard facility, it cannot be a “technical services” as per Section 9(1)(vii).
• The services provided by the German laboratory was a standard service done automatically by machines and not requiring human intervention. The test is whether the services are rendered by a human or by a machine. If a human renders the technical services with the aid of a machine, the services are “technical services”. But if the services are rendered by a machine without human interface or intervention, then it is not “technical services”. The mere fact that certificates have been provided by humans after the test is carried out by the machines does not mean that services have been provided by human skills.
CIT vs. Bennett Coleman & Co. Ltd.
NO SECTION 271(1)(C) PENALTY IF INCOME NOT OFFERED TO TAX DUE TO
“INADVERTENT MISTAKE”
In the case of CIT vs. Bennett Coleman & Co. Ltd., the assessee claimed deduction/
exemption of interest on tax‐free bonds. When the AO asked the assessee to give
details of the interest on tax‐free bonds, the assessee stated that it had inadvertently
treated taxable interest of a certain amount as being tax‐free; the assessee offered
the said sum to tax. The AO levied penalty u/s 271(1)(c) for concealment of income/
filing inaccurate particulars of income. The Bombay High Court held that the decision
of the Tribunal is based on finding of fact that there was an inadvertent mistake on the
part of the assessee in including the interest received as interest received on tax free
bonds. It is not contended by the Revenue that above finding of fact by the Tribunal is
perverse and there is no reason to entertain the proposed question.
Note: It was also decided that offering income under the wrong head (capital gains
instead of other sources) does not attract s. 271(1)(c) penalty.
CIT vs. Ashwani Chopra
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A FAMILY SETTLEMENT DOES NOT RESULT IN A “TRANSFER” AND COMPENSATION
RECEIVED TO EQUALIZE INEQUALITIES IN FAMILY SETTLEMENT IS NOT TAXABLE AS
“INCOME”
In the case of CIT vs. Ashwani Chopra, there was a dispute between two groups of a
family. During the pendency of litigation, the parties agreed to divide the assets and
businesses of the family into two lots i.e. lot‐1 and lot‐2. In terms of such settlement,
lot‐1 fell to the share of Group ‘A’ and lot‐2 fell to the share of Group ‘B’ with the
condition of payment of Rs.24 crores. A dispute regarding the date of split of the said
amount was pending. The AO assessed the said sum in the hands of the assessee. The
Punjab & Haryana High Court had to consider whether the compensation paid to the
assessee to settle inequalities in partition, being a provision of “owelty” represents
immovable property and is not an income exigible to tax. The High Court held that:
• A family partition which results in an adjustment of shares and of the respective rights in the family properties is not a “transfer” in the eyes of law. Hence, there is no capital gain and consequently there is no liability to pay tax on capital gains.
• In a family partition, if a situation arises where an item of property is not capable of physical partition or is such that, if divided, it will lose its intrinsic worth; then with a view to ensure an equitable partition, the item is allotted to one party and he is asked to pay compensation in money value to the other party which is called “owelty”. As the amount of compensation is only to equalize the inequalities in the partition it is a share in the immovable property itself (though paid in cash) and is not a capital gain. If such amount is to be treated as income liable to tax, inequalities would set in as the share of the recipient will diminish to the extent of tax. On facts, the payment of Rs.24 crores to Group A is to equalize the inequalities in partition of assets. The amount so paid is immovable property and is not income liable to tax.
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INTERNATIONAL TAXATION
Circulars/ Notifications/Press Release Double Taxation Agreement – Agreement for avoidance of double taxation and prevention of fiscal evasion with Foreign countries – Malaysia
In exercise of the powers conferred by section 90 of the Income‐tax Act, 1961, the
Central Government, has through this notification, directed that all the provisions of
the Agreement between the Republic of India and the Government of Malaysia for the
avoidance of Double taxation and the Prevention of Fiscal evasion with respect to
taxes on income, shall be given effect to in the Union of India with effect from the 1st
April, 2013.
Notification No. 07/2013 dated 29‐01‐2013
Protocol amending the convention and the protocol between the Republic of India and the Kingdom of Sweden signed
India and Sweden have signed a Protocol amending the Article 27 of the DTAC, which
was first signed on 24th June, 1997, concerning exchange of information to bring it in
line with the international standards and to add an Article in the protocol to the DTAC
to include tax examination abroad, on 7th Feb, 2013.
The Protocol will replace the article concerning exchange of information in the existing
DTAC between India and Sweden and will allow exchange of banking information as
well as information without domestic interest. It will, now, allow use of information
for non‐tax purpose if allowed under the domestic laws of both the countries, after
the approval of the supplying state. The Article added in the Protocol to the DTAC will
enable both the countries to assist in conducting tax examination abroad by allowing
officials of one country to enter the territory of other country for this purpose.
Press release, dated 08‐02‐2013
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Case laws Sanofi Pasteur Holding SA vs. Dept of Revenue (Andhra Pradesh High Court)
CAPITAL GAINS ARISING FROM TRANSFER OF SHARES OF A FRENCH COMPANY
WHICH IN TURN HELD CONTROLLING STAKE IN AN INDIAN OPERATING COMPANY IS
TAXABLE IN FRANCE AND NOT IN INDIA.
