Direct Tax

The Finance Act 2020 has introduced several amendments to the Income-tax Act, 1961 (“IT Act”) such as change in residential criteria for individuals and widening the scope of digital transaction taxation. One significant amendment which has caught the eyes of the corporate investors most is the resurrection of the classical dividend taxation regime to tax dividends in the hands of shareholders, thereby doing away with the Dividend Distribution Tax (“DDT”).

In Part 1 of their 2-Part article series, the authors lucidly analysed the provisions of the Black Money Act. In Part 2 today, the authors briefly discuss a few defences available to the taxpayers and also deliberate on a few court rulings on the same.

Recently there has been a lot of administrative action in the field of offshore assets and related action initiated under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA). This is so especially in view of the constant flow of information concerning offshore assets coming to the notice of the authorities on account of various data leaks as well as from various jurisdictions under information sharing arrangements as well as automatic sharing of information.

Under Indian income tax law, an individual’s tax residency is determined by his physical stay in India during a Financial Year (FY) (i.e. 1 April to 31 March) as well as his stay in the preceding years. The residential status then determines whether his global income would be taxable in India or not.

The Mumbai Bench of the Income Tax Appellate Tribunal (Tribunal) in the case of M/s Anik Industries Limited (Tax Payer) vs DCIT (ITA No. 7189/Mum/2014 & ITA No. 5234/Mum/2016) allowed the appeal by the Tax Payer that the compensation received by the Tax Payer for reduction in profit sharing ratio would not tantamount to capital gains chargeable to tax under Section 45(1) of the Income-tax Act, 1961 (IT Act).

On April 1, India ushered in a new era of taxation in the digital age. In a significant move to widen its tax net on the digital economy, India announced that an equalisation levy at the rate of 2% will apply to e-commerce sales and services by non-resident operators to Indian customers, among others.

Recently, in the case of Sesa Goa Limited v The Joint Commissioner of Income-Tax (ITA No. 17/2013), the High Court of Bombay at Goa allowed a deduction in respect of cess (education cess and higher and secondary education cess) from the business income of the taxpayer.