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Unit 11: Computation of Taxable Income of Companies

Moreover the Venture Capital Company or Venture Capital Fund is not liable to make payment Notes
of dividend tax under Section 115-O or a tax on distributed income to the unit holders under
section 115-R.

Self Assessment

Fill in the blanks:
17. ………………is a term coined for the capital required by an entrepreneur to ‘venture’ into
something new, promising and unconventional.
18. ……………..means a domestic unlisted company which is engaged in the business for
providing services, production or manufacture of article or things.
19. The person responsible for making payment of the income distributed by the venture
capital company shall be liable to pay tax to the credit of the Central Government within
……………from the date of distribution or payment of such income, whichever is earlier.
20. The Venture Capital Company or Venture Capital Fund is not liable to make payment of
dividend tax under …………..

Case Study Vodafone Investments in India

ndia Inc. has been surging ahead audaciously with the support of its Information
Technology developments with its repertoire of resources. Global players have been
Ieying the Indian market, owing to immense opportunities that the continent provides;
both in terms of expansion and profit. Investment patterns in India have shown positive
growth over the years with significant process on the de-regulation front. India has been
greatly involved with the G-8 and G-20, including signing of the Double Taxations
Avoidance Agreements/Treaties (DTAA) with various tax-haven countries. This has
boosted the image of India as a ‘lookout destination’ for investment and an emerging hub
for economical activities. World Report 2010 ranked India as the 9th most attractive
investment destination, while Bloomberg Global Poll conducted in September 2010 put
India in the third position, above the United States of America (US).
However, the very same image is said to have taken a beating with the recent Vodafone
Tax case, which has been revolving in courts since 2009. With clear signs of the court ruling
in favour of the tax authorities, many global companies are said to be rethinking their
investment plans in India, keeping in mind the impact of the judgment on the taxation
front. The Doing Business Report 2011 of World Bank has ranked India at 134, below
neighbouring countries like Pakistan and Bhutan. This is a result of procedural difficulties
for start-up companies and investment companies, in India and abroad.
Tax regulations play a major role in cross border transactions and investments in a country.
Tax havens, open borders and DTAA countries are major destinations for investment
through Foreign Direct Investment (FDI) or other routes. The Vodafone tax case throws an
interesting question on the taxability of a non-resident company acquiring shares of a
resident company through an indirect route. This is a landmark case, as it is for the first
time that the tax departments have sought to tax a company through a mechanism of
tracing the source of acquisition. While we have heard about lifting the ‘corporate veil’,
this instance has set a rare example wherein the Indian tax authorities have gone to length
to interpret the existing tax laws, to bring a global company like Vodafone to its tax ambit.
Contd...

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