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Informist, Friday, Apr. 17, 2026

NEW DELHI – The income tax department has moved the Supreme Court seeking to reopen Genpact Consulting Singapore Pte. Ltd.'s income assessment on a transaction wherein it sold the shares held in Genpact India Pvt. Ltd. to its wholly owned subsidiary for $1.40 billion in the financial year 2014-15 (Apr-Mar). The income tax department said Genpact group had sought to avoid payment of dividend distribution tax under the Income Tax Act, 1961, on the sale of shares. The apex court will hear the tax department's plea next on Apr. 24.

 

Genpact Consulting is governed by the provisions of India-Singapore Agreement for the Avoidance of-Double Taxation with respect to taxes on income. The company's principal activity is that of software, computer consultancy and advisory, and investment holding.

 

The case goes back to Genpact Consulting transferring 1.50 million equity shares held in Genpact India to its wholly owned Indian subsidiary, Empower Research-Knowledge Services Pvt. Ltd. Empower Research merged with the Indian company and came to be known as Genpact India.

 

Challenging the acceptance of nil income in an assessment filed by Genpact Consulting, the tax department said the assessing officer did not conduct basic enquiries like asking for the upstream or downstream structure of the Genpact group and did not ascertain the source of the money used to carry out the transactions. These transactions were carried out between the group entities as part of a grand tax avoidance scheme designed by the Genpact group, however, the assessing officer did not make any enquiries to find out the true nature of the transactions, said the income tax department. The assessing officer has not examined the transaction in detail and even the basic facts were not examined and thus it accepted the exempt income claim of Genpact Consulting, which was exempt short-term capital gain income amounting to INR 64.86 billion, which was prejudicial to the interest of revenue, said the department.

 

The transfer of shares by Genpact Consulting would amount to the transfer of capital assets, said the respondent. However, in view of the specific exemption provided in the Income Tax Act, the transaction would not be considered as a "transfer" for the purpose of computing capital gains and hence will not result in taxable capital gains, since Empower Research was a wholly owned Indian subsidiary of Genpact Consulting at the time of above transfer, said the respondent. Further, the gains arising to Genpact Consulting from the transfer of shares would also be exempt in India in view of the provisions of Article 13 of the India-Singapore Agreement for the Avoidance of-Double Taxation, said the respondent.

 

Section 47(iv) of the Income Tax Act, 1961, stipulates that the transfer of a capital asset from a holding company to its wholly-owned subsidiary company is not considered a "transfer" for capital gains tax purposes. The exemption applies if the parent company owns 100% of the subsidiary's shares and the subsidiary is an Indian company.  End 

 

US$1 = INR 92.86

 

Reported by Surya Tripathi

Edited by Ashish Shirke

 

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