Home Case Index All Cases Income Tax Income Tax + AAR Income Tax - 2012 (4) TMI AAR This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2012 (4) TMI 154 - AAR - Income TaxDTAC between India & Mauritius – Taxability of gains arising from transfer of shares and CCDs held by Mauritius company in Indian company – Z ltd (Mauritius company) along with Vltd (Indian Company) invested in shares and CCDs of S Ltd (Indian company) engaged in development of real estate project in India – prior to the mandatory conversion date of CCDs, V was given the call option to purchase particular shares and CCDs from Z, which was exercised by it – applicant contending CCDs not to be loan or advances and gains to be capital gains exempt from tax – withholding of taxes - Held that:- CCD creates or recognizes the existence of a debt, which remains to be so, till it is repaid or discharged. Further, it is observed that S Ltd being subsidiary of V ltd is though independent juridical person, S exercises no powers in managing its own affairs. It is de facto under the control and management of its parent company, V. It is V who is developing and running the real estate business of S, standing as a guarantor of the investment made by Z. V rather than S, acknowledges the CCDs as debts. The relationship between them as a parent and subsidiary is on paper: they are one and the same entity. Acknowledgment of debt with commitment to pay is factually upon V. Since, V and S are one and the same, hence the amount paid by V is clearly towards the debt that was taken by S from the Applicant. Gains arising on the sale of equity shares and CCDs are not exempt from capital gain tax in India under DTAC with Mauritius. The gains arising on the sale of CCDs being interest within the meaning of Section 2(28A) of the Act and Article 11 of the DTAC and are taxable as such. Tax is to be withhold on such payments – Decided against the applicant.
|