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2016 (9) TMI 162

Head Note:
Capital gain on transfer of shares - Tax liability in India - India-Mauritius DTAA - Held that:- This is a matter of fact and can be examined from share purchase agreement and other documents filed by the applicant. Sinshei Bank is a party to, the share purchase agreement because it is the sponsor and settler of the mutual fund in India and as required under the mutual funds regulations, Sinshei Bank Ltd. executed a trust deed dated 16. 7.2008 with the trustee company whereby Sinshei Bank Ltd. had established the mutual fund and contributed to the initial corpus. As Sinshej Bank was the existing sponsor it was required to be part of the SPA for transfer of the sponsorship to the new sponsor i.e. Daiwa Asset Management Company Ltd. It is also noticed that in terms of mutual fund regulation the trustee Sinshei Bank Ltd. is subject to certain requirements and responsibilities and on sale of shares it is required to be released from its obligation and responsibilities. This is the reason that the SPA contains such provisions.

The applicant has given para wise reply to the Department's contentions and the essence of the reply is that Sinshei Bank Ltd. in its capacity as sponsor of the mutual fund is party to SPA and has borne certain responsibility to the regulations, investors of the individual sponsor. The matters regarding place of arbitration, sharing of responsibility to obtain the tax withholding order etc are not relevant particularly in view of the fact that shares have been subscribed by the applicant in its own name and the bank statements filed show that the applicant has paid for such subscription of shares. In these circumstances the applicant cannot be termed as a 'permitted transferee' as was the case in Aditya Birla Nuvo [2011 (7) TMI 60 - BOMBAY HIGH COURT ]. The facts in Aditya Birla Nuvo were entirely different where AT&T had paid for and subscribed to the shares of JV Company in India and obtained the shares in the name of AT&T Mauritius as a 'permitted transferee'. Here the facts are very clear that the applicant had paid for shares. Once it is established that the applicant has made investment on its own and Sinshei Bank Ltd. was party to SPA only in its capacity as sponsor and in order to comply with mutual funds regulations, there is no bar on application of Article 13(4) of the India-Mauritius DTAA in this case. The applicant is a resident of Mauritius and a valid tax residency certificate has been produced before us. Therefore, the treaty will apply and the applicant is not liable to tax in India.

The applicant is not liable to tax in India under India-Mauritius DTAA. There is no liability to withhold tax.

The applicant is not required to file Income-tax returns in India.The applicant is not liable to tax under the provisions of section 115 JB of the Income-tax Act.

 


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