TMI Blog2018 (2) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... fer, they are to be allowed. The words “in connection with” are of wide import and if such expenses have an intimate connection with the transfer, they have to be allowed u/s 48. In the instant case there is no doubt that the expenses are incurred for effecting the transfer only. Even if it was a mutual decision of the two parties for their convenience, that the shares should be dematerialized and an Escrow account be opened, as contended by the Revenue, this in no way suggests that the expense were not incurred wholly and exclusively in connection with the transfer of shares. During the course of the final hearing, the Revenue has not opposed the Applicant’s contentions on the issue. Hence, the same are to be treated as allowable as a deduction under section 48 of the Act. - Appeal Decided in favour of assessee - A.A.R. No 1200 of 2011 - - - Dated:- 7-2-2018 - Mr. R.S. Shukla, In-charge Chairman And Mr. Ashutosh Chandra, Member (Revenue) For the Applicant : Mr.TarunGulati, Advocate Mr. Manish Rastogi, Advocate For the Department : Mr. G C Srivastava, Advocate Mr. SukhsagerSyal, CA Mr. A.K.Verma, DCIT, DR Mr. D.K. Srivastava, DCIT(IT), Noida RULING ( By As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer. Therefore, all the expenses incurred by the Applicant were for the purposes of transferring the shares from the Applicant to the buyer. 3. On the above facts, the Applicant is seeking a Ruling on the following questions: (i) Whether, on the stated facts and circumstances of the case and in law, the tax payable by the Applicant on the long term capital gains arising on the sale of equity shares of the Hero Honda Motors Limited [now known as Hero MotoCorp Limited] (hereinafter referred to as HHML ), being listed securities, will be 10% (plus surcharge and cess) of the amount of capital gains as per the proviso to section 112(1) of the Act? (ii) Whether, on the stated facts and in the circumstances of the case and in law, the Applicant is eligible to claim deduction for expense incurred by the Applicant in connection with the transfer of shares of HHML, as per provisions of section 48 of the Act? 4. The Applicant submits that it is entitled to the benefit of proviso to Section 112 (1) of the Act although it is not eligible to the benefit of indexation under Second proviso to Section 48 of the Act, and that the applicability of this proviso is not a condition prec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue submitted that the expression before giving effect to the 2nd proviso to section 48 pre- supposes the existence of a case where computation of long-term capital gains could be made in accordance with the formula contained in the 2nd proviso to section 48. Occasion to apply the proviso to section 112(1) does not arise as the 2nd proviso to section 48 is not applicable to non-residents. The 1st and the 2nd proviso to section 48 are mutually exclusive as they provide distinct modes of computation of capital gains to two different sets of persons. The non-resident foreign company cannot claim to have the double benefit of the protection against rupee value fluctuation as well as the indexation. 5.1 It was submitted that the intention of the legislature in introducing the 1st proviso to section 48 is also clear from explanatory notes to the Finance Act 1992 issued vide CBDT s Circular No.636 dated 31.8.1992. It would not be a logical interpretation that legislature s intention could be that while the persons falling under the 2nd proviso have to forego the benefit of indexation to avail the lower rate of 10%, the persons falling under the 1st proviso would be granted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not been done. On the scheme of the provisions and the level playing field sought to be achieved, the natural way of understanding the proviso is to confine its operations to assets not covered by the first proviso to Section 48 and the assets specified in the proviso to Section 112 itself. 6. We have considered the submissions of both the Applicant and the Revenue. 6.1 It is seen from the submissions of the Revenue that, though it has raised objections to the arguments taken by the Applicant in support of its case for a lower rate of tax, the Revenue acceptsin its written submissions as well as during the course of these proceedings, that this issue was covered by the case of Cairn UK Holdings LimitedVs. DIT (Supra), as mentioned in the submissions of the Applicant. This was a case in which this Authority had, accepting Revenue s plea, ruled that the proviso to section 112(1) was not applicable, and the applicant could not avail the lower rate of 10% on the capital gains derived by it. On a writ filed by the applicant against the order of thisAuthority before Hon ble High Court of Delhi, the ruling was reversed and it decided the matter in favour of applicant and held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Timkin France SAS (2007), 249 ITR 513 (AAR), where this Authority had agreed with the contention of the Applicant. In those proceedings the CBDT circular no. 636, dated 31.8.1992 was also considered, wherein the provisions of the Finance Act had been clarified. 6.3 In the instant case also the applicant is contesting that the tax payable on the long term capital gains arising on the sale of equity shares of Hero Honda Motors Ltd. will be 10% of the amount of capital gains as per the proviso to Section 112(1) of the Act. In short, that the benefit of the proviso of Section 112(1) of the Act is applicable in the case of non-resident as well,in spite of section 48. This issue is identical to the above case and the decision in Cairn UK is squarely applicable. Following the above decision we conclude that the benefit under Section 112(1) of the Act could not be denied to the Applicant. We have been following this line in several cases and more recently in the case of Pan-Asia iGate Solutions, Mauritius, In Re 2014 SCC Online AAR 13. 7. On the second question, the Applicant has submitted that the expenditure incurred by it on computerization of share certificates and opening of Esc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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