Flipkart cofounders, Sachin Bansal and Binny Bansal, after ending the decade-long stint with the company, are now struggling to make their way out of the after-effects of the deal. The duo, along with 35 other stakeholders, have received notice from the Income Tax (I-T) department, questioning the total income raised from the sale of their equity stake in the company.
The Walmart-Flipkart deal was announced in May 2018 and the acquisition was approved by the Competition Commission of India in August 2018. The I-T department aims to assess the capital gains that have accrued by the Flipkart founders and the equity stakeholders with this deal. Reportedly, the Walmart-Flipkart deal is expected to help the government mop up over $1.3 Bn (INR 10,000 Cr) in taxes.
The I-T department has been reviewing Section 9 (1) of the I-T Act, which deals with indirect transfer provisions, to see if the benefits under the bilateral tax treaties with countries like Singapore and Mauritius, could be applicable to foreign investors who sold their stake to Walmart.
About the notice, Binny Bansal reportedly said, “There was a query received with regard to the sale of shares and payment of advance taxes. It happened a few months ago and I had already responded to the same.”
However, a media report citing sources said that the founders have not responded to the I-T notice sent to them on October 18, but the responses of other Indian shareholders have started arriving.
Earlier, in May 2018, I-T authorities issued notices to global retailer Walmart and Flipkart seeking the details of the acquisition deal to investigate the tax due from the company.
In a notice served to Walmart earlier, the tax department had asked it to furnish details of 44 shareholders of Flipkart, and how much each of them gained from the deal.
Further, the tax department had also conveyed to Flipkart that there is no escape from the capital gains tax as the General Anti-Avoidance Rule (GAAR) provisions are applicable to its deal with Walmart.
The GAAR provisions have come into operation from the assessment year 2018-19 and the tax benefit on capital gains has been sought by Flipkart for the financial year 2018-19 or assessment year 2019-20.
At the same time, to ascertain the actual beneficiaries of the deal, the tax department is also investigating the complex structure of investments made in Flipkart Ltd (Singapore) by eBay and had sought complete information on the fund flow from eBay and other subsidiaries in Flipkart.