In a press released yesterday, the Central Board of Direct Taxes yesterday decided to freeze the recent Circular on Indirect Transfer.
Circular No. 41/2016 was issued on 21 December, 2016 which dealt with clarification on Indirect Transfer provisions.
After the issue of the aforementioned circular, representations have been received from various FPIs, FIIs, VCFs and other stakeholders.
The stakeholders have presented their concerns stating that the circular does not address the issue of possible multiple taxation of the same income. The representations made by the stakeholders are currently under consideration and examination. Pending a decision in the matter, the operation of the above mentioned circular is kept in abeyance for the time being.
The circular has been issued with an aim to remove the controversies arose at the time of Vodafone case. Though the Government had issued a clarification earlier, the same was had created a stir among many foreign investors who were concerned about getting taxed in India.
The circular illustrates 19 situations which could result in indirect transfers and the impact of such transfers.
The Circular also stipulates that if the value of assets sold is more than Rs 10 crore and represents at least 50% of the total value of the assets owned by a company, fund or an entity, it comes under the purview of income tax net. That means, a company, who sells even their global business, at a value more than 50% of the total valuation is derived from India, the transaction can be taxed in India.
