StartupTalky

Tag: Income Tax Department

  • Blackbuck Hit with INR 28.56 Lakh Tax Demand for FY18, Set to Appeal

    On July 8, listed logistics startup BlackBuck announced that the Income Tax (IT) Department has sent it a tax demand notice for INR 28.55 Lakh. The company stated in a statement with the exchanges that the July 7 tax notice was sent because certain expenses that qualified for tax deducted at source (TDS) had not been taxed.

    The company claims that the tax demand, which included taxes, was made by the Bengaluru office of the Assistant Commissioner of Income Tax (TDS) and related to the fiscal year 2017–18 (FY18).

    In explaining the nature of the infractions, BlackBuck said that an order under Sections 201(1) and 201(1A) of the Income-tax Act, 1961, was issued because some expenses did not have tax deducted at the source, confirming the total demand payment of INR 28,55,872/-, including applicable interest.

    BlackBuck Plans to Appeal the Order

    According to BlackBuck, it has a “strong case on merits,” and the business intends to appeal the notification to the relevant authority.

    The logistics firm added that there would be “no material implications” for the business from the IT department’s order.

    BlackBuck, which was founded in 2015 by Rajesh Yabaji, Chanakya Hridaya, and Ramasubramaniam B, began as an online truck aggregator before growing to include a wide variety of load management, telemetry, payment, and vehicle financing products.

    It links small and large companies with shipping needs with truck fleet operators. Additionally, the organisation provides fuel cards and FASTag payments, GPS tracking and truck theft protection systems, certified communication channels between the shipper and the trucker, and vehicle financing options.

    BlackBuck Financial Outlook

    The logistics company’s fourth quarter (Q4) of the fiscal year 2024–25 (FY25) had a consolidated net profit of INR 280.1 Cr, compared to a net loss of INR 90.8 Cr in the same period last year.

    A tax credit of INR 245 Cr during the reviewed quarter was the reason for the strong, profitable results. Operating revenues, on the other hand, increased by 30.6% to INR 121.8 Cr in Q4 FY25 from INR 93.2 Cr in the same period the previous year.

    BlackBuck Subsidiary Gears Up for Digital Payments with RBI’s PPI Nod

    The Reserve Bank of India (RBI) has granted a prepaid payment instruments (PPI) licence to Zinka Logistics, a subsidiary of listed logistics giant BlackBuck.

    The business stated in an exchange statement that its fully owned subsidiary, TZF Logistics Solutions Pvt Ltd, was awarded the licence by the central bank. Banks and non-banks cannot issue PPIs without a licence under the Payment and Settlement Systems Act of 2007.

    To put it in perspective, PPIs enable remittance facilities, conduct financial activities, assist the purchase of goods and services, and more, all of which are facilitated by the value they store.

    According to BlackBuck’s petition, the licence will assist the company’s fully owned subsidiary TZF Logistics Solutions Pvt Ltd, in setting up and running a payment system for prepaid payment instruments.

  • Show-Cause Notices Issued to Firstcry Over Esop Expenditures Totalling INR 80 Crore

    Show-cause notices have been issued to Brainbees Solutions, the parent company of FirstCry, in relation to employee stock ownership plan (ESOP) expenses that were close to INR 80 crore and were incurred during the fiscal years 2018-19 and 2021-22.

    The notices have been sent by the Income Tax Department in accordance with clause (b) of Section 148A of the Income Tax Act.

    Firstcry in Its Defence

    According to the filing that the company made with the Bombay Stock Exchange (BSE), the company is determined in its belief that the claim of ESOP expenses that it has made in its tax returns for the assessment years mentioned above is in compliance with the provisions of the Income Tax Act of 1961 and is in accordance with judicial precedents established by a variety of courts as well as the advice of our external tax advisors.

    A comparable employee stock ownership plan (ESOP) expenditure claim was previously allowed by the Commissioner of Income Tax (Appeals) for the assessment year 2015-16, according to the company to which SoftBank provided financial backing. Consequently, the organisation is of the opinion that “no income that is subject to tax has evaded the assessment.”

    As was stated earlier, the corporation is of the opinion that it has a solid case on merit, and at this point, there has been no order of any type having been passed. According to the filings, the corporation will, in due course, provide a response that is suitable to the show cause notices.

    Not the First Time for the FirstCry

    In 2023, it has been reported that the tax department, which is under the jurisdiction of the Ministry of Finance in India, has sent notices to the creator of FirstCry, Supam Maheshwari, requesting him to explain why he did not pay more than $50 million in taxes on equity transactions that were carried out in privately held FirstCry. The tax department has requested that they not be named because the information is not publicly available.

