TMI Blog2020 (3) TMI 1325X X X X Extracts X X X X X X X X Extracts X X X X ..... eca Corporation India Private Limited (STCIPL). STCIPL is the wholly owned subsidiary of Global Symphony Technology Group Private Limited, Mauritius. The ultimate holding company of the Indian entity is STC(USA), whose shares are transacted. It is a fact that during 2012 to 2016, the word substantially appearing in Explanation 5 to section 9(1)(i) of the Income-tax Act was not defined in the Act and it was subject matter of scrutiny of the courts in number of cases, i. e., DIT (International Tax) v. Copal Research Ltd. [ 2014 (8) TMI 606 - DELHI HIGH COURT] , GEA Refrigeration Technologies GmbH [ 2018 (1) TMI 945 - AUTHORITY FOR ADVANCE RULINGS, NEW DELHI] and Banca Sella S.P.A., In re [ 2016 (9) TMI 163 - AUTHORITY FOR ADVANCE RULINGS NEW DELHI] and it was uniformly held that substantially will mean at least 50 per cent. This position was also clarified by Explanation 6 which was brought in to the statute after recommendation of Expert Committee under Dr. Shome on this issue was accepted by Government and Circular No. 19 of 2015, dated November 11, 2015 affirmed this position. AR has averred that STC's Indian assets are less than 31 per cent. of its world assets, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mphony Technology Private Limited, Mauritius (SSC Mauritius), which in turn is a wholly owned subsidiary of STSI. STCIPL is a limited risk captive software development unit of STSI and is compensated on a cost plus appropriate mark up for the services rendered. 4. During the financial year 2014-15 STCIPL has entered into share purchase agreement to acquire 99.63 per cent. of the shares of Aditi Technologies Private Limited (Aditi) an Indian company from its existing shareholders. STCIPL has received an in-principle approval from the Reserve Bank of India for the said acquisition. As of the date hereof STCIPL has already acquired approximately 76 per cent. total share capital of Aditi and acquisition of the balance (representing approximately 24 per cent. of the total share capital of Aditi) shall be completed once the requisite regulatory approvals are obtained. These approvals are expected in the near future. For the purposes of this application Aditi may be considered as a wholly owned subsidiary of STCIPL. 5. STC, Harman International Industries Incorporated (hereinafter referred to as the buyer ), Sabita Sub Incorporated, buyer's wholly owned sub-sidiary (hereinafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India : Explanation 5.-For the removal of doubts, it is hereby clarified that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India : The following Explanations 6 and 7 shall be inserted after Explanation 5 in clause (i) of sub-section (1) of section 9 by the Finance Act, 2015, with effect from April 1, 2016 : Explanation 6.-For the purposes of this clause, it is hereby declared that- (a) the share or interest, referred to in Explanation 5, shall be deemed to derive its value substantially from the assets (whether tangible or intangible) located in India, if, on the specified date, the value of such assets- (i) exceeds the amount of ten crore rupees ; and (ii) represents at least fifty per cent. of the value of all the assets owned by the company or entity, as the case may be ; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged by the Revenue. 13. The applicant submits that, however, the matter has been overtaken by the recent ruling of this hon'ble authority in the case of GEA Refrigeration Technologies GmbH, In re [2018] 401 ITR 115 (AAR) (AAR No. 1232 of 2012), which squarely covers the present case in favour of the applicant. GEA Refrigeration was a case where the shares of a foreign company were transferred in 2010, and the very same issue arose, viz., whether the transfer gave rise to a capital gain taxable in India. On the unchallenged assumption that rule 11UB was applicable, the Rule was applied and it was found that as the value of the Indian assets was far less than 50 per cent. of the global assets of the company whose shares had been transferred, it was held by this hon'ble Authority for Advance Rulings that the said share transfer did not give rise to a capital gain taxable in India under section 9(1)(i). 14. The learned authorised representative has mentioned that once it is held that the said transfer of shares is not taxable in India, the provisions of section 195 of the Act would not apply and therefore the buyer should not be required to withhold any taxes while makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resence in India in the form of a subsidiary, M/s. Symphony Teleca Corporation India Private Limited (STCIPL). STCIPL is the wholly owned subsidiary of Global Symphony Technology Group Private Limited, Mauritius. The ultimate holding company of the Indian entity is STC(USA), whose shares are transacted. 19. It is a fact that during 2012 to 2016, the word substantially appearing in Explanation 5 to section 9(1)(i) of the Income-tax Act was not defined in the Act and it was subject matter of scrutiny of the courts in number of cases, i. e., DIT (International Tax) v. Copal Research Ltd. (supra), GEA Refrigeration Technologies GmbH (supra) and Banca Sella S.P.A., In re [2016] 387 ITR 358 (AAR) and it was uniformly held that substantially will mean at least 50 per cent. This position was also clarified by Explanation 6 which was brought in to the statute after recommendation of Expert Committee under Dr. Shome on this issue was accepted by Government and Circular No. 19 of 2015, dated November 11, 2015 affirmed this position. 20. Further the language of Explanation 6 begins with words for the purposes of this clause it is hereby declared In Justice G P. Singh's (Sixth Ed ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
