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2012 (8) TMI 747 - AAR - Income TaxMultiparty 'Option Agreement' - an outstanding obligation on the part of Mahindra-British Telecommunications Ltd. (now, Tech Mahindra) to allot shares to SBC Services Incorporated, a US company (now AT&T Limited) would have stood in the way of Tech Mahindra making a public issue - public issue - denial of ruling - Held that:- If the right to exercise the option remained outstanding, there could not have been a public issue. So the share purchase agreement dated 23.6.2005 was entered into between Tech Mahindra and the applicant providing for investment by the applicant in Tech Mahindra and for getting shares allotted in its name. The shares to be allotted was of the numbers considered adequate to meet the obligation incurred by Tech Mahindra to AT&T in exercise of its option. The applicant as adopted process did not result in any avoidance of tax. If it had been a case of allotment of shares by Tech Mahindra to AT&T as per the option available to AT&T, that allotment would not have attracted capital gains tax since an allotment by a company was not a sale of shares. Hence, the constitution of the applicant had no motive of tax avoidance. The issue of capital gains has now arisen only because the applicant after getting the allotment of shares is selling them resulting in a gain giving rise to a question of chargeability to tax of that gain. The aim was to speed up the public issue. The public issue by Tech Mahindra was in the year 2006. If the route now adopted had not been adopted, Tech Mahindra would have had to wait till the year 2010 before it could come out with a public issue. The object of the Guideline 2.6.1 SEBI (Disclosure and Investor Protection) Guidelines, 2000 as relied is clearly to protect the investing public by ensuring that while a company makes a public issue, it is not burdened with any outstanding financial instruments or a right which would entitle the existing promoters or shareholders any option to receive equity share capital after the initial public offering, thus on such a transaction, it does not appear to be proper for this Authority to give a ruling on the basis that this Authority is not concerned with public interest or violation of a provision over which another authority would alone have jurisdiction to take penal action.
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