Treaty protection for Singapore share-sale gains prevailed, while refund and interest computation was sent back for verification.

Gains from the sale of shares in a Singapore resident company were treated as not taxable in India under the India-Singapore DTAA because the assessee held valid Singapore tax residency certificates, the revenue did not displace the evidence on control and decision-making, and Article 13(5) applied as the residuary rule. Article 13(4B) was held inapplicable since both the transferor and the company were Singapore residents, and section 90(2) prevented the domestic deeming fiction in section 9(1)(i) from overriding the treaty. The refund and consequential interest computation was directed to be verified and recomputed in accordance with law.

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Issues: (i) Whether gains arising from the sale of shares of a Singapore company were taxable in India under the India-Singapore DTAA, and whether the treaty could be denied on the basis of alleged management and control from the USA; (ii) Whether the computation of refund and consequential interest required verification and correction.

Issue (i): Whether gains arising from the sale of shares of a Singapore company were taxable in India under the India-Singapore DTAA, and whether the treaty could be denied on the basis of alleged management and control from the USA.

Analysis: The assessee was found to be a Singapore tax resident holding valid tax residency certificates, and the revenue did not dislodge the evidence showing that the relevant board-level control and decision-making were situated outside the USA allegation. The transaction involved alienation of shares of a company resident in Singapore, not shares of an Indian company or an asset falling within the specific charging paragraphs of Article 13. Paragraph 4B was held inapplicable because both the alienator and the company whose shares were transferred were residents of Singapore. The residuary rule in Article 13(5), read with section 90(2), was treated as governing the capital gains and as overriding the domestic deeming fiction under section 9(1)(i) in the absence of a specific look-through clause in the treaty.

Conclusion: The gains were held not taxable in India under the treaty, and the issue was decided in favour of the assessee.

Issue (ii): Whether the computation of refund and consequential interest required verification and correction.

Analysis: The assessment computation relating to refund already issued and consequential interest was not finally quantified on the record and required verification in accordance with law.

Conclusion: The assessee succeeded on this issue to the extent of a direction for verification and lawful recomputation.

Final Conclusion: The appeal was allowed, with the primary addition deleted on treaty grounds and the ancillary computation issues left for verification in accordance with law.

Ratio Decidendi: In the absence of a specific treaty provision conferring source-state taxing rights, gains from alienation of shares of a company resident in the treaty partner State are taxable only in the State of residence of the alienator, and domestic deeming provisions cannot override that allocation by virtue of section 90(2).

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