TMI Blog2014 (5) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 48 is not applicable on transfer of a long-term capital asset being bond, debenture other than the capital index bond - Zero coupon bonds are specifically made eligible for the benefit under the proviso to section 112(1). 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 gains on listed shares, bonds and units at 10 per cent., without the benefit of indexation under the second proviso to section 48 of the Act - Legislative policy and object is nothing more, and it is impermissible to read into the provision an affirmative legislative intention on assumption and guess work and this would be beyond the acceptable principles of interpretation - the assessee is entitled to benefit of lower rate of tax @ 10% while computing the tax under the head “long term capital gain” – Decided against Revenue. - ITA No. 5086/Mum./2009, ITA No. 7343/Mum./2010 - - - Dated:- 2-5-2014 - Shri P. M. Jagtap And Shri Amit Shukla,JJ. For the Petitioner : Mr. Ajay Srivastava For the Respondent : Mr. Nitesh Joshi ORDER Per Amit Shukla, J. M. The present appeals have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any other resident and not to the non-resident and held that withholding the tax should be 20% + 2.5% surcharge + 2% education cess. 3. Before the learned Commissioner (Appeals), detail submissions were made. Reliance was also placed on various decisions which has been noted by the learned Commissioner (Appeals) in Para-1.2 and 1.3 in his order. The learned Commissioner (Appeals) duly appreciated the assessee s submission and directed the Assessing Officer to charge @ 10.455% which is exclusive of income tax, surcharge and education ncess. The relevant observations and findings of the learned Commissioner (Appeals) are as under:- I have considered the facts and submissions of the Ld.A.R. It is seen that the applicant M/s.Abbott Equity Holdings Ltd. is foreign company and it has purchased 11,66,184 shares of Abbott India Ltd. an Indian Co. whose shares are registered on the Bombay Stock Exchange The AO held that in view of the proviso to section 112 of the Act which refers to 2nd proviso to section 48, the assessee is not entitled to lower rate of taxation at the rate of 10% + surcharge and education cess as applicable. On reading of the provisions of section 112 it becom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to another non-resident i.e. Abbott Equity Holdings Ltd. registered in U.K. to Abbott Capital India Ltd., of U.K. Accordingly the AO is directed to charge the rate of 10.455% i.e. 10% IT + 2.5 % Surcharqe + 2% Education Cess. Accordingly this ground of appeal is allowed. 4. Before us, the learned Counsel for the assessee submitted that this issue has now been settled by the Hon'ble Delhi High Court in Cairm U.K. Holdings Ltd. v/s DIT, [2013] 359 ITR 268. Earlier also, there were several Tribunal decisions in favour of the assessee. On the other hand, the learned Departmental Representative strongly relied upon the decision of the BASF Aktiengesellchaft v/s DDIT, 293 ITR (AT) 001. However, he admitted that the latest Delhi High Court decision has decided this issue in favour of the assessee. 5. After carefully considering the relevant findings and observations of the learned Commissioner (Appeals) as well as the decision of the Hon'ble Delhi High Court cited supra, we find that the issue of chargeability of rate of tax under the long term capital gain on a transfer of listed shares by non-resident has been decided in favour of the assessee after analyzing the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial and inconsequential. For him, the gain or loss is to be computed with reference to the foreign currency utilized for purchase and foreign currency available to him for repatriation after the sale. From the assessee's view point and objective, he is most concerned with exchange rate fluctuation and his true and actual gain should take into account the exchange rate fluctuation. The second proviso to section 48 is applicable to all others including non-residents, who are not covered by the first proviso and they are entitled to the benefit of cost indexation which neutralises inflation. It is wrong to state that inflation alone contributes and is the determinative factor in exchange rate fluctuation. The first proviso to section 48 ensures that a non-resident, who utilised his foreign currency, is taxed after taking into consideration the fluctuation in exchange rate. The two provisos cannot be equated as granting the same relief or benefit. They operate independently and have different purposes and objectives. The benefits under the first proviso and the second proviso to section 48 are not identical nor do they serve the same purpose. Though it is true that if the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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