Tax department rejects exemption plea in Flipkart-Walmart deal

The income tax (I-T) department has rejected all applications made by shareholders of the Singapore-registered Flipkart Ltd seeking exemption from capital gains tax arising out of its sale of majority shares to US retail giant Walmart in a deal worth $16 billion. It has also initiated inquiries against some alleged suspicious transactions and investment flow into the e-retailer.Tax officials are inquiring into the mismatch between lower losses booked by the e-retailer in earlier years compared to the loss of Rs 46,901 crore in the year of its sale to Walmart. Authorities have demanded a valuation report as it noted that the total finance cost debited was not clear from the company’s financial statements.A Flipkart spokesperson told TOI that the company would not like to comment on the ongoing I-T proceedings.The tax department has also conveyed to Flipkart that there is no escape from capital gains tax as the General Anti-Avoidance Rule (GAAR) provisions are applicable to its deal with Walmart. The GAAR provisions have come into operation from assessment year 2018-19 and the tax benefit on capital gains has been sought by Flipkart for financial year 2018-19 or assessment year 2019-20.To ascertain the actual beneficiaries of the deal, the tax department is also investigating the complex structure of investments made in Flipkart Ltd (Singapore) by eBay and has sought complete fund flow from eBay and other subsidiaries in the Flipkart. The international taxation division of the I-T department is currently studying the valuation of Indian assets of Flipkart Singapore.

from Economic Times https://ift.tt/2MK3Iz9