Conditions to claim relief for indirect transfer of assets before 28-05-2012
Introduction
Any income accruing or arising through or from any indirect transfer of Indian assets or capital assets before 28-05-2012 shall not be taxable in India if the prescribed conditions are satisfied. Rule 11UE provides for the specified conditions to claim such relief in respect of concluded assessment. Rule 11UF provides the form and manner of furnishing the undertaking required to claim the relief.
1. About
The Taxation Laws (Amendment) Act, 2021 (hereinafter referred to as TLA, 2021) inserted three provisos (Fourth, Fifth, and Sixth Proviso) in Explanation 5 to Section 9(1)(i) to give relief to certain eligible entities impacted by the retrospective amendment made to Section 9 by the Finance Act, 2012. These amendments provides that the provisions of indirect transfer of assets in India shall not apply to the assets transferred before 28-05-2012 (i.e., the date on which the Finance Bill, 2012 received the assent of the President). Accordingly, all pending assessments shall be deemed to have been concluded without additions for such income. It is further provided that the demand raised in concluded assessments or rectification orders for indirect transfer of Indian assets made before 28-05-2012 shall be nullified on the fulfilment of specified conditions. Further, the amount paid/collected in these cases shall be refunded, without any interest, on fulfilment of the said conditions. These conditions have been prescribed by the CBDT in Rule 11UE
(See also Assessment involving indirect transfer before 28-05-2012)
2. Conditions prescribed under Rule 11UE
Following conditions are required to be fulfilled by a declarant and interested parties:
(a) Furnishing of undertaking in Form 1;
(b) Withdrawal of all proceedings or appeals;
(c) Withdrawal or waiver of all rights;
(d) Waiver of right to seek any cost in respect of any proceedings;
(e) Waiver of right in relation to any event which may otherwise be available;
(f) Indemnifying India from any cost arising from filing claim after furnishing Form 1;
(g) Refrainment from assisting any person to raise any claim or reward; and
(h) Issue of public notice.
All the conditions mentioned above are required to be fulfilled cumulatively by the declarant. Further, the undertaking and indemnity bond from the declarant and all the interested parties should be duly authorised by all necessary corporate action, including but not limited to any board resolution or similar authorisation under applicable law. A copy of such board resolution and legal authorisation shall be furnished by the declarant.
2.1. Furnishing of undertaking in Form 1
The relief in case of concluded assessments shall be given only to those assessee who either withdraw or submit an undertaking to withdraw pending appeal or petition or arbitration. This undertaking is required to be furnished in Form 1 along with necessary attachments. Further, assessee is also required to furnish an undertaking from all the interested parties.
These interesting parties are as follows:
(a) All the companies or entities in the entire chain of holding of the declarant till the ultimate holding company or entity;
(b) Any person to whom the declarant has transferred any of its claims under any award, judgment, or court order pertaining to the relevant orders or under the relevant orders or granted any rights;
(c) Any person other than the person mentioned above, in whose favour any interest has been created or assigned by the declarant or under any law or rules made thereunder with respect to any of the relevant order; and
(d) Any person who has initiated any proceedings with respect to any of the relevant orders.
2.2. Withdrawal of all proceedings or appeals
The declarant and all the interested parties shall irrevocably withdraw, terminate, or discontinue all:
(a) Appeals or applications or petitions or proceedings against the relevant order;
(b) Proceedings for arbitration, conciliation or mediation, or notices thereof against the relevant order; and
(c) Proceedings to enforce or pursue attachments in respect of any award, order or judgement or any other relief against the Republic of India or Indian affiliates with respect to the relevant order.
After such withdrawal, the declarant and all the interested parties shall furnish evidence thereof. They are also required to furnish a declaration in Form 1 to the effect that they shall not reopen or file any such proceeding in future.
2.3. Withdrawal or waiver of all rights
The declarant and all the interested parties shall irrevocably terminate, release, discharge, and forever irrevocably waive all rights, whether direct or indirect.
They shall also terminate any claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys' fees, court's fees expenses, damages, judgments, orders, declaratory relief, and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown previously (or in future discovered), suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist in relation to any award, order, judgment, or any other relief against the Republic of India or Indian affiliates in connection with the relevant order or orders and furnish evidence thereof.
They are further required to furnish a declaration in the undertaking in Form 1 to the effect that they shall not reopen or file any such proceeding or initiate any such arbitration, conciliation, or mediation in future under any circumstances.
2.4. Waiver of right to seek any cost in respect of any proceedings
The declarant and all the interested parties shall irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding referred to above. This shall also include proceeding initiated by India to set aside the award, order or judgement, or any other relief issued in favour of the declarant or any of the interested parties.
2.5. Waiver of right in relation to any event which may otherwise be available
The declarant and all the interested parties shall terminate, release, discharge, and forever irrevocably waive any right, whether direct or indirect, any remedies, claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorney's fees, court's fees, expenses, damages, judgments, orders, compensation, and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist, based on pursuit of any remedy or any and all claims, demands, damages, judgments, awards, costs, expenses, compensation or liabilities of any kind (whether asserted or un-asserted), in relation to any facts, events, or omissions occurring at any time in relation to taxation of income referred to in the fifth and sixth proviso to Explanation 5 to section 9(1)(i) or relevant order or orders, or any related award, judgment or court order, which may otherwise be available to the declarant or any of its interested parties.
2.6. Indemnifying India from any cost arising from filing claim after furnishing Form 1
The declarant and all the interested parties shall indemnify, defend, and hold harmless the Republic of India and Indian affiliates from and against any and all costs, expenses (including attorneys' fees and court's fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of any claim, at any time after the date of furnishing the undertaking in Form 1.
The declarant and all the interested parties shall furnish an indemnity bond to fully assume the risk of any omission or mistake with respect to identification and procurement of authorisations and undertakings from any related parties or interested parties as provided in the undertaking.
They shall secure the Republic of India and Indian affiliates from any claim related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief against the Republic of India and Indian affiliates in connection with any relevant order or orders.
Related party means affiliates, predecessors, successors, all the companies or entities in the entire chain of holding till the ultimate holding company or entity, subsidiaries (whether direct or indirect), assignees, agents, shareholders (present and future), owners, directors, officers, those providing financing, and employees of the declarant.
2.7. Refrainment from assisting any person to raise any claim or reward
The declarant and all the interested parties shall refrain from facilitating, procuring, encouraging, or otherwise assisting any person from bringing any proceeding or claims of any kind related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief against the Republic of India or Indian affiliates in connection with any relevant order or orders.
2.8. Issue of public notice
The declarant and all the interested parties shall notify by a public notice or press release that, by signing the undertaking in Form 1 or Part M of the Annexure to the undertaking in Form 1, as the case may be, any claims arising out of or relating to the relevant orders or any related award, judgment or court order, no longer subsist, and that such person or entity issuing the public notice has signed the undertaking, and that such undertaking includes an indemnity against any claims brought against the Republic of India or any India affiliate contrary to the undertaking, and that the declarant and all the interested parties shall furnish a copy of such public notice to the Republic of India.
3. Manner of furnishing of undertaking
The CBDT has notified Rule 11UF to prescribe guidelines for furnishing of undertaking in Form 1. The undertaking shall be furnished in the following manner:
3.1. Time limit to submit Form 1
Undertaking in Form 1 shall be submitted to the jurisdictional Pr. Commissioner or Commissioner within 45 days from the date of commencement of the Income-tax (31References
Income-tax (31
This article is general information and not tax advice. Provisions change. Confirm your position with a qualified professional before acting.