Terminated venture between HP and HCL not chargeable to capital gains tax
Direct Taxation
The Delhi High Court ruled in favour of HCL Infosystems in a long running tax case arising from termination of a joint venture agreement between HCL and Hewlett Packard. Though it agreed with Department’s assessment that receipt of Rs 60.80 crores by HCL upon termination was a capital receipt, however it could not be charged to capital gains tax because there had existed no such provision at the time of transacting. Amendments to Section 55(2) of the Income Tax Act, 1961 regarding ‘right to manufacture’ were effected prospectively from 1998, whereas the joint venture between the companies was terminated in 1997.
Relevant : Section 55 Income Tax Act, 1961 Act
Tags : CAPITAL GAINS JOINT VENTURE RIGHT TO MANUFACTURE SECTION 55
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