Direct Tax

The Insolvency and Bankruptcy Code, 2016 (IBC) was introduced to facilitate and streamline the process for revival of business and maximizing asset value by providing a framework for either the resolution of financial stress of the corporate debtor, on a going concern basis or the liquidation of the corporate debtor. From a bidder's perspective, there are certain aspects which are relevant to be considered while bidding / planning a bid for a corporate debtor.

In a welcome development, the Central Board of Direct Taxes (CBDT), India’s apex tax administration body, has provided much-needed clarity regarding the application of the ‘Principal Purpose Test’ (PPT) under tax treaties. The CBDT has clarified that in case of shares acquired by residents of Mauritius, Cyprus, and Singapore in Indian companies prior to 1 April 2017, the gains on transfer of such shares will remain outside the purview of the PPT and that the PPT will apply prospectively.

In a first of its kind ruling, the Delhi bench of the Income Tax Appellate Tribunal (ITAT) has adjudicated on the merits of the PPT provisions and in the facts, granted the benefit under the double taxation avoidance agreement (Tax Treaty) between India and Luxembourg with respect to income earned by a Luxembourg company (Taxpayer) from its India investments.

The Hon’ble Income-tax Appellate Tribunal (Jodhpur bench) (ITAT), in the case of Raunaq Prakash Jain v ITO, [2024] 169 taxmann.com 298 (Jodhpur-Trib) [28.11.2024] ruled that gains arising from transfer of cryptocurrency are taxable as ‘capital gains’ (Ruling).