    In addition, queries concerning the problem have been received by at least six investors in FirstCry, according to the statement. These investors include the private equity firm ChrysCapital Management Co. and the family office of Sunil Bharti Mittal. In order to resolve the investigation, Maheshwari had several meetings with the tax agency.

    The financial year that ended on March 31, 2021 was the first time that FirstCry had generated a profit after years of operating at a loss.

    FirstCry’s IPO

    An initial public offering (IPO) of $500 million was submitted by FirstCry earlier this year. The IPO featured a fresh issue of INR 1,666 crore as well as an offer for sale of 543 lakh equity shares by existing shareholders. FirstCry is a company that offers a wide variety of products meant for infants and toddlers.

    The omnichannel retailer finished the first day of trading on the Indian stock markets with a market value of $4.1 billion, an increase of 44.8% from the previous day’s trade.

    Details of the FirstCry IPO That Opens on August 6
    FirstCry’s parent company, BrainBees Solutions Ltd, has announced that its red herring prospectus (RHP) indicates that the IPO would begin on August 6 and conclude on August 8.
    StartupTalkyNitin Konde

  • NCLT Gives Clearance to Merger Between Slice and North East Small Finance Bank

    Slice, a unicorn in the financial technology industry, has been granted permission by the National Company Law Tribunal (NCLT) to merge with North East Small Finance Bank (NESFB).

    Both businesses made the announcement that they would be merging in October of 2023. In March of the previous year, Slice paid around $3.42 million to purchase a five percent ownership in a bank with its headquarters in Guwahati.

    How Merger Will Help Both the Entities?

    In a news release, Slice noted that the merger will make it possible for the merged business to make use of cutting-edge technology and profound community awareness, which will ultimately lead to increased financial inclusion across the country.

    Customers may anticipate an increased selection of products, improved omnichannel offers, and a banking experience that is more streamlined.

    The scheme of arrangement and amalgamation that involves Garagepreneurs Internet Private Limited, Quadrillion Finance Private Limited, Intergalactory Foundry Private Limited, RGVN (North East) Microfinance Limited, and North East Small Finance Bank Limited has been approved by the National Company Law Tribunal (NCLT).

    The Competition Commission of India (CCI) and the Registrar of Companies (RoC) have both given their thumbs up to Slice and NESFB respective applications.

    In addition, the Reserve Bank of India (RBI) and the Income Tax Department also issued certificates stating that they did not have any objections to the transaction.

    Slice’s Financial Report Card

    Shortly after the conclusion of Slice’s debt round of thirty million dollars, this new development has taken place. The most recent valuation of Slice was above $1.5 billion, which occurred at the Series C round in November 2021. To date, Slice has raised a total of $340 million.

    According to the data intelligence platform TheKredible, Rajan Bajaj, who held the position of CEO and co-founder of the company, owned 8.21% of the ownership.

    While Slice’s losses increased by 59.8% to a total of INR 406 crore, the company’s revenue increased by a factor of three, reaching INR 843 crore in the fiscal year 2023.

    The Bengaluru-based company was able to scale during the fiscal year 23, despite the disruption it experienced as a result of the Reserve Bank of India’s change in rules for card issuers. It has not yet submitted its annual financial reports for the fiscal year 2024.

    About Slice Card

    Slice is a digital lending platform that, in partnership with non-bank financial companies (NBFCs), provides a credit card. The Slice card is intended for individuals who are new to the concept of credit, as well as students and young professionals who have their finances limited.

    There is no requirement for a credit score, and the eligibility requirements are more lenient. There is also no annual charge or membership cost associated with the card.

    Fintech Takeaways from Slice-North East Small Finance Bank Merger
    In this article, we explore how fintech companies can lay the foundation and prepare for a probable merger-like scenario with a bank in the future.
    StartupTalkyPrithvi Durai

  • From Instagram to Investigation: I-T Department Issues Notices in Rs 10,000 Crore Tax Scandal

    The income tax (I-T) department has reportedly uncovered instances of tax evasion totaling around Rs 10,000 crore over three years, as per credible sources. The evasion is believed to have been perpetrated by online retailers marketing their products through social media channels like Instagram and Facebook. Notices have been issued to 45 brands operating nationwide, and it is anticipated that additional companies will receive similar notifications in the near future. These companies are alleged to have either neglected tax payments or provided inaccurate information regarding their incomes, according to insider information.

