2024 (7) TMI 1428 - AT - Income Tax

Mauritius company wins exemption on long term capital gains from share sale under Article 13(4) India-Mauritius DTAA

ITAT Delhi held that long term capital gains from sale of shares by a Mauritius-registered assessee were exempt from tax under Article 13(4) of ... Addition on account of LTCG on sale of shares u/s 112 - assessee is registered in Mauritius and is holding tax residency certificate of Mauritius - assessee had claimed long term capital gains arising from sale of shares as exempt from tax in light of Article 13(4) of India-Mauritius DTAA - LEI Singapore Holdings Pte. Ltd. deducted tax at source on the payments made to the assessee. Now, the assessee is seeking refund of withholding tax deducted on the aforesaid transaction. HELD THAT:- We find that similar transaction of transfer of shares of Pearl Retail Solutions Pvt. Ltd. was undertaken by the assessee in AY 2018-19. The assessee claimed refund of TDS deducted on sale of shares. The matter travelled to the Tribunal, the Coordinate Bench after considering the facts of the case, provisions of Article 13(4) of the India-Mauritius DTAA and placing reliance on the decision rendered in the case of Bid Services Division (Mauritius) Ltd. vs. Authority of Advance Ruling (Income Tax) [2023 (3) TMI 563 - BOMBAY HIGH COURT] and the decision of Vodafone International Holding BV vs. UOI [2012 (1) TMI 52 - SUPREME COURT] held that long term capital gain on sale of shares in the case of assessee is not liable to be taxed in India. Decided in favour of assessee. Issues:Assessment of long term capital gains on sale of shares under section 112 of the Income Tax Act, 1961. Refund of TDS deducted on sale of shares under India-Mauritius DTAA.Analysis:The appeal concerns the assessment order dated 27.04.2023, challenging the addition of Rs. 39,95,46,592/- as long term capital gains on the sale of shares for the assessment year 2020-21. The assessee, a Mauritius-based company, claimed refund of TDS deducted by LEI Singapore Holdings Pte. Ltd. on the sale of shares of an Indian company, Pearl Retail Solutions Pvt. Ltd. The department rejected the refund claim, leading to the present appeal.The assessee argued that the issue in appeal is identical to the one considered in the preceding year, AY 2018-19. The Tribunal had previously ruled in the assessee's favor, holding that long term capital gains on the sale of shares are not taxable in India under the India-Mauritius DTAA. The department contended that a similar issue is pending before the Supreme Court in the case of Blacks Stone Capital Partners (Singapore) VI FDI Three Pte. Ltd. However, the Coordinate Bench had already considered the issue in the assessee's case for the preceding assessment year.After hearing both parties and examining the facts, the Tribunal found that the assessee's case was similar to the one decided in the preceding year. Citing the decision in Bid Services Division (Mauritius) Ltd. vs. Authority of Advance Ruling, the Tribunal held that the long term capital gains on the sale of shares by the assessee were not taxable in India under the India-Mauritius DTAA. The Tribunal emphasized the grandfathering of investments made before 01.04.2017 and allowed the assessee's appeal based on the precedent set in the earlier year.The Tribunal noted that the factual matrix of the case in the impugned assessment year was identical to that of the preceding year, which was not disputed by the department. Consequently, the Tribunal allowed the appeal of the assessee for parity of reasons. The remaining grounds of appeal were considered argumentative and in support of the main issue, requiring no separate adjudication.In conclusion, the Tribunal allowed the appeal of the assessee, ruling in favor of the exemption of long term capital gains on the sale of shares under the India-Mauritius DTAA for the assessment year 2020-21.