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Dilemma of formation by reconstruction or splitting-up of existing business – A deterrent to income-tax benefits?
By Prachi Goel and Aastik Ahuja
The article in this issue of Direct Tax Amicus elaborately discusses a restriction under various provisions of the Income Tax Act, granting certain tax holidays to new businesses and providing that the new business should ‘not be formed by splitting up, or the reconstruction, of a business already in existence’. The authors deliberate upon the meaning of reconstruction and splitting-up on basis of various case law. They observe that though the position on the interpretation and meaning of the phrase ‘reconstruction or splitting-up of a business already in existence’, is pretty settled, the controversy arises with respect to the applicability of this restriction. The article highlights various contrary decisions of the Courts on the usage of the term ‘formed’ - whether the applicability of the conditions is restricted only to the year of formation of the start-up/business/company, or would it apply every year for which the tax benefit is being claimed? According to the authors, the taxpayers must be extremely vigilant while claiming the benefits as such cases are highly prone to scrutiny by the Income-tax Department...
Notifications & Circulars
E-Advance Rulings Scheme, 2022 notified
Securities Transaction Tax Rules amended to include insurance companies
Exemption on consideration from unit linked insurance policies – Guidelines
Computation of capital gains from ULIPs not exempt under Section 10(10D) – New Rule notified
MFN clause on Protocol to India’s DTAA clarified
Computation mechanism for specified funds attributable to investment division of an offshore banking unit
Ratio decidendi
Sale of self-generated technical know-how is not taxable under Section 45 as cost of acquisition is indeterminable – Karnataka High Court
Collection charges retained from passenger service fee by airline operators is commission liable to TDS under Section 194H – Karnataka High Court
Judicial and quasi-judicial proceedings – Period between 15 March 2020 to 28 February 2022 to be excluded for calculating limitation – Supreme Court
Notices issued after 1 April 2021 for re-opening of assessment, pursuant to relaxed limitation period, quashed – Calcutta High Court
AO is bound by the decision of ITAT passed in case of assessee for earlier years and the Supreme Court – Andhra Pradesh High Court
Additions made on account of alleged excess share capital/ share premium, alleged bogus purchases and alleged funds deposited with banker during demonetization deleted – Delhi High Court
