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2012 (8) TMI 433 - AAR - Income TaxIndia-Mauritius DTAA – chargeability to tax of the proposed transaction of sale of shares of GSKPL, the Indian company, to GSK Pte. Singapore by applicant company being Mauritius resident and part of GSK group – Held that:- It is observed that shares were held by the applicant from the year 1993 in one and from the year 1996 in the other and had no intention to trade in those shares and they were held as investments. Hence, it is ruled that the shares held would be considered as ‘capital asset’ Taxability of capital gains arising from transfer of shares in India – Held that:- Once the asset is held to be a capital asset, its proposed sale will generate a gain that would qualify to be capital gains under the Act and under the India-Mauritius DTAC. However, capital gains that would arise would not be chargeable to tax in India in view of paragraph 4 of Article 13 of the DTAC between India and Mauritius. Applicability of transfer pricing provisions from Section 92 to Section 92F – Held that:- Even if section 92 to section 92F are machinery provisions, without resort to them, the capital gains from an international transaction cannot be determined. Only on determining whether capital gains have arisen, would the question arise whether the gain is chargeable to tax or not under the Act. The application of Section 92 cannot be kept at bay by jumping to the second stage straight away. Therefore, whether ultimately the gain or income is taxable in the country or not, Sections 92 to 92F would apply if the transaction is one coming within those provisions. Liability to withhold taxes u/s 195 – Held that:- In cases where there is no chargeability to tax, there will be no obligation to withhold. Requirement to file return of income u/s 139 – Held that:- Since the income is not taxable in this country, under the Act, there is no obligation on the applicant to file a return of income u/s 139 Applicability of Section 112 when the proposed transfer or sale of shares is not through a recognized stock exchange – Held that:- Section 112(1) would be attracted when the income of an assessee includes income chargeable under the head capital gains under the Act. In the present case, the income of the applicant would be capital gains. Once it is, Section 112 of the Act is attracted. Applicability of provisions of Section115JB – Held that:- Section 115JB overrides section 34 to 48 of the Act. So by reading section 115JB as confined in its operation to domestic companies alone, one may be doing violence to the special scheme of taxation adopted for taxing certain companies. There is no compelling reason to jettison the scheme of taxation adopted by the Act by reading down section 115JB as confined in its application to domestic companies alone. Therefore, Section 115JB(1) would equally apply to a foreign company Theory of precedents may not have strict application in proceedings before this Authority. This Authority is bound only by the decisions of the Supreme Court. The decisions of High Courts have only persuasive value. This Authority is not subordinate to any High Court for even Article 227 of the Constitution to apply. While the AAR should be slow in disagreeing with propositions of law laid down in earlier rulings, it should not be deterred from taking a contrary view if it is convinced that the earlier view is not correct.
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