Home Case Index All Cases Income Tax Income Tax + AAR Income Tax - 2018 (2) TMI AAR This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (2) TMI 856 - AAR - Income TaxTaxability of capital gains in India - transfer of shares held in ‘AB’ India to its subsidiary company, ‘AB’ Singapore - eligibility of benefits of India-Mauritius tax treaty - benami transaction - Held that:- Neither was the Applicant acting on its own behalf in taking decisions like an independent company with a separate legal status in a foreign territory, regarding the investment in ‘AB’ India, though it was an Investment Holding company itself; and also that the manner and accounting followed in acquiring those shares only go to show that they were taken on its books on hindsight, at the directions of the Holding company. Only this can explain the various lacunae noticed, and as discussed above. It had only lent its name and was a benami of the ‘C’ Group. We are unable to rule that the shares were genuinely acquired by the Applicant, that it became the beneficial owner of those shares, and that the capital gains derived on the transfer of those shares to ‘AB’ Singapore was income in its hands. On the above facts, since the ‘C’ Group, comprising of two US companies had acquired the shares in ‘AB’ India from two other US companies, the gain having arisen in India in the hands of the ‘C’ Group of the US, was taxable in India as per the India-US DTAA. In the above factual matrix, the Applicant, “AB” Mauritius, would not be entitled to the benefits of the Agreement between the Government of Mauritius and the Government of the Republic of India for the avoidance of double taxation and prevention of fiscal evasion, with respect to taxes on income from capital gains. Applicability of section 195 - i.e. whether tax has to be withheld on the gains arising from the sale of shares - Held that:- Since in the instant case we have held that the income would be chargeable to tax in India, there would be a liability to withhold tax as required by this section. The cases cited by the Applicant are not applicable. Applicability of transfer pricing provisions - Held that:- As against the position in section 195 of the Act, there is no such requirement in section 92 that the transaction should result in income chargeable to tax under the Act. Hence, the transaction in the instant case of sale of shares in the Indian Company will have to be benchmarked as per the transfer pricing provisions contained in Chapter X of the Act. Transfer pricing provisions contained in section 92 to 92Fof the Act would apply to the proposed transaction. Application of section 115JB on the subject transaction - Held that:- As the Applicant as well Revenue agree that the provisions of the said section shall not be applicable to foreign companies, as per the retrospective amendment to section 115JB by Finance Act, 2016, and the clarification issued by the CBDT dated 24 September 2015. This being so, we have no reason to disagree. Thus the provisions of section 115JB shall not be applicable.
|