After the Bansals, IT department targets overseas investors involved in FK-WM deal
Income tax department of India, last month sent notices to Sachin and Binny Bansal, co-founders of Flipkart, and 35 other stakeholders who made capital gains via Flipkart-Walmart deal.
After sending these notices to Indian stakeholders, and starting to receive responses from them, the IT department has now moved on to the overseas investors who are also expected to have made capital gains out of the acquisition.
The department had studied Section 9 (1) of Income Tax Act about the indirect transfer provisions to find out if the tax benefits available to investors registered in Mauritius or Singapore were applicable under the bilateral tax treaties or not.
This was done keeping in mind that all entities with business connections in India are liable to pay taxes if the asset being transacted is Indian or is significantly valuable in India, no matter where the transaction takes place, within the nation or in abroad.
Indirect transfers had become liable for taxes in 2012 after India had lost the case against Vodafone’s acquisition of Hutch because the transaction had taken place on a foreign soil. The government leaves no such scope in the Flipkart-Walmart deal.
Apart from asking the details about their tax liabilities in India from the overseas investors, the authorities have also sent informal inquiries to Walmart to ensure they had duly fulfilled their withholding tax liability.
Walmart had to withhold tax that was payable to Indian authorities while paying shareholders, and the company had reportedly done the job by deducting Rs 7,439 crore at a source and then depositing it in India.
Overall, the Indian Income Tax department has been very particular regarding the taxation complexities in the Walmart-Flipkart deal and has been looking at it from every angle to find out any major or minor loophole and close it. This is just another move in that process.
Source: Entrackr
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