TaxTonic Session : Deciphering the “Angel Tax” - Sec 56(2)(viib)!

Episode Duration:
100 minutes

Episode Background:

'TaxTonic', a new 'subscriber only' thought leadership series, is Taxsutra's endeavour to consistently deliver top notch technical content to it's readers. The labyrinth of tax rulings on convoluted transactions keeps the world of taxation unpredictable and ever-evolving. This series will feature engrossing presentations, incisive analyses and a deep-dive by the tax experts on burning issues & controversies. So, gear up for a 'tonic' to chisel your tax mind and challenge your wit.

Speaker:

Mr. Nihar Jambusaria (Chartered Accountant)

Moderator: 

Mr. Sachin Sastakar (Chartered Accountant)

What shall the episode cover?

In a series of measures to deter the deployment and proliferation of unaccounted money, Section 56(2)(viib), popularly known as “Angel Tax” was introduced by the Finance Act, 2012. In stark contradiction to its avowed object, the Angel Tax Regime became a noose for the startups that received equity at purportedly high valuation. CBDT as the apex administrator endeavoured to iron out the creases that demoralised Indian startups and investors alike yet it is open to debate if the same has been delivered.  The Angel Tax regime even after a decade of its enactment,  is controversial and prone to litigation.

Taxsutra, in this third episode of 'TaxTonic' has discussed threadbare the multi-fold challenges faced in the interpretation and implementation of Section 56(2)(viib). The discussion is focused on how a simple piece of legislation could have unforeseeable complications and what Assessees have in their arsenal to win the legal battle that possibly has wider ramifications on India's economic growth.

Broad facets of Section 56(2)(viib) analysed in this episode are:

1. Intention v. Implementation
2. Rules for applicability
3. Ambiguities regarding various transactions
4. Complexities in valuation
5. Interplay with Section 68