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2022 (11) TMI 1390 - AT - Income TaxIncome taxable in India - Taxability of short term capital gain arising on sale of shares - Gains derived by a resident of one of the States from the alienation of shares (other than shares quoted on an approved stock exchange) - HELD THAT:- A careful reading of Article 13(4) makes it clear that the source State has the authority to tax the capital gain, only if, the value of shares sold is derived principally from immovable property situated in the source State, other than, property in which the business of the company whose shares were sold was carried out. In case of JCIT Vs. Merrill Lynch Capital Market Espana SA SV [2019 (10) TMI 1163 - ITAT MUMBAI] while dealing with an identical provision under India – Spain DTAA has held that the onus is entirely on the AO to prove that the value of shares is derived principally from immovable property situated in the source country. In other words, it has to be proved that the Indian company in which the assessee had invested the money towards equity was principally holding immovable property. Neither any such allegation has been made by the Assessing Officer in the assessment order before invoking Article 13(4) of India – Netherlands Tax Treaty, nor in course of the proceeding before DRP or even the Tribunal any material has been brought on record by Revenue to demonstrate that the condition of Article 13(4) of India – Netherlands Tax Treaty is satisfied. Thus the short term capital gain will not be taxable even under Article 13(4) of the India – Netherlands Tax Treaty. Thus, seen from any angle, the short-term capital gain arising on sale of shares is not taxable in India. In view of the aforesaid, we delete the addition made by the AO. Appeal of assessee allowed.
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