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India: 100% deduction after substantial expansion; share transfer

India: 100% deduction after substantial expansion

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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  • 100% deduction allowed after substantial expansion: The Larger Bench of the Supreme Court allowed the taxpayer’s claim for a 100% deduction under section 80-IC of the Income-tax Act, 1961 for a “fresh” five-year period after completion of a “substantial expansion.” The taxpayer had claimed a 100% deduction for the first five-year period, and then following a substantial expansion, in the sixth year, claimed a second 100% deduction for the next five-year period (instead of a 25% deduction as otherwise warranted). The court allowed the “fresh” 100% deduction but subject to a total period for the 100% deduction not to exceed 10 years. The case is: Aarham Softronics. Read a February 2019 report [PDF 705 KB]

  • Encouraging investment in startups: The Department for Promotion of Industry and Internal Trade issued guidelines concerning the definition of a “startup” and relaxed rules relating to an exemption from “angel tax” in an effort to make capital available for startups. Read a February 2019 report [PDF 630 KB]

  • Transfer of shares in company vs. sale of assets: The Bombay High Court addressed whether a transaction was a mere transfer of shares or was a transfer of an undertaking of the company by means of a “slump sale” and thus subject to short-term capital gains taxation under section 50B. The court found that the sale of shares of a company is not tantamount to a sale of the company’s assets. Therefore, the provisions of section 50B did not apply to the transfer of shares. The case is: UTV Software Communication Ltd. Read a February 2019 report [PDF 744 KB]

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