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2012 (8) TMI 162 - AAR - Income TaxIndia-Mauritius DTAC - sale of shares of a US Company holding 100 per cent shares of company incorporated in India by a Mauritian company to another US company - Held that:- The beneficial ownership has not prevailed over the apparent legal ownership & Company law also recognized the recorded owner of the shares and not the person on whose behalf it may have been held thus the applicant is justified in its view that capital gains arising on the sale of shares of Exevo Inc., US by Copal Market Research Ltd. ("CMRL") to the applicant would not be chargeable to tax in India in the hands of CMRL. Earn-out would be part of the full value of consideration receivable by CMRL i.e.seller as the share purchase agreement also provided for the seller to get 'earn-out' consideration calculated as per a formula contained in clause 5.3 of the agreement and subject to clause 3.8 and 5.5 of the agreement. Section 115JB of the Act would apply even to a foreign company but no ruling on this point as nothing was argued on it. There would be no liability in the applicant to withhold tax under section 195. Sale by a Mauritian company of the shares held by it in an Indian company to a Cyprus company - Held that:- The Capital Gains arising on the sale of shares of Indian company helb by Mauritian company are not chargeable to tax in India in the hands of the applicant as the transactions are held to be taxable in India, going by the DTAC, the transactions which give rise to capital gains, can be taxed only in Mauritius, in view of paragraph 4 of Article 13 of the India-Mauritius DTAC Earn-Out consideration would be part of the full value of consideration receivable by the applicant - no obligation on Moody's Group Cyprus Limited, Cyprus to withhold tax under section 195.
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