India: Foreign direct investment in e-commerce - KPMG Global
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India: Foreign direct investment in e-commerce; shares for no consideration

India: Foreign direct investment in e-commerce

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

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  • Tax of income related to shares received for no or inadequate consideration under section 56(2)(viia): The Central Board of Direct Taxes (CBDT) issued a circular to clarify the applicability of section 56(2)(viia) that concerns the taxation of income related to shares received for no or inadequate consideration, and clarified that section 56(2)(viia) may not apply in situations when shares are received by a private company or firm as a result of fresh issuance of shares by a private company. Read a January 2019 report [PDF 625 KB]

  • Foreign direct investment in e-commerce: The Department of Industrial Policy and Promotion changed its policy concerning foreign direct investment in e-commerce activities. The revised policy is effective 1 February 2019.  Read a January 2019 report [PDF 726 KB]

  • Provisions of section 56(2)(vii)(c) do not apply to the proportionate issue of “right shares:” The Mumbai Bench of the Income-tax Appellate Tribunal held that the provisions of section 56(2)(vii)(c) do not apply to the proportionate issue of “right shares.” The shares are issued to comply with a covenant in a loan agreement with a bank to fund the acquisition of the business, and the consideration for the shares was received through banking channels. The case is: Shri. Subhodh Menon. Read a December 2018 report [PDF 561 KB]

  • Tax withheld at source when there are joint buyers of immovable property: The Delhi Bench of the Income-tax Appellate Tribunal held that in a situation when there are joint buyers of property, the tax withheld at source provisions may not apply when the portion of the purchase consideration paid by the individual transferee is less than a threshold amount. The case is: Vinod Soni. Read a December 2018 report [PDF 729 KB]

  • Reduction in share of capital amounts is “transfer” of capital asset: The Bangalore Bench of the Income-tax Appellate Tribunal held that a reduction in the share capital of a company is deemed to be a “transfer” of a capital asset under section 2(47) of the Income-tax Act, 1961. Accordingly, a capital loss related to the reduction in the share capital of the Indian company can be set off against capital gains. The case is: Jupiter Capital Pvt Ltd. Read a December 2018 report [PDF 710 KB]

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