Wal-Mart owned Flipkart does not want it's tax and IT department to go off track
Wal-Mart owned Flipkart does not want it's tax and IT department to go off track
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Wal-Mart is going to buy Flipkart, which is one of the top e-commerce companies in the country, to buy American company Wal-Mart and tax officials also have a look at it. Tax officials have sought information related to the proposed deal by writing a letter to the American company's Indian office in Walmart's case. One source said that information from Proposed Transaction from Flipkart's Bangalore office has also been sought. The letter sent to Walmart is referring to the potential deal, in which the shareholding can be transferred to non-residents in the Indian e-commerce company. A comment about this from both the companies could not be received.

The source said that in this deal, the provisions of income tax related to withholding tax will be applicable. The Income Tax Authority has also asked Walmart to approach the provisions of the tax laws of India, the laws applicable to this transaction and tax liability, to clarify the situation. Major Foreign Investors of Flipkart include Tiger Global, Excel Partners and Naspers. There is a possibility that Wal-Mart will buy the full or partial share of these investors. The tax department wants to ensure that this deal does not have any tax loss. 

Finance Act 2012 added provisions related to indirect transfer under Section 9 (1) (i) of the Income Tax Act. As a result, through the transfer of an asset located in India, non-residents are supposed to get income directly or indirectly, and it has to be taxed with the effect of the previous date from 1st April 1962. After this amendment, all the persons having a business in India, whether resident or non-resident, have to pay aside tax in spite of having a foreign transaction. Long-term capital gains tax is 10-20% depending on the investment. 

The previous UPA government had introduced this amendment to end the impact of the decision of the Supreme Court in connection with the tax case involving telecom firm Vodafone. The Income Tax Authority claimed tax on the 2007 deal of buying a big stake in Vodafone's Hutchison Vampaa local telecom subsidiary. The current government has not overturned this amendment from the previous date but has taken some vigilance measures related to its implementation. 

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