Parliamentary panel for abolishing tax on LTCG from investments in startups
The Standing Committee on Finance (2019-20) has recommended to the Centre to abolish tax on Long Term Capital Gains for all investments in startups which are made through collective investment vehicles (CIVs) such as angel funds, alternate investment funds (AIF), and investment LLPs.
 
The committee in its report on "Financing The Startup Ecosystem" said the tax should be removed at least for the next two years to encourage investments amid the pandemic.
 
"The Committee would like to strongly recommend that tax on Long Term Capital Gains be abolished for all investments in startup companies (as designated by DPIIT) which are made through collective investment vehicles (CIVs) such as angel funds, AIFs, and investment LLPs," it said.
 
It suggested that after this 2 year period, the Securities Transaction Tax (STT) may be applied to collective investment vehicles (CIV) so that revenue neutrality is maintained.
 
Investments by CIVs are transparently done and have to be done at fair market value, the Standing Committee said, adding that it is easy to calculate the STT associated with these investments.
 
"This can be done in lieu of imposing LTCG on these CIVs and to make the taxation system fairer, less cumbersome, and transparent. This will also ensure that investments in unlisted securities are on par with investments in listed securities," it said.
 
It has also recommended that there should be no punishing of domestic risk capital at any level, as the current tax disparity is proving advantageous to foreign capital through low tax jurisdictions and low taxes for fund management services.
 
As per the panel, such a move will establish a level playing field for domestic investments in comparison to foreign investments and domestic listed in comparison to unlisted securities.
 
The committee recommended that to encourage domestic investments in unlisted debt and equity securities, once the pandemic period concessions are lifted, CIV capital gains should always be taxed at the same rate as listed securities.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User 

    SC Dismissed Plea Against Bombay HC Order Rejecting Anticipatory Bail in GST Circular Trading: Report
    The Supreme Court has dismissed a special leave petition filed against an order of Bombay High Court that rejected anticipatory bail of the petitioner held guilty of circular trading in goods and services tax (GST), says a report from GSTSutra.com, a portal associated with Taxsutra.com
     
    As per the report, pursuant to the irregularities in return-filing, the HC had found the petitioner to have availed input tax credit (ITC) of Rs63.53 crore during July 2017 to September 2019 on invoices valued at Rs352.92 crore.
     
    Last month, while rejecting anticipatory bail of Ashok Kumar and Sheelam, who are husband and wife as well as partners of Sheela Sales Corp, the Bombay HC had ruled that to prevent tampering of evidence, GST officials can keep the accused in custody. 
     
    The HC said that the assessment is not a prerequisite for arrest under GST.
     
    The investigation in this matter revealed that after availing the ITC of Rs53.50 crore without any actual receipt of goods, Sheela Sales Corp has passed the tax credit of Rs53.50 crore to six firms. 
     
    GST department's main allegation against Ashok Kumar and Sheelam of Sheela Sales Corp was, all three were guilty of circular trading by claiming input tax credit on the materials never purchased and passing on such ITC to companies to whom they never sold any goods.
     
  • Like this story? Get our top stories by email.

    User 

    ITAT Dismisses Income Addition of Rs152 Crore Based on News Report on Flipkart Founders
    The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has dismissed an appeal by the income tax department to count Rs152 crore as undisclosed income of the founders of Flipkart, including Sachin and Binny Bansal, when they exited UrbanTouch.com during 2012. Citing a news report, the I-T department had made the addition of Rs152 crore as consideration received in both cash and in stock by Flipkart founders.
     
    In the order, the ITAT bench of George George K and BR Baskaran says, "...the assessment in the instant case has been concluded based on a news article which does not in any case constitute adequate material on record."
     
    In August 2012, the stocks of UrbanTouch were transferred to Goldsquare for Rs12.33 crore. Those stocks were transferred by angel investors like Tiger International, Accel India, Sachin and Binny Bansal and Mukesh Bansal.
     
    However, later the business of UrbanTouch was consolidated under Goldsquare due to huge losses. It sold off all its assets, including the domain name of www.urbantouch.com along with all other intellectual property (IP) and brand assets for Rs3 lakh to Goldsquare through an agreement signed in March 2013. 
     
    Based on a news article from Economic Times , the assessing officer (AO) alleged that UrbanTouch received an amount of $30 million as proceeds for sale of urbantouch.com and had accordingly made an addition of Rs152 crore. 
     
    Quoting a person with direct knowledge of the transaction, the news report says, "...online fashion flash sales venture Fashion and You has acquired online fashion and beauty retailer Urban Touch. Fashion and You paid $30 million (Rs167 crore) in cash and stock for the acquisition..."
     
    UrbanTouch, however, contended that the angel investor had invested Rs20 crore and it was impractical for AO to presume that these investors would receive Rs167 crore.
     
    While upholding an order passed by the commissioner of I-T (appellate), the ITAT dismissed the appeal by I-T department of adding Rs152 crore as undisclosed income on angel investors, who were also founders of Flipkart.  
     
  • Like this story? Get our top stories by email.

    User 

    We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 3 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone