FIS Payment Solutions And Services India Private Limited Vs Union of India & Ors. (Delhi High Court)
Delhi High Court recently adjudicated on the writ petition filed by FIS Payment Solutions and Services India Private Limited, challenging the applicability of Section 56(2)(viib) of the Income Tax Act, 1961. The petitioner sought a declaration that the provision, introduced via the Finance Act, 2012, was unconstitutional. Alternatively, it requested that the provision be read down to apply only to unaccounted income cases and not to transactions between wholly owned subsidiaries and their holding companies. Additionally, the petitioner contested the Dispute Resolution Panel’s (DRP) order dated June 29, 2024, which had led to an income tax addition under this provision.
The Court examined precedents set by the Income Tax Appellate Tribunal (ITAT), including BLP Vayu (Project-1) (P.) Ltd. vs. Principal Commissioner of Income Tax and DCIT v Kissandhan Agri Financial Services (P.) Ltd. [2023] 150 com 390 (ITAT, Delhi). In both cases, ITAT had clarified that Section 56(2)(viib) was intended to prevent tax evasion through artificially inflated share premiums but was not applicable to transactions between a wholly owned subsidiary and its holding company. The Tribunal emphasized that such transactions do not lead to any real gain or transfer of value, thereby falling outside the scope of the deeming provisions.
