25 January, 2016
Scheme of Amalgamation cannot be Invalidated on the Sole Ground that One of the Reasons for the Proposed Amalgamation is Tax Planning
Recently, the Andhra Pradesh High Court (‘Andhra HC’) has held1 that a scheme of amal- gamation cannot be invalidated on the sole ground that one of the reasons for the proposed amalgamation is tax planning. The revenue authority argued that the scheme of amalgamation was undertaken to offset the losses being suffered by the transferee company against the profit of the transferor companies, and therefore, was contrary to public interest. Rejecting this argu- ment, Andhra HC held that the intention of a party to reduce tax liability cannot be said to be contrary to public interest or against public policy so long as such planning by a tax payer is permissible in law.
Draft Guiding Principles for Determination of “Place of Effective Management” (‘POEM’)
The Finance Act, 2015, had prescribed POEM as a test for determination of fiscal residence of a foreign company. The Central Board of Direct Taxes (‘CBDT’) has recently issued draft guiding principles2 for determination of POEM and opened these principles to public comments.
Various Steps by CBDT for Improving Ease of Doing Business and Reducing the Burden of Tax Compliance
Over the last three months, CBDT has taken a number of steps for improving ease of doing business and reducing the burden of tax compliance which, inter alia, include setting up of a committee with to simplify the provisions of Income-tax Act, 1961, its decision to expedite issue of refunds, the enhancement of threshold for filing appeal by the Income Tax Department before Tribunal and High Courts, simplification of procedures for furnishing self-declaration for lower deduction or no deduction of tax, notification of Transfer Pricing Rules to incorporate “range concept” and use of “multi year data” etc. 3
1 Goman Agro-Farms (P.) Ltd., In re. [2015] 63 taxmann.com 203 (Andhra Pradesh), dated September 29, 2015.
2 F. No. 142/11/2015-TPL. dated December 23, 2015.
3 Press Release dated December 15, 2015, issued by Press Information Bureau, Government of India
For further information, please contact:
Zia Mody, Partner, AZB & Partners
zia.mody@azbpartners.com
