Flipkart deal: Tax dept will act once Walmart obtains regulatory nod

Last month, the tax department had written to Walmart saying that the US company can seek guidance about the tax liability under Section 195 (2) of the I-T Act

E-commerce major Flipkart has shared 'some details' with the I-T authorities on its USD 16 billion deal with US-based Walmart, but the tax department will act only after regulatory approvals have been obtained, an official said.

The department is currently studying the details received from the company, the official said, adding that they can issue notices seeking details of taxes withheld once the transactions are completed.

Last month, the tax department had written to Bentonville -Arkansas based Walmart saying that the US company can seek guidance about the tax liability under Section 195 (2) of the I-T Act.

Under Section 195 of the Act, anyone making payment to non-residents is required to deduct tax (commonly known as withholding tax).

The official said Flipkart has filed "some details" with the tax authorities and the same are being examined.

"There is no action required right now on our part. We will wait till the regulatory clearances are obtained," the official said.

Nangia Advisors LLP Managing Partner Rakesh Nangia said Income tax department has power to issue notices u/s 133(6) of IT Act to any party involved in this mega deal, including Flipkart, Walmart or any of the investors selling their stake.

"If the department is not satisfied with the reply/ explanation furnished by the purchaser/ payer, it may hold the purchaser/ payer as 'assessee in default' for failure to withhold appropriate taxes u/s 195 of the Act," Nangia said.

The department currently is going through the Section 9 (1) of the Income Tax law, which deals with indirect transfer provisions, to see if the benefits under the bilateral tax treaties with countries like Singapore and Mauritius, could be available for foreign investors selling stakes to Walmart.

Singapore-registered Flipkart Pvt Ltd holds majority stake in Flipkart India.

Walmart had, on May 9, announced that it will pay about USD 16 billion to buy about 77 per cent stake in Flipkart.

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