    A high-ranking official, discussing the issue, shared insights with a publication, declaring, “Beyond significant eCommerce entities, we are actively overseeing operations on Instagram and Facebook, revealing a suspected evasion amounting to roughly Rs 10,000 crore.” Notifications from the Income Tax (I-T) department were sent out from the final week of October to November 15, covering evaluation periods from 2020 to 2022.

    The report identifies the 45 companies involved in sectors such as apparel, jewelry, footwear, bags, and gift items. This roster comprises well-known retailers utilizing social media platforms for consumer outreach. Several of these companies, which received the I-T notices, were also involved in international product sales.

    India boasts over 230 million active Instagram users, the highest globally, and more than 314 million Facebook users. Government sources assert that the 45 entities in question exhibit significant turnovers. An official elaborated on the sales activities of these companies, revealing, “They operate small shops and warehouses, primarily selling through Instagram, with turnovers exceeding Rs 110 crore, while their reported income tax returns were only Rs 2 crore.”

    Following the impact of COVID-19, there was a noticeable upswing in the number of retailers utilizing these platforms, known for their substantial user engagement. The official noted that three Mumbai-based saree eTailers attracted the attention of the tax department after sponsoring a high-profile fashion show.

    Most of the transactions involving these online retailers were conducted through UPI, facilitating the I-T department’s ability to trace these financial activities. Despite the increasing trend of individuals leveraging social media for retail purposes, such income often goes unreported, leading to the non-payment of taxes.

    Social Commerce Surpasses Ecommerce Dominance in India

    In 2022, the projected market size for social commerce in India stands at seven billion U.S. dollars, with expectations of an increase to 84 billion U.S. dollars by 2030. eCommerce has dominated the market for over a decade, leading to a discernible shift towards social commerce, which is poised for significant advancement.

    Market Size of Social Commerce in India in 2019, With Forecasts From 2022 Until 2030
    Market Size of Social Commerce in India in 2019, With Forecasts From 2022 Until 2030

    Social commerce involves the direct selling and purchasing of products or services through social media platforms, encompassing every aspect from product discovery to the entire checkout process, shaping a holistic shopping experience for consumers.

    The prominence of social commerce is evident in the State of Social Media Investment Report, revealing that 77% of consumers are likely to favor enterprises offering a superior social media experience. Surprisingly, four-fifths of social media marketers anticipate consumers will increasingly buy directly from social apps rather than brand platforms or third-party eCommerce portals in 2023.

    While many companies engage in sales through both eCommerce sites and social media handles, in India, the bulk of social commerce transactions are propelled by new brands and first-time entrepreneurs. With the continuous surge in social media users, brands are innovating strategies to convert captive audiences into customers.

    Given that people spend an average of three hours daily online—engaging in activities such as posting, scrolling, viewing videos, and messaging—this presents a crucial window of opportunity for brands to target consumers through their marketing tools.

    Unlike transactional buy-and-sell models, social commerce focuses on building a dedicated community around a brand. Brand development hinges on loyal fans or followers who praise and promote the brand, contributing to a robust community or consumer base in a short period. Social commerce differentiates itself by leveraging influencers for product marketing, fostering community creation efficiently.

    The authenticity of feedback within social commerce is bolstered by a strong presence on social media and community connections, providing organic and genuine feedback. With its distinct advantages over traditional eCommerce methods, there is a growing global belief that social media represents the future of eCommerce.

    The trajectory of social commerce indicates sustained growth in the years to come, driven by approximately 70% of the nation’s population actively using social media. Presently valued at $2 billion, industry analysts anticipate the social commerce market in India to grow at a CAGR of around 50 to 60% over the next five years.

    In light of these statistics, it is evident that brands adept in social commerce are strategically investing time, money, and resources to enhance their success through this evolving platform. This increased success, however, has also attracted the attention of the income tax department.

    The Rise Of E-commerce Industry In India
    Ecommerce market share of India is approximately $88 billion in 2022. Read about the growth and future of the industry in India.
    StartupTalkyDevashish Shrivastava

  • I-T Department Slaps on Startups With Investor Details, Ashneer Grover’s Query Sparks Buzz

    The I-T department slaps notices on Indian startups asking for their investor’s identity and last three years’ ITRs to verify their creditworthiness and genuineness of the transactions. Ashneer Grover jumped on X to question the pragmatism of this notice.

    The ITR notices to Indian startups since earlier this year continue to create uncertainty and anxiety for the startups, making it difficult for them to raise funding. The turmoil started following the Income Tax Return (ITR) notices that were sent, under Section 68 of the Income Tax Act, 1961, to various startups earlier this year asking for the ITRs of the last three years of their investors and shareholders. The Income Tax Department slapped the notices to seek information about the creditworthiness of their investors and shareholders to verify whether the amount invested aligns with the income declared by them.

