TMI Blog2012 (8) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the India Mauritius DTAC - . Once it is held that the applicant is entitled to invoke the India Mauritius DTAC, then it is clear that Article 13 of the said DTAC is attracted - the capital gains arising out of the proposed buyback of shares is not taxable in India in view of paragraph 4 of Article 13 of the DTAC between India and Mauritius. Applicability of Section 47 - Held that:- Section 47 (iv) has to be read as conferring benefit in three situations, one, when the parent company holds the whole of the share capital of the subsidiary, two, when the nominees of the principal hold the whole of the share capital of the subsidiary and three, when the principal and the nominee together hold the whole of the share capital of the subsid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheme of amalgamation, approved by the High Court of Bombay, the flooring business of Inarco Limited was transferred to Armstrong-India. In consideration of that transfer of business, Inarco Limited was allotted 3,60,000 shares of the value of Rs.10/- each in Armstrong India. Subsequently, Inarco Limited s share capital was reduced by resorting to section 100 of the Companies Act, 1956 from Rs.72,00,000 (divided into 72000 equity shares of the value of Rs.100 each) to Rs.36,00,000 (divided into 36000 equity shares of the value of Rs.100 each). This was by cancelling of 50% of its share capital by Inarco Limited. As consideration, Inarco Limited transferred to the applicant 3,600,000 shares of Rs.10 each of Armstrong India. This constitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tius ( Armstrong Mauritius ) or the applicant ) would be liable to tax in India on the capital gains that may arise, from buyback of shares by its Indian subsidiary, viz. Armstrong World Industries India Private Limited ( Armstrong India) as per the provisions of the Income-tax Act, 1961 ( the Act ) read with double taxation avoidance agreement (DTAA) between Republic of India and Government of Mauritius? 2. Whether on the facts and in the circumstances of the case, the transfer of shares of Armstrong World Industries India Pvt. Limited by the applicant to its wholly owned subsidiary Armstrong World Industries India Pvt. Limited in the course of proposed buyback of shares, would be exempt from tax in India in the hands of the applicant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Even if the original capital might have flowed from USA or UK, the coming into existence of the applicant as an investor in the year 1999 cannot be ignored. Alternatively, it was submitted that the buyback was not a transfer for the purpose of section 45 of the Act since it was excluded from the operation of section 45 of the Act by section 47 (iv) of the Act. Sections 92 to 92F of the Act had no application, since there was no chargeable income arising under the Act. 8. On behalf of the Revenue, it was argued that what was involved was a scheme for avoidance of tax and hence it should be discountenanced by this Authority. Even now the applicant has not disclosed all the facts and an investigation into the facts was necessary. It was pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Azadi Bachao Andolan, what ever may be its merit. 11. Hence on question no. 1 formulated for Ruling, it has to be ruled that the capital gains arising out of the proposed buyback of shares is not taxable in India in view of paragraph 4 of Article 13 of the DTAC between India and Mauritus. 12. Question no. 2 is whether even otherwise the transaction will stand outside section 45 of the Act in view of the section 47 (iv) of the Act. In the light of the Ruling on question no. 1, this question may have no efficacy. Counsel argued that an earlier Ruling rendered by this Authority in Re RST (AAR No.1067 of 2011) requires reconsideration. He argued that the interpretation placed on section 47 (iv) of the Act, therein is not in consonance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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