TMI Blog2016 (2) TMI 495X X X X Extracts X X X X X X X X Extracts X X X X ..... route to the non-resident shareholders. In view of the above, we are of the view that the Ld CIT(A) was justified in upholding the view taken by the AO on this issue. Accordingly we uphold his order on this issue. - Decided against assessee Entitlement to concessional rate of tax provided in the second proviso to sec. 112 - Held that:- The only contested in the appeal filed by the revenue relates to the rate at which the capital gains is taxable. The Ld A.R submitted that this issue is covered in favour of the assessee by the decision rendered by Hon‟ble Delhi High Court in the case of Cairn U.K. Holdings Ltd (2013 (10) TMI 430 - DELHI HIGH COURT ), which was followed by the co-ordinate bench of Tribunal in the case of ADIT Vs. Abbott Capital India Ltd ( 2014 (5) TMI 316 - ITAT MUMBAI ). Hence, we are of the view that the Ld CIT(A) was justified in holding that the assessee is entitled to concessional rate of tax @ 10% on the impugned Capital gains.- Decided against revenue - I.T.A. No.4688/Mum/2010, I.T.A. No.5025/Mum/2010 - - - Dated:- 13-1-2016 - SHRI B.R.BASKARAN, AM AND PAWAN SINGH, JM For The Assessee : Shri Yogesh Thar For The Respondent : Shri Jasbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, gains from the alienation of shares issued by a company resident in other state of which, shares form part of at least 10 percent interest in the capital stock of the company may be taxed in that other State if the alienation takes place to a resident of that other state. However, such gains shall remain taxable only in the State of which the alienator is a resident if such gains are realized in the course of a corporate organization, reorganization, amalgamation, division or similar transaction and the buyer or the seller owns at least 10 percent of the capital of the other. While the tax authorities have held that the condition highlighted by us in bold letters shall be applicable to this transaction, the assessee is contending that the condition highlighted by us by under scoring shall be applicable. 7. The AO has interpreted the provisions highlighted in bold letters as under:- .the gains arising from the alienation of shares issued by a company resident in other state (Century Enka Ltd, in the case under consideration) of which, shares form part of at least 10 percent interest in the capital stock of that company (30% in the case under consideration) may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on account of buy back scheme u/s 77A of the Companies Act, 1956. Thus there was transfer of shares. The appellant has transferred its share to CE and in lieu of that reconsideration. It was a scheme only for non resident share holders of the CE. The objective of scheme was to enable the assessee to transfer its share holding. Therefore, the intention of the buy back is more important. Therefore, the facts of Vania Silk Mills Pvt. Ltd. (Supra) are not applicable to present case. 1.3.3 It is further noticed that the capital gains were not realized by the assessee in the case of corporate organization, reorganization, amalgamation or division of the Century Enka Ltd. as contemplated by the treaty. The assessee has tendered shares of CE under buy back Scheme of 77A of Companies Act and CE bought back 8593109 shares held by the assessee. The CE has cancelled the shares is nothing to do with transfer even though it led to a reduction of CE's paid-Up shares capital. It is also noticed that prior to such buy back, the assessee held 38.24% of the total paid-up shares capital of CE and the Indian Promoters, i.e. B.K. Birla Group held 13.91% of such capital. The assessee was one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In that reference, the reference of reorganisation word was made. However, in the case of appellant, it is the case of alienation of shares under the buy back scheme. Hence, capital gain earned on such transfer is taxable as per Article 13(5) of the DTAA. I, therefore, of the opinion that the AO was right in taxing the capital gain arising on account of buy back of shares of CE Group. I, therefore, uphold the action of the AO on the reasons advanced by him. Accordingly, the findings of the AO are hereby upheld. 9. The Ld A.R submitted that the tax authorities are not justified in rejecting the claim of the assessee on the ground that the assessee did not pay tax on the same in Netherlands. He submitted that taxability in one country is not a sine qua non for availing relief under the treaty in the other country. In this regard, he placed reliance on the decision of Hon‟ble Bombay High Court rendered in the case of DIT Vs. ICICI Bank Ltd (370 ITR 17)(Bom) and also upon the decision rendered by the Mumbai bench of Tribunal in the case of Asst. DIT Vs. Green Emirate Shipping Travels (2006)(100 ITD 203). In view of the decisions relied upon by the assessee, we agree with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a part of shares held by it to the company, M/s Century Enka Ltd and accordingly earned Capital gain. Subsequently, the above said company has reduced its paid up capital and reserves by cancelling the shares bought by it. As per the definition given above, there should be a major change in the financial structure and the same should result in alteration in the rights and interest of security holders. However, in the instant case, there is reduction in share capital and in our view, the same cannot be considered as a major change in financial structure. Further, the security holders continue to enjoy the same type of rights and interests even after the reduction of share capital and hence there is no alteration in the rights and interests of security holders. Accordingly, we are of the view that arrangement entered by the assessee in selling part of its share holding to the company in the scheme of buy back does not fall under the definition of reorganization given in the dictionary cited above. 13. The Ld A.R also placed reliance on a study material titled as Strategic Financial Management issued by the Board of Studies of the Institute of Chartered Accountants of India, es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia Vs. Sterlite Industries (India) Ltd (Order dated 15-07-2002 given in Appeal Lodging No. 520 of 2002 in Company petition No.203 of 2002 in Company Application No. 18 of 2002 other)(113 Company cases 273) rendered under the Companies Act. We have gone through the said decision and we notice that the issue considered therein was whether the Court can sanction buy back of its shares under a scheme of arrangement prescribed in sec. 391 of the Companies Act, when a specific section 77A is available for that purpose. Thus, we notice that the emphasis was given by the Hon‟ble High Court with regard to the scope of sec. 391 of the Act and it was not a case of finding out the meaning of the term reorganization . Hence, we are of the view that the above said decision may not help to support the contentions of the assessee. 15. From the decision taken by Ld CIT(A), it can be noticed that the Ld CIT(A) has observed that the scheme of arrangement framed by M/s Century Enka Ltd was only with the purpose of providing an exit route to the non-resident share holders. Thus, the objective of the scheme was to enable the assessee to transfer its shareholding. Further the Ld CIT(A) has ob ..... X X X X Extracts X X X X X X X X Extracts X X X X
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