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Redesigned taxation upon exit from partnership firm – New jeopardy for taxpayers?
By Harshit Khurana and Devashish Jain
The article in this issue of Direct Tax Amicus discusses how the legislature has vide Finance Act, 2021 gone far beyond the expectations of the taxpayers by redesigning the entire scheme of taxation in cases of reconstitution and dissolution of partnerships. The article critically analyses the amendments in Sections 45(4), 9B and 48(iii) of the Income-tax Act, 1961 and observes that the issues have been resolved mostly in favour of the taxman. The authors also examine some of the open issues, like the issue of taxation under Section 45(4) on receipt of asset other than capital asset, whether capital gains will qualify as short term or long-term capital gains and the issue of taxation on receipt of money by a partner at the time of dissolution of the firm. According to the authors, it is important that CBDT provides appropriate clarification else, we will see a new round of litigation in partnership taxation...
Notifications
Relaxation in time limits under Income-tax law due to COVID-19 pandemic
Faceless appeal scheme applicable only for Income-tax
Relaxation in master file and country-by-country report (CbCR) compliances
Statement of Financial Transactions under Section 285BA – Formats, procedures and guidelines notified
Exemption under Section 10(23FE) to pension funds – Conditions revised
Mechanism for withdrawal of applications filed before Income-tax Settlement Commission notified
Thresholds of Significant Economic Presence defined
No PAN required by eligible foreign investors
Rules of cash allowance in lieu of leave travel concession (‘LTC’) notified
Ratio decidendi
India-Netherlands DTAA – Benefit under MFN clause available from date when third country became OECD member – Delhi High Court
Issue of shares at face value during amalgamation not attracts Section 56(2)(viib) – ITAT Ahmedabad
India-UAE DTAA – Residential status of director irrelevant if non-resident assessee incorporated, controlled and managed in UAE – ITAT Mumbai
India-UAE DTAA – Limitation of Benefit (‘LoB’) provision when cannot be invoked – ITAT Mumbai
No liability to withhold tax on a transaction conducted prior to insertion of Explanation 2 to Section 195 despite its retrospective application – ITAT Mumbai
Beneficial rate provided in DTAA for taxation of dividends to prevail over rate provided in Section 115-O – ITAT Kolkata
