TMI BlogCAPITAL GAINS - Income deemed to accrue or arise in India - BUDGET 2015X X X X Extracts X X X X X X X X Extracts X X X X ..... CAPITAL GAINS - Income deemed to accrue or arise in India - BUDGET 2015 - By: - CS Swati Dodhi - Budget - Dated:- 3-3-2015 - - CAPITAL GAINS Provisions for Indirect transfers The Explanation 5 in section 9(1)(i) with retrospective effect from April 1, 1962 clarified that an asset or capital asset, being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be situated in India if the share or interest derives, directly or indirectly, its value substantially from the assets located in India. After considering the recommendations of the expert committee the following amendments are proposed in the provisions of section 9 relating to indirect transfer:- The shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or interest of a foreign company or entity shall be deemed to derive its value substantially from the assets (whether tangible or intangible) located in India, if on the specified date, the value of Indian assets exceeds the amount of ₹ 100 million; and represents at least 50% of the value of all the assets owned by the company or entity. Value of an asset shall mean the fair market value of such asset without reduction of liabilities, if any, in respect of the asset. The specified date of valuation shall be the date on which the accounting period of the company or entity, as the case may be, ends preceding the date of transfer. However, if the book value of the assets of the company on the date of transfer exceeds by at le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ast 15% of the book value of the assets as on the last balance sheet date preceding the date of transfer, then instead of the date mentioned in Above, the date of transfer shall be the specified date of valuation. The manner of determination of fair market value of the Indian assets vis-a-vis global assets of the foreign company shall be prescribed in the rules. The taxation of gains arising on transfer of a share or interest deriving, directly or indirectly, its value substantially from assets located in India will be on proportional basis. The methods for determination of proportionality are proposed to be provided in the rules. The exemption shall be available to the transferor of a share of, or interest in, a foreign entity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if he along with its associated enterprises neither holds the right of control or management, nor holds voting power or share capital or interest exceeding 5% of the total voting power or total share capital, in the foreign company or entity directly holding the Indian assets (direct holding company). Transfer of shares or interest in a foreign entity which does not hold the Indian assets directly then the exemption shall be available to the transferor if he along with its associated enterprises neither holds the right of management or control in relation to such company or the entity, nor holds any rights in such company which would entitle it to either exercise control or management of the direct holding company or entity or entitle it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to voting power exceeding five percent in the direct holding company or entity. Exemption shall be available in respect of any transfer, subject to certain conditions, in a scheme of amalgamation, of a capital asset, being a share of a foreign company which derives, directly or indirectly, its value substantially from the share or shares of an Indian company, held by the amalgamating foreign company to the amalgamated foreign company. Exemption shall be available in respect of any transfer, subject to certain conditions, in a demerger, of a capital asset, being a share of a foreign company which derives, directly or indirectly, its value substantially from the share or shares of an Indian company, held by the demerged foreign company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the resulting foreign company. A reporting obligation be created on Indian concern through or in which the Indian assets are held by the foreign company or the entity. The Indian entity shall be obligated to furnish information relating to the off-shore transaction having the effect of directly or indirectly modifying the ownership structure or control of the Indian company or entity. In case of any failure on the part of Indian concern in this regard a penalty shall be leviable. The proposed penalty shall be a sum equal to two percent of the value of the transaction in respect of which such failure has taken place in case where such transaction had the effect of directly or indirectly transferring the right of management or control ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to the Indian concern; and a sum of ₹ 500,000 in any other case. These amendments shall take effect from April 1, 2016. Cost of acquisition of a capital asset in the hands of resulting company to be the cost for which the demerged company acquired the capital asset Any capital asset transferred by the demerged company to the resulting company in the scheme of demerger is not regarded as transfer if the resulting company is an Indian company. In such cases the cost of such asset in the hands of resulting company should be cost of such asset in the hands of demerged company as increased by the cost of improvement, if any, incurred by the demerged company. Also the period of holding of such asset in the hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of resulting company should include the period for which the asset was held by the demerged company. It is proposed to amend sub-clause (e) of clause (iii) of sub-section (1) of section 49 of the Income-tax Act to include transfer under clause (vib) of section 47 and to provide that the cost of acquisition of an asset acquired by resulting company shall be the cost for which the demerged company acquired the capital asset as increased by the cost of improvement incurred by the demerged company as under the existing provisions of the Income-tax Act , there is no express provision to this effect This amendment will take effect from April 1, 2016. - - Scholarly articles for knowledge sharing authors experts professionals Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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