India: Minimum alternate tax computation; unquoted shares valuation; other developments

India: Minimum alternate tax; other developments

The KPMG member firm in India has prepared reports about the following tax developments (read more at the hyperlinks provided below).

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  • Disallowance under section 14A does not apply to minimum alternate tax computation: The Delhi Special Bench of the Income-tax Appellate Tribunal held that disallowance under section 14A of the Income-tax Act, 1961 does not apply to minimum alternate tax computation. Following a decision of the Delhi High Court in the case of Bhushan Steel Ltd, it was determined that the computation under the minimum alternative tax provisions is to be made without resorting to the computation as contemplated under section 14A read with Rule 8D of the Income-tax Rules, 1962. The case is: Vireet Investment Pvt Ltd. Read a July 2017 report [PDF 444 KB]
  • Valuing unquoted shares: The Central Board of Direct Taxes issued guidance prescribing the method of valuation for unquoted shares for tax purposes. The amended rules are effective 1 April 2018 and will apply for assessment year 2018-19 and subsequent years. Read a July 2017 report [PDF 299 KB]
  • Constitutional challenge to income computation and disclosure standards: The Chamber of Tax Consultants filed a writ petition before the Delhi High Court challenging the constitutional validity of a provision of the Income-tax Act, 1961 that requires compliance with “income computation and disclosure standards” (ICDS). Read a July 2017 report [PDF 333 KB]
  • Establishing related-party relationship when there is participation in management or control: The High Court of Gujarat affirmed a tribunal decision for the taxpayer, holding that the mere fact of participation by one enterprise in the management or control or capital of the other enterprise, or the participation of one or more persons in the management or control or capital of both the enterprises, does not always make them related parties. The case is: Veer Gems. Read a July 2017 report [PDF 332 KB]
  • Capital gains under income tax treaty with Netherlands: The Andhra Pradesh and Telangana High Court held that capital gains arising from the sale of shares by the taxpayer of its Indian subsidiary, deriving its value from the immovable property, are not taxable in India under the India-Netherlands income tax treaty. The case is: Venenberg Facilities BV. Read a July 2017 report [PDF 593 KB] 

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