    I-T Department’s Notice to Startups
    Ashneer Grover’s Concerns and Questions
    I-T Department’s Clarification
    Disagreements and Criticism From Investors

    I-T Department’s Notice to Startups

    The I-T department has been sending these notices to startups that have raised large amounts of money from angel investors or venture capital firms. The I-T department is concerned that some of these investments may be disguised as loans and that the startups may be avoiding paying taxes on the interest income.

    Everything You Need to Know about ITR E-filing 2.0 – New ITR Filing Website
    The Income Tax Department of India has launched a new ITR filing website. If you are confused here’s everything you need ti know about it.
    Alan JosephStartupTalky

    Ashneer Grover’s Concerns and Questions

    Ashneer Grover, former Co-Founder, and Managing Director of BharatPe, took his concern to X to ridicule and raise questions on the grounds on which the notices are being sent. He acknowledged that in the last month, several startups, including some under his portfolio as well, have received the ITR notices seeking the shareholder’s information.

    He said, “In the last 1 month, a number of startups (a few in my portfolio as well) have received Income Tax notices asking to furnish information about shareholders.”

    Grover even raised questions on how and why would a startup have their shareholders’ last three years’ ITR details and why would the shareholder or individual share the same with a private company.

    He said, “Bahut interesting hai (It is very interesting) – they are asking start-up companies to furnish 3 year ITR of all shareholders. 1) How and why will companies have ITR of shareholders? 2) Why would a shareholder/individual share their ITR with a private company?”

    Ashneer Grover’s Questions

    I-T Department’s Clarification

    Replying to Grover’s post, the I-T department clarified that the notices were sent as per Section 68 of the Income Tax Act, 1961, when being asked by an Assessing Officer (AO), it is the responsibility of the company to provide the required information about their investor, their creditworthiness and their legitimacy.

    His post also contained an image of the notice issued under Section 142(1) of the Income-Tax Act, 1961 which gives the Assessing Officers (AOs) the power to seek data from those filing the ITRs.

    It reads, “Provide documentary evidence to substantiate the identity and ITR of last three years of shareholders to substantiate creditworthiness (of) the shareholders as well as the proof of the genuineness of the transaction in respect of fresh credit of  the share capital/premium account,”

    The reply from the I-T department on X reads, “Section 68 of Income-tax Act, 1961 (the Act) under which the AO has made the enquiry about the creditworthiness of the shareholder/investor, places the initial onus on the assessee-company to prove the following: the identity of the investor, the creditworthiness of the investor and genuineness of the transaction”

    “Finance Act, 2012 mandated that the nature and source of any sum credited as share capital, share premium, etc., in the books of a closely held company (excluding Venture Capital Fund or a Venture Capital Company registered with SEBI) shall be treated as explained u/s 68 only if the source of funds from a resident shareholder is also explained by the investor,” the I-T department added.

    The I-T department also mentioned that in this case the notices are sent as the AO has sought to assess the genuineness of the transaction and source of investment by the shareholder or investor. This is to be done to verify if the amount invested is commensurate with the income declared in the ITR of the investor.

    However, it was also mentioned by the I-T department that the companies have the liberty to share the PANs of their investors instead, for verification.

    “This has been the practice,” the I-T department added.

    Income Tax Department’s Reply

    Disagreements and Criticism From Investors

    PTI reported that Mohandas Rai, Co-founder, of Infosys, who is also an investor, posted on X, tagging Prime Minister Narendra Modi and Prime Minister’s Office (PMO) on Grover’s initial post, to say it was “misleading”. He also added, “Sir tax terrorism is increasing! This is against what you have stood for. Please intervene.”

    In the same post, he also tagged a multitude of politicians and ministers, including Tejasvi Surya, MP and BJP Yuva Morcha National President, and PC Mohan, BJP’s Bengaluru Central MP.

    In response to the clarification issued by the I-T department, stating that companies have the option to furnish their investor’s PANs as an alternative to their last three years’ ITRs, Rai expressed his disagreement, condemning it – “again this is misleading.” He also tagged the Union Ministry of Finance, Prime Minister Narendra Modi, and Finance Minister Nirmala Sitharaman in his response, which was later reposted by Grover on X.

    “Asking for the PAN is the law. But how can you also ask for 3-year tax returns of the investor from the startup? Does the law permit this? @IncomeTaxIndia itself says that Pan is sufficient. Why this overreach?” Rai asked.