2016 (11) TMI 1735 - HC - Income Tax

Japanese Company Wins Tax Appeal for Lower Rate on Capital Gains

The Commissioner of Income Tax-2 Versus Mitsubishi Motors Corporation

The Commissioner of Income Tax-2 Versus Mitsubishi Motors Corporation - TMI Issues:- Interpretation of proviso to Section 112(1) of the Income Tax Act, 1961- Applicability of lower tax rate @ 10%- Benefit from foreign exchange fluctuations affecting tax liabilityAnalysis:The judgment dealt with the interpretation of the proviso to Section 112(1) of the Income Tax Act, 1961. The appellant, a company incorporated in Japan, engaged in various business activities, including the sale of shares resulting in long-term capital gains. The Assessing Officer (AO) imposed a higher tax rate of 20% instead of the lower rate of 10% claimed by the appellant under the proviso to Section 112(1). The Dispute Resolution Panel (DRP) and the Income Tax Appellate Tribunal (ITAT) relied on a previous court ruling and allowed the lower tax rate.The main contention raised was whether the appellant, having benefited from foreign exchange fluctuations, was eligible for the lower tax rate under the proviso to Section 112(1). The appellant argued that the benefit from foreign exchange fluctuations should not disqualify them from availing the lower tax rate. The ITAT's decision was based on a previous court ruling, which the High Court examined in detail.The High Court analyzed the interaction between Section 48 and Section 112(1) of the Act. It noted that despite deriving benefits from foreign exchange fluctuations, the appellant could still claim the lower tax rate under Section 112(1). The Court upheld the ITAT's decision, citing the precedent set by a previous ruling in a similar case. As there was no disagreement with the impugned order and no new question of law arose, the appeal was dismissed.