Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2013 (8) TMI 1113

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ed capital gain from sale of mutual funds units both long term and short term as per details given below:- (i) Long term capital gain (with indexation) ₹ 1,80,31,475/- (ii) Long term capital gain (without indexation) ₹ 11,95,52,457/- (iii) Short term capital gain ₹ 75,44,598/- 3. The assessee being a citizen of Switzerland claimed benefit of Double Tax Avoidance Agreement (DTAA) between India and Switzerland. The assessee filed tax residence certificate from Swiss authorities. It was submitted that as per Article 13(6) of the tax treaty between India and Switzerland, the capital gain of sale of units of mutual funds was taxable only in Switzerland and not in India. The said Article is reproduced below as ready re .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ding the provision of sub-paragraph (a), India may tax gains from the alienation of shares in a company which is a resident in India. 6. Gains from the alienation of any property other than that referred to in paragraphs 1,2,3, 4 and 5 shall be taxable only in the Contracting State of which the alienation is a resident. 4. The AO however asked the assessee to explain as to why the capital gains should not be taxed in India under the provisions of Article 13(5) of the Indo-Swiss tax treaty. The assessee submitted that Article 13(5) dealt with capital gain arising on alienation of shares whereas the capital gains in case of the assessee had arisen on account of sale of mutual fund units. It was also submitted that terms "company" .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... the decision of AO and submitted before CIT(A) that there was clear distinction between shares issued by Indian companies and units issued by mutual funds. The shares held by a shareholder entitles him for voting rights in the company whereas the unit holder only hold the units of mutual fund and are not entitled to voting rights in the companies in which the investments had been made by the mutual fund. The Income Tax Act has also given different treatment to shares and units of mutual funds as dividend from shares was covered u/s 10(34) and in respect of mutual fund section 10(35) was applicable. The provisions under the Act relevant to tax on distributed income in case of shares and in case of mutual funds were also provided under differ .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... Judgment of Hon'ble Supreme Court in case of Apollo Tyres Ltd. (supra). It was thus pleaded that the order of CIT(A) should be upheld. The learned DR on the other hand supported the order of AO and placed reliance on the finding given in the assessment order. 7. We have perused the records and considered the rival contentions carefully. The dispute is regarding taxability of capital gain arising on account of sale of mutual fund units in India by the assessee, who is a non resident based in Switzerland. The assessee has claimed the benefit of Indo-Swiss tax treaty and argued that the capital gain is not taxable in India under the provisions of Article 13(6) of the Indo-Swiss tax treaty. The said Article has been reproduced in para 3 of .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... applied for the purpose for which it had been specifically created. It was confined only to deeming UTI a company and deeming the income from units as dividend. There were no specific provisions for deeming the units as shares. Hon'ble Supreme Court, therefore, upheld the view that units of UTI are not shares of companies. Though the said judgment had been rendered in the context of Explanation to section 73, therefore is also applicable to the present situation which involves the interpretation as to whether units can be considered as shares. In our view in the absence of any specific provision under the Act to deem the unit as shares, it could not be considered as shares of companies and, therefore, the provisions of Article 13 (5) (b .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates