India: Goodwill in amalgamation; deductions allowed in special economic zones

India: Goodwill in amalgamation

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

  • Production-linked incentive scheme grants: The Union Cabinet approved a production-linked incentive scheme to provide financial assistance grants that would promote the domestic manufacture of “white goods” (e.g., air conditioners and LED systems). Read a November 2020 report [PDF 289 KB] 

  • Individual taxpayer eligible for foreign tax credit on taxes paid in the UK: The Delhi Bench of the Income-tax Appellate Tribunal held that the taxpayer (an individual resident of India who was on assignment in the UK) was eligible for a foreign tax credit pursuant to a provision of the India-UK income tax treaty with regard to taxes paid in the UK on the salary paid to the taxpayer during the time in the UK. The case is: Kapil Dev Ranwan. Read a November 2020 report [PDF 305 KB] 

  • Section 10AA deduction on commercial profits allowed before depreciation and investment allowance: The Mumbai Bench of the Income-tax Appellate Tribunal held that a deduction under section 10AA from “profits and gains” of units located in a special economic zone was allowed before the taxpayer deducted amounts for tax depreciation and investment allowance. In other words, the tribunal concluded that the taxpayer could claim a deduction under section 10AA from its “commercial profits” before claiming the tax depreciation and the investment allowance. The case is: Reliance Industries Ltd. Read a November 2020 report [PDF 314 KB] 

  • Charges receivable by electric transmission entity: The Karnataka High Court held that “wheeling and transmission charges” received by the taxpayer (a government undertaking engaged in the transmission of electricity) from constituent states did not accrue to the taxpayer but was “hypothetical income.” The court held that given Accounting Standard-9 and Income Computation and Disclosure Standards (ICDS), the taxpayer rightly decided not to recognise the revenue for the relevant assessment year. The case is: Karnataka Power Transmission Corp. Ltd. Read a November 2020 report [PDF 419 KB]

  • Treatment of goodwill in amalgamation: The Ahmedabad Bench of the Income-tax Appellate Tribunal held that goodwill arising during an amalgamation was part of the intangible assets and thus was eligible for amortization (depreciation). The case is: Urmin Marketing P. Ltd. Read an October 2020 report [PDF 442 KB] 

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