slump sale

Smooth Transitions: Navigating Succession in Business Transfers on Slump Sale Basis!

Succession of a business, in simple words, implies a change in ownership of a business from one person (“the predecessor”) to another (“the successor”). Section 170 of the Act deals with the provisions relating to income tax liability in the case of succession of business pursuant to any business restructuring – transfer of business, amalgamation, demerger, etc. This note discusses the tax implications that may arise pursuant to succession of a business by way of slump sale.


Indo-Pacific Economic Framework

The Indo-Pacific Economic Framework for Prosperity: Opportunities for Indian Companies

Along with 13 other countries (including the US, Japan, Singapore, South Korea and Australia), India has joined the Indo-Pacific Economic Framework for Prosperity (“IPEF”). Representing 40% of global GDP and almost 30% of international trade in goods and services, the IPEF is expected to promote economic activity, investment, and sustainable growth in the Indo-Pacific region. It also aims to address emerging economic challenges – such as those related to trade, supply chains, clean energy (including green infrastructure), taxation and anti-corruption.
While agreements in respect of a clean economy and a fair economy, respectively, were reached in June 2024 at the IPEF Ministerial meeting held in Singapore, the IPEF agreement on supply chains, signed in November 2023, came into force earlier this year (February 2024).
The IPEF presents a unique opportunity for Indian companies to enhance competitiveness and expand their markets. By actively engaging with the framework, businesses in India can position themselves as key players in the dynamic Indo-Pacific landscape. Further, the IPEF presents an opportunity for India to strengthen economic cooperation with the US – which relationship, in turn, is likely to prove valuable for both Indian and American companies.


Payments to Micro and Small Enterprises

Payments to Micro and Small Enterprises (MSEs): Implications under Section 43B(h) of Income-tax Act, 1961

To encourage prompt payment of dues to micro and small enterprises (“MSEs”), the Government of India introduced clause (h) in Section 43B of the Income Tax Act, 1961 with effect from financial year 2023-24. As per clause (h) of Section 43B, if an assessee makes payment to MSE after the time specified under the Micro, Small and Medium Enterprises Development Act, 2006, then deduction for such payment will be allowed in the year of actual payment. In this note we examine the stipulations outlined in Section 43B(h) of the IT Act and delve into its implications on the taxpayers.


India's Satellite Communication

Regulatory Shifts in India’s Satellite Communication Landscape

There is a rising interest in satellite-based connectivity in the Indian market among internet service providers. Eutelsat OneWeb India, Jio Satellite Communications, Elon Musk’s Starlink and Amazon’s Kuiper are in the process of obtaining the requisite licenses to provide satellite communication services in India. Satellite communications represent an inevitable technological development in response to a continued demand for better network quality and higher capacity.
In this background, the Telecommunications Act, 2023 (“Telecommunications Act”) which received the President’s assent on December 24, 2023 and provides for administrative allocation of satellite spectrum as well as liberalization of the FDI policy applicable to the space sector further spurs the gaining momentum in satellite-based communication technology in India. This note explores the regulatory shifts in the Indian satellite communications landscape.


Capital Gains and Beneficial Ownership Test

Indian Tax Treaties: Capital Gains and Beneficial Ownership Test

India’s double tax avoidance agreements (“DTAAs”) with certain countries (for e.g. Singapore, Mauritius and the Netherlands) provide that the capital gains on sale of shares is taxable only in the resident country of transferor and no tax is payable in India. However, the tax authorities have disputed the benefit available under the DTAAs by applying the “beneficial ownership” test. Further, they have also argued the sufficiency of tax residency certificate (“TRC”) to claim such benefit. In this note we analyze these aspects in light of the decision of Delhi High Court in Blackstone Capital Partners (Singapore) VI FDI Three Pte. Ltd., appeal against which has been recently admitted by the Supreme Court.


Capital Reduction

Capital Reduction: Tax Conundrums!

Capital Reduction, simply put, refers to the technique of reducing a company’s share capital in any form. It is a usually adopted mechanism by the companies for re-modelling their capital structure, amongst other means (viz., buy-back of shares and redemption of the preference share capital). Depending upon the objectives and attendant circumstances, a company can undertake capital reduction either with or without making any payment to its shareholders. This note discusses the tax implications that may arise in the hands of the company undertaking such capital reduction and its shareholders under different situations.


secondment

Secondment: An Endless Battle with the Tax Authorities!

Secondment of employees, as an approach, has become a common practice followed by multinationals to utilize their skilled resources with an ambition of geographical expansion. The tax implications at the time of re-imbursement of salary costs to secondees under a secondment arrangement has been a controversial issue which has led to protracted litigation between the tax authorities and the assessees. The courts have delivered plethora of judgements over the past many years depending upon the facts and circumstances of each case. This note discusses the principles emerged from various judicial precedents.


Reverse Flipping

Reverse Flipping: Is it Time to Return Home?

In the last few years, many Indian businesses “flipped” their shareholding structure by setting up a holding company in offshore jurisdictions. This was driven by several factors, including commercial, tax and regulatory considerations. However, this trend has reversed in recent times and the notion of “reverse-flipping” has picked up momentum. One objective of reverse flips has been to achieve a public listing in India. This note explores reverse flips and potential mechanisms to achieve them.


Cross-Border Merger Framework

Cross-Border Merger Framework in India: Limited Efficacy?

The facilitation of outbound mergers under the Companies Act and the FEMA Regulations has contributed towards expansion of the scope of cross-border mergers in India. However, as a practical matter, the framework for cross-border mergers in India has largely been utilized only in the context of merger of foreign wholly owned subsidiaries with and into their Indian holding companies or vice versa. This note discusses certain key issues leading to limited efficacy of the cross-border merger framework in India from a regulatory and tax perspective.