Direct Tax

The Chandigarh bench of the Income Tax Appellate Tribunal (ITAT) in its recent decision in the case of Electra Paper and Board Pvt Ltd v. ITO [ITA NO.222/Chd./2021] has held that for computing the fair market value (FMV) of the shares of a company, for the purposes of section 56(2)(viib) of the Income-tax Act, 1961 (IT Act), the unaudited balance sheet drawn as on the valuation date should be sufficient, if such unaudited balance sheet is subsequently audited with there being no difference in the audited and unaudited numbers.

The income-tax authorities conducted a search and seizure operation at the residential premises of Mr Dilip Thakkar (Taxpayer). Some material found during the exercise indicated that the Taxpayer was linked to an offshore bank account.

In a significant development, the Government of India vide its communication dated 11 February 2022 has informed the senior level tax officers that a secretariat has been set up in New Delhi for providing assistance to the approving panel under the General Anti-Avoidance Rule (GAAR) provisions of the Income-tax Act, 1961 (IT Act). The communication also mentions that the approving panel under the GAAR provisions has been constituted vide office order no 37/2022 dated 24 January 2022 (Approving Panel).

In a significant development, the apex tax administration body of India, the Central Board of Direct Taxes (CBDT) vide its Circular No. 3 of 2022 dated 3 February 2022 (Circular) has clarified its position with respect to interpretation of Most Favoured Nation (MFN) clauses in tax treaties.

In a recent order in Manoj Jain v Union of India & Ors (WPA No. 11950 of 2021) (Order), the Hon’ble Calcutta High Court (High Court) has quashed reassessment notices issued by the income-tax authorities (IT Authorities) under the old reassessment regime (ie, law existing prior to 1 April 2021) under the Income Tax Act 1961 (IT Act).