News shortcuts: From the Courts | Top Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | Professional Updates | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
« Professional Updates »
 Educational Material on Indian Accounting Standards 20, Accounting for Government Grants and Disclosure of Government Assistance
 Empanelment of CA Firms as Technical Reviewers for National Financial Reporting Authority (NFRA).
 Advanced ICITSS is Scheduled on Sundays, the 15th March, 2020 and 12th April, 2020 from 10.30 AM to 12.30 PM (IST).a
 ICAI Invites Suggestions on Tax Proposals of Union Budget 2020-21.
 Special Examinations - MRA / MOU, June 2020
 Empanelment of Members to act as Observers at the Examination Centres for The Chartered Accountants Examinations May, 2020
 CPE Events 27th January -1st February 2020
 Register for Fourth Exclusive Batch of German Language (120 hours) for ICAI Members and Students at Delhi. Last Date - 29th January, 2020
 CMI&B of ICAI is conducting 51st Campus Placement Programme in the month of Feb-March, 2020.
 Office hours arising out of Security Arrangements for Republic Day - 2020
 Certificate Course on Forex and Treasury Management –Forthcoming Batches at Noida & Mumbai

Tax department proposes to ease anti-abuse clause in finance bill
April, 05th 2017

Tax department clarifies that budget proposal to levy capital gains tax on all equity share sales where securities transaction tax has not been paid would apply in three cases

The tax department has proposed to soften an anti-abuse provision in Finance Bill 2017 meant to check money laundering by limiting its scope to only three specified instances of abuse.

A draft notification issued by the department on Monday clarified that a budget proposal to levy long-term capital gains tax (LTCG) on all equity share sales where securities transaction tax (STT) has not been paid would be applicable only in three cases.

These are: sale of listed equity shares in a company done outside a recognized stock exchange; acquisition of listed equities that are not very frequently traded on the stock exchanges through a preferential issue except in cases of court-approved mergers and cases of rehabilitation and debt restructuring; and the acquisition of equity shares in a company that is de-listed.

The proposal gives relief to investors acquiring shares in initial and follow-on public offers and non-residents participating in bonus or rights issues of a listed company, where securities transaction tax is not paid.

While tax experts welcomed the move in general, they fear that one of the three specified instances—sale of listed equity shares in a company done outside a recognized stock exchange—could hit mergers and acquisitions (M&As).

M&As are often done off-market to avoid influencing share prices and could attract capital gains tax as per the draft notification, according to Amit Maheshwari, partner, Ashok Maheshwary and Associates LLP.

The tax department will receive feedback on the draft till 11 April.

Ravi Mehta, partner, Grant Thornton India LLP, said, “On a literal reading, it could encompass both primary as well as secondary transactions, including genuine transactions such as purchase of shares under employee stock options, fresh fund-raising by listed companies from promoters or financial investors during down-turn and genuine off-market purchases such as share acquisition where price also includes control premium.”

In many cases, income tax would have been properly paid by sellers and, hence, there would be no effective revenue loss to the exchequer, added Mehta.

“This (provision) would dissuade acquirers to purchase shares of listed companies through a private transaction/off market. There have been several instances where some of the large acquisition transactions, including by private equity investors, have been undertaken off-market purely for commercial reasons,” said Anil Talreja, Partner, Deloitte Haskins and Sells LLP.

Still, the draft is conceptually appropriate and some of the issues with it should ideally be sorted out in the final notification, said Pranav Sayta, tax partner, EY India.

The anti-abuse provision was introduced in the budget this year after the Supreme Court-appointed special investigation team on black money highlighted the use of penny stocks in money laundering by inflating their price through market manipulation.

 

Home | About Us | Terms and Conditions | Contact Us
Copyright 2020 CAinINDIA All Right Reserved.
Designed and Developed by Ritz Consulting