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2014 (1) TMI 34 - AT - Income TaxExemption From capital gains u/s 10(23G) of the Act – Held that:- Explanation 2 to section 10(23G) inserted by the Finance Act, 1999 is declaratory, thus, retrospective in operation - the assessee was entitled to exemption under section 10(23G) on long-term capital gains arising on infrastructure capital fund invested before 1st June, 1998 - Following Vbc Ferro Alloys Limited. Versus Assistant Commissioner Of Income-tax, Circle 3(4), Hyderabad. [2005 (9) TMI 253 - ITAT HYDERABAD-B] - The Assessing Officer and the Commissioner of Income-tax (Appeals) erred in rejecting the exemption provided under the statute to the assessee on the reason that the investments made prior to April 1, 2002 are not eligible for exemption - the Indian company was already approved as an infrastructural company and was allowed deduction under section 80-IA and further at the time of sale the conditions as provided under section 10(23G) are satisfied – Thus, the sale of shares of an infrastructural company is eligible for exemption as provided under section 10(23G) - on both the counts, i.e., by virtue of the Double Taxation Avoidance Agreement as well as by virtue of section 10(23G), the assessee's claim of exemption from capital gain is to be upheld - The Assessing Officer is directed to treat the amount as exempt from tax under the income-tax provisions. Issue of interest received on delayed payment - Sale consideration paid by the buyer – Applicability of Section 9(1)(v) of the Act - Held that:- Payment of sale consideration and payment of interest are of two different transactions - The interest was calculated for the period of delay on the balance amount of sale consideration which was due on a given day - The Assessing Officer as well as the Commissioner of Income-tax (Appeals) relied on section 9(1)(v) of the Act to consider that this amount is taxable as per the provisions of the Act - Sub-clause (c) only is applicable in respect of income by way of interest under section 9(1)(v) - the interest payment payable on any debt incurred or moneys borrowed and used for the purpose of a business or profession carried on by such persons in India - neither assessee nor the purchaser is carrying on any business in India nor the interest is payable in respect of any debt incurred or moneys borrowed and used for the purpose of business - the interest payment received by the assessee was received outside India and the payment was made by a non-resident neither in relation to any debt incurred or moneys borrowed nor used for the purpose of business or profession in India. The interest income cannot be considered as received or deemed to have received or accrued or arising or deemed to have accrued or arise as provided by section 9 of the Act - by virtue of the provisions of section 5 interest income received abroad and paid by a non-resident cannot be brought to tax under the Income-tax Act – the interest was paid by the purchaser to compensate the delay in discharging the consideration and cannot be considered as part of consideration - If it were to be considered as part of consideration, then it becomes part of the sale consideration which was already considered as exempt from the long-term capital gain. - Thus, the interest received by the assessee abroad from a non-resident cannot be brought to tax as the provisions of section 9 or section 5 are not applicable to the transaction - the Assessing Officer is directed to exclude the interest amount – Decided in favour of Assessee.
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