Indian Private Equity & Venture Capital Association submit proposal to CBDT and DIPP to resolve angel tax issue
The Indian Private Equity and Venture Capital Association (“IVCA”) have submitted a proposal (“Proposal”) to the Central Board of Direct Taxes (“CBDT”) and the Department of industrial Policy and Promotion (“DIPP”) to resolve the issue of angel tax. Angel tax was introduced in 2012 and is the tax collected by the CBDT on the investment a start-up receives in excess of its fair-market value. This has been seen as a start-up killer in India.
The Proposal recommends to exempt angel tax on start-ups receiving investment with a valuation in excess of its fair-market value, provided that, such start-up:
- is registered with DIPP and has less than INR 10 Crores of non-promoter capital; or
- the investment made by high net-worth individuals is made along with an exempted investor, a SEBI verified alternative investment fund, or a fund verified by the DIPP (eg. Start-Up India Fund); or
- is a registered start-up where all shareholders have a permanent account number.
Furthermore, it also recommends that all notices issued for payment of angel tax should be fast-tracked in order to resolve these matters at the earliest.
Quick View:
- The Proposal aims to strike a balance between the interests of startups whilst at the same time ensuring the government’s plan of removing black money from the start-up ecosystem is also possible. The Proposal, therefore, rather than asking for the law on angel tax to be removed, seeks for its exemption for startups and investors who are either (a) registered with the DIPP; and/or (b) have a PAN number.
- If adopted, this Proposal will go a long way in calming promoters of various start-ups, who have received notices from the CBDT asking for up to 30% tax on the investment they have received with a valuation in excess of the fair-market value.
India’s online sellers to appeal against CCI’s ruling on Flipkart’s abuse of dominant position
The All India Online Vendors Association (“AIOVA”), an association of more than 3,500 online retailers are planning to challenge the order of the Competition Commission of India (“CCI”) which recently ruled that Flipkart did not unfairly promote any of its products. The AIOVA has alleged that Flipkart has been using its Dominant Position to favour select sellers that it partly owns.
The AIOVA plans to appeal the CCI’s decision before the the National Company Law Appellate Tribunal (“NCLAT”) soon.
Quick View:
- It will be interesting to see the manner in which the NCLAT will adjudicate on this matter given the recent amended FDI rules issued by the DIPP for e-commerce platforms (“Amended Rules”). The Amended Rules prohibit the same issues that AIOVA has alleged. The Amended Rules prohibit entities which are owned by e-commerce websites from selling their items on the same e-commerce website (eg: entities owned, partly or wholly, by Flipkart, cannot sell their items on Flipkart).
Disclaimer: This post has been prepared for informational purposes only. The information/or observations contained in this post does not constitute legal advice and should not be acted upon in any specific situation without seeking proper legal advice from a practicing attorney.