TMI Blog2011 (11) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to file a return of income in India in respect of the income from the proposed transfer of the shares. - A.A.R. No.866 of 2010 - - - Dated:- 14-11-2011 - Justice Mr. P.K.Balasubramanyan, Mr. V.K. Shridhar, JJ. Present for the applicant Mr. Kanchun .Kaushal, FCA, Mr. Raju Vakharia,FCA, Mr. Amit G.Jain, FCA, Mr. Ravi Sharma, Advocate Present for the Department Mr. Shishir Srivastava, Addl.DIT, Mr. Satya Pal Kumar, DDIT RULING 1. This is an application under section 245Q(1) of the Income-tax Act by the applicant, a company incorporated under the law of Mauritius. It was formerly known as Norcros Investments (Mauritius) and the name was changed subsequently into the present one, the change of name being recognized by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn of income in India in respect of the proposed transfer of shares of Ardex Endura (India) Pvt. Ltd.? 2. After the application was allowed under section 245R(2) of the Act, a report was forwarded by the Revenue to this Authority. In that report, the Revenue pointed out that on a perusal of the details, it is noticed that the applicant is a wholly owned subsidiary of Ardex Holdings U.K. Ltd. There was no income of any type for the year or the immediate previous year for the applicant company. The only asset was the investment in Indian company. Prima-facie it appeared that the sole purpose for which the applicant company was brought into existence was to hold the shares of the Indian company on behalf of the parent company, Ardex Hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up was not involved. Hence the allegation that the applicant company was created by Ardex group was not correct and justified. Ardex group was in the business of manufacturing of construction material. In November, 2001, with a view to expand its business, a business decision was taken to acquire Norcros Investments (Mauritius) Ltd., the applicant company, which enabled the Ardex group to acquire the business of the products allied to construction materials. Ardex Holdings UK Ltd., never created the applicant company. The decision to transfer the shares held by the applicant company to the German Group company was taken by the Board of Directors of the applicant company. The allegation to the contrary was not correct. It was the applicant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iary in Germany, by the principal in UK and that the treaty that governed was the one between India and the UK. 5. On behalf of the applicant, it is contended that the applicant was a tax resident of Mauritius and the Tax Residency Certificate produced in this behalf has to be accepted view of the decision in Azadi Bachao Andolan (263 ITR 706). The applicant, a company incorporated in Mauritius, was dealing with the shares it held in an Indian company and selling them to another company in Germany. Article 13 of the Treaty between India and Mauritius applied. According to paragraph 4 of the treaty, the capital gains derived by a resident of Mauritius from the alienation of shares would be taxable only in Mauritius and not in India in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action would be governed by the India-UK Treaty. The decision in Azadi Bachao Andolan has even gone to the extent of holding that treaty-shopping itself is not taboo. This decision would stand in the way of our further probing the question. We may incidentally, notice that the decision in McDowell (154 ITR 148) did not deal with treaty shopping and the only guidance is provided by the decision in Azadi Bachao Andolan. It is true that this authority may have a little leeway in considering the question whether the transaction is designed for the avoidance of income-tax. But then, the transaction concerned would be the proposed transaction of sale of shares by the applicant to the German entity. We may be in a position to take note of the step ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be required to file a return of income in India in respect of the proposed transfer of shares of Ardex Endura (India) Pvt. Ltd. Since the shares to be transferred are the shares of an Indian company which would otherwise have been taxable under the provisions of the Income-tax Act, we rule that the applicant is bound to file a return of income in India in respect of the income from the proposed transfer of the shares. We may notice that at the hearing the applicant relied on the ruling in Vanenburg Group BV (218 ITR 464) in support of the contention that filing of a return was not called for. But in the light of the view taken by us in VNU International BV, AAR 871of 2010, and subsequent rulings, which we prefer to follow, we rule that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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