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Angel tax row: War of words continues between taxmen and Delhi-based startup — Here’s what happened

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Updated: February 10, 2019 7:42:51 AM

Pushpinder Singh, founder, TravelKhana, responding to the CBDT clarification said in his blog that there was no cash transaction involving the company as alleged by the income tax department (ITD) notice.

War of words continues between startup TravelKhana and CBDT

In the ensuing war of words between Delhi-based startup TravelKhana and apex direct tax body CBDT, the former has presented its side of the story after the CBDT issued a clarification late on Friday night, saying that the action of attaching the company’s bank account to recover Rs 36 lakh was under a different provision of the Income Tax Act and not under the so-called ‘Angel Tax’ provision.

Pushpinder Singh, founder, TravelKhana, responding to the CBDT clarification said in his blog that there was no cash transaction involving the company as alleged by the income tax department (ITD) notice. Further, Singh said that the ITD didn’t allow the company the required time to furnish the details of investors and also refused to entertain the plea of stay on assessment order demanding Rs 2.1 crore.

After facing criticism over notices sent to the startup demanding tax at 30% on funding received by early-stage investors, the CBDT issued directions to its officials in December last year, asking them to refrain from coercive action on notices sent under section 56(2)(viib), while the CBDT worked on a new dispensation to deal with taxation on startup funding.

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Justifying the action against TravelKhana, the CBDT in its statement said that the case against the company was “under section 68 of the Income Tax Act on account of unexplained cash credits and not under section 56(2)(viib) on account of premium on shares, as has been alleged”.

“Thus, it is clear that the case of Travel Khana is not covered by the instruction issued by CBDT of December 24, 2018, prohibiting coercive measures for enforcing recovery of outstanding demand in angel tax cases, as the addition was made under section 68 of the IT Act and not under section 56(2)(viib),” the CBDT said. Singh in his blog said that the company didn’t engage in any cash transaction as investment.

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