KPMG FLASH NEWS 
KPMG in India 
CBDT sets-up a Committee to examine fresh cases referred by the tax 
officer in respect of...
The Director (FT&TR-I) shall be the Secretary of 
the Committee. 
Our comments 
This is a welcome step taken by the Financ...
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CBDT sets-up a Committee to examine fresh cases referred by the tax officer in respect of indirect transfer of assets prior to 1 April 2012

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In July 2014, the Finance Minister while delivering his budget speech mentioned that henceforth all fresh cases arising out of the retrospective amendments of 2012 in respect of indirect transfers will be scrutinised by a High Level Committee to be constituted by the Central Board of Direct Taxes (CBDT) before any action is initiated by Assessing Officer in such cases.

In line with the above, the CBDT has now issued the Order under Section 119 of the Act, for proper administration of provisions dealing with indirect transfer of assets.

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CBDT sets-up a Committee to examine fresh cases referred by the tax officer in respect of indirect transfer of assets prior to 1 April 2012

  1. 1. KPMG FLASH NEWS KPMG in India CBDT sets-up a Committee to examine fresh cases referred by the tax officer in respect of indirect transfer of assets prior to 1 April 2012 1 September 2014 Background The Supreme Court in the case of Vodafone International Holdings B.V.1 had held that the transfer, by a non-resident to another non-resident, of shares of a foreign company holding an Indian subsidiary Company does not amount to transfer of any capital asset situated in India. Accordingly, the gains arising from the said transaction were not liable to tax in India. Subsequently, the Finance Act, 2012 amended Section 9 of the Income-tax Act, 1961 (the Act), to provide that the income deemed to be accruing or arising to non-residents directly or indirectly through the transfer of a capital asset situated in India, is to be taxed in India with retrospective effect from 1 April 1962. Also, certain clarificatory amendments were introduced retrospectively in Sections 2(14), 2(47) and 195 of the Act. In July 2014, the Finance Minister while delivering his budget speech mentioned that henceforth all fresh cases arising out of the retrospective amendments of 2012 in respect of indirect transfers will be scrutinised by a High Level Committee to be constituted by the Central Board of Direct Taxes (CBDT) before any action is initiated by Assessing Officer (AO) in such cases. __________________ 1 Vodafone International Holdings B.V. v. Union of India [2012] 341 ITR 1 (SC) In line with the above, the CBDT has now issued the Order2 under Section 119 of the Act (the order), for proper administration of provisions dealing with indirect transfer of assets. CBDT’s Order  If AO considers that any income is deemed to accrue or arise in India before 1 April 2012, through transfer of a capital asset situated in India in consequence of the amendments introduced with retrospective effect, and as on the date of this order:  no proceeding of assessment or reassessment in relation to the said income is pending; or  no notice for proposed assessment or re-assessment in relation to the said income has been issued; or _______________ 2 CBDT Order F.No. 149/141/2014-TPL, dated 28 August 2014 © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
  2. 2. The Director (FT&TR-I) shall be the Secretary of the Committee. Our comments This is a welcome step taken by the Finance Minister which has now been implemented by CBDT by way of issuance of this order. The order provides that if the AO considers that any income is deemed to accrue or arise in India before 1 April 2012, through a transfer of a capital asset situate in India due to such retrospective amendments, he shall seek prior approval of the Committee for the proposed action. Accordingly, the fresh cases will be selected after the Committee has examined the issue and given an opportunity of hearing to the taxpayers. This will provide relief to the taxpayers from unwanted litigation on indirect transfer of asset situated in India.  no proceeding under section 201 of the Act is pending, or no notice for initiation of such proceeding has been issued in relation to the said income, then, before proceeding with any action in relation to the said income, the AO shall seek prior approval of the Committee for the proposed action by making a reference to the Committee through the Principal Commissioner or the Commissioner concerned. The AO shall forward a copy of the reference to the taxpayer.  All such references shall be addressed to the Secretary of the Committee, and it shall be the responsibility of the Secretary that the meetings of the committee are convened at appropriate time and intervals so as to effectively and expeditiously dispose of the references received by it.  The Committee, on receipt of the reference from the AO, shall examine the proposed action of the AO and, after providing an opportunity to the taxpayer, take a decision on the proposed action. The Committee shall convey its decision in writing to the AO with a copy to the Principal Commissioner or the Commissioner concerned and the taxpayer.  The Committee shall endeavor to decide the reference within 60 days of its receipt by the Secretary of the Committee. However, the Committee shall have due regard to any limitation period involved in the proposed action.  The AO shall thereafter proceed in accordance with the directions of the Committee.  The Committee shall submit its report in respect of references decided by it in the relevant period to the CBDT through Member (IT) in the prescribed proforma.  The CBDT may intervene in the working/deliberations of the Committee, as and when required.  The first report shall be submitted in respect of period ending on 31 December 2014, and subsequent reports shall be submitted on half yearly basis (i.e. 30 June and 31 December).  The Committee will consist of the following officers of CBDT as Members:  Joint Secretary (FT&TR-I)  Joint Secretary (TPL-I)  Commissioner of Income-tax (ITA) © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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