Facts of the case
• Shantha Biotechnics Limited (SBL) is a company incorporated under the Companies
Act, 1956 having its registered office in Hyderabad, India. Sanofi Pasteur Holding
(Sanofi) is a company incorporated under the laws of France.
• During the year 2009, Sanofi had purchased 80.37 percent of the share capital of
another French company (i.e. ShanH) from Merieux Alliance (MA), a French
company, and balance 19.63 percent share capital of ShanH from Groupe
Industriel Marcel Dassault (GIMD), another French company. ShanH held 82.5
percent of the share capital of SBL.
• The tax department passed an order on Sanofi dated 25 May 2010 under Section
201(1)/(1A) of the Act holding Sanofi as an ‘assessee‐in‐default’ for not
withholding taxes on payments made to MA and GIMD on acquisition of shares of
ShanH
• MA and GIMD made an application to the Authority for Advance Ruling (the AAR)
on the taxability of the transaction. The AAR in November 2011 ruled that the
capital gain arising from the sale of shares of ShanH by MA and GIMD was taxable
in India in terms of Article 14(5) of the tax treaty.
• Subsequently, both the parties i.e. the Buyer (Sanofi) and Sellers (MA and GIMD)
filed writ petitions before the Andhra Pradesh High Court (High Court).
Issues before the High Court
• Whether ShanH was an entity with commercial substance or was it a mere
nominee of MA and/or MA/GIMD?
• Whether ShanH was incorporated only for the purpose of avoiding capital gains
liability under the Act?
• Whether the investment by MA and GIMD through ShanH in SBL, a colourable
device designed for tax avoidance?
• Whether the corporate veil of ShanH must be lifted and the transaction (of the
sale of the entirety of ShanH shares by MA/GIMD to Sanofi) treated as a sale of
SBL shares?
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• Whether retrospective amendments to provisions of the Act (by the Finance Act,
2012) alter the trajectory or impact provisions of the tax treaty and/or otherwise
render the transaction liable to tax under the provisions of the Act? Decision of the High Court Commercial substance of ShanH
• The High Court observed that ShanH received dividends on its SBL shareholding which was assessable to tax under the provisions of the Act. Even post the
transaction in issue, the commercial and business purpose of ShanH as an
investment vehicle, was intact. These indicators/factors are, The High Court
determined that in the light of Vodafone International Holdings B.V., the above
stated indicators / factors provided an adequate base to legitimize the conclusion
that ShanH was not a sham or was not conceived only for the purpose of tax‐
avoidance.
Lifting of corporate veil of ShanH
• The High Court observed that in the light of the ratio laid down by the SC in Azadi Bachao Andolan and Vodafone International Holidays B.V., ShanH was not a
corporate entity brought into existence only for avoiding capital gains tax liability
under the provisions of the Act. Since the tax department failed to establish that
ShanH was interposed only as a tax avoidant device or that the entity did not have
any commercial substance, no case was made out for piercing or lifting the
corporate veil ShanH.
Impact of retrospective amendments
• The High Court observed that the retrospective amendments do not alter the
provisions of the tax treaty and given the text of section 90(2) of the Act, these
amendments do not alter the taxability of the present transaction. Further it
stated that, the retrospective amendments in section 2(14), 2(47) and section 9 of
the Act were not fortified by a non‐obstante clause to override the provisions of
the tax treaties.
No liability to tax in India
• The High Court further observed that the present transaction was for alienation of 100% of shares of ShanH held by MA and GIMD in favour of Sanofi and such
transaction was covered within Article 14(5) of the tax treaty. The transaction
neither constituted transfer nor deemed transfer of shares or of the
control/management or underlying assets of SBL.
• The controlling interest of ShanH over the affairs, assets and management of SBL
was identical to its shareholding and not a separate asset. Thus, it could not be
considered or computed as a distinctive value. The assets of SBL could not be
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considered as belonging to a shareholder (even if a majority shareholder). The
value of the controlling rights over SBL attributable to ShanH shareholding could
not be determined and hence could not also be computed. For these reasons, the
High Court observed that the computation component which was inextricably
integrated to the charging provision (section 45 of the Act) failed and consequently
the charging provision would not be applicable in the present transaction. Thus,
the transaction was not liable to tax in India under the provisions of the Act read
with the provisions of the tax treaty.
Case Analysis:
• In the case of Sanofi, the fact that the intermediate company ShanH was located in
France and tax was paid in France on the capital gains at a rate higher than in
India, may have had a significant influence in deciding that ShanH had commercial
substance and was not a sham.
• The decision of Andhra Pradesh High Court has reiterated the view that the
retrospective amendment does not alter the provisions of the tax treaty.
• It has also reaffirmed the various factors brought out in the Vodafone decision
while considering whether an entity is a sham entity or set up only for the purpose
of tax avoidance.
• The High Court did not lift the corporate veil since it could not be established that
the entity was set up with the purpose of tax avoidance.
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SERVICE TAX
Circulars/ Notification Notification No:‐01/2013‐ST dt. 22‐02‐2013: Seeks to amend the Service Tax Rules 1994 so as to prescribe the revised return Form ST3 and also stipulate that the last date for filing a return for the period July 2012 to September 2012, is 25th March 2013
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