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2014 (5) TMI 631 - AAR - Income TaxWithholding of Tax u/s 195 of the Act Purchase of equity shares LTCG arising u/s 112(1) of the Act Whether the tax is required to be withheld by the Applicant u/s 195 of the Act on purchase of equity shares of Patni Computer Systems Ltd, being listed security, from iSolutions, Inc. USA of the amount of long term capital gains arising to iSolutions, Inc. as per the proviso to section 112(1) of the Act - Held that:- Following Cairn UK Holdings Limited Versus Director of Income-Tax [2013 (10) TMI 430 - DELHI HIGH COURT] - the first proviso to Section 48 ensures that a non-resident, who utilized his foreign currency, is taxed after taking into consideration the fluctuation in exchange rate - if proviso to Section 112(1) is applied, then almost all assessees covered by the first proviso to Section 48 would be liable to pay tax @ 10% only and not @ 20% on long-term capital gains - it is not possible to decipher and clearly elucidate the exact legislative purpose and object behind the proviso to Section 112(1) in a categorical and unambiguous manner - The purpose and object behind the proviso to Section 112(1) itself is somewhat debatable, except that the legislative intention was to tax long-term capital gain on listed shares, bonds and units @ 10%, without benefit of indexation under second proviso to Section 48 of the Act the applicant will be entitled to benefit of proviso to Section 112(1) of the Act on sale of equity shares Decided in favour of Assessee.
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