The Institute of Chartered Accountants of India (ICAI) Dubai chapter has hailed the Union budget for 2023-24 and termed it future oriented and supporting g..
No TDS required on import of shrink-wrapped software: Supreme Court
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No TDS required on import of shrink-wrapped software: Supreme Court
Lubna Kably / TNN / Updated: Mar 3, 2021, 08:10 IST
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MUMBAI: The Supreme Court (SC) on Tuesday ruled that payments made by resident Indian end-users or distributors (such as technology companies) to overseas suppliers on import of ‘shrink-wrapped’ software – generally known as off-the-shelf software, is not a ‘Royalty’ payment. Thus, no withholding tax obligations arise in India, against such payment.
During assessment and at various levels of judicial appeals, payments made for import of shrink-wrapped software to overseas suppliers was held assessable to tax as ‘Royalty’ under section 9(1)(vi) of the I-T Act and Article 12 of the respective tax treaties. This classification as ‘Royalty’ required tax to be deducted at source (TDS) when making payment to the overseas suppliers.
Retro tax rush blunts court verdicts Finance Bill 2021 has widened the scope of slump sale to include all transfers thereby making them taxable even as an appeal is pending in the Supreme Court
The fine print of the budget shows the government resorting to retrospective provisions to overturn judicial pronouncements in the areas of slump sale, goodwill and the income adjustment of charitable trusts.
Finance Bill 2021 has widened the scope of slump sale to include all transfers thereby making them taxable even as an appeal is pending in the Supreme Court. Slump sale is defined as “the transfer of one or more undertakings as a result of sale for lump sum consideration without value being assigned to individual assets and liabilities”.
Many companies will have to fork out higher tax on past M&A deals while some may renegotiate valuations of ongoing and future transactions with the budget ending Corporate India’s age-old practice on ‘goodwill’ accounting.
In a balance-sheet, goodwill is typically captured as the extra amount a company pays either as stock or cash over the net worth of the entity that is acquired. After the acquisition or merger, the goodwill is treated as an ‘intangible asset’ and the depreciation claimed on it lets the acquiring company or resulting or surviving entity lower its taxable income.
That depreciation on goodwill will now be disallowed not just for future deals but even those cut during the financial year 2020-21. Also, depreciation on goodwill on M&A deals done earlier cannot be claimed from 2020-21. The measure proposed in the budget would hurt profitability of several listed and unlisted companies.