TaxTMI 
TaxTMI 
2011 (3) TMI 22
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....nt transferred 50% shares of ORG-IMS to IMS-AG, a company incorporated in Switzerland. After the said transfer, the applicant was left with 50,756 shares of ORG-IMS. The details of acquisition of 50,765 shares of ORG-IMS held by the applicant as per letter dated 25.03.2010 are as under: Date of acquisition Number of shares Cost of acquisition 30 December 2003 3,615 shares Rs.3,61,500 13 February 2004 1,000 shares Rs. 1,00,000 30 September 2006 46,150 shares (issued as bonus) Nil Total 50,765 shares Rs.4,61,500 2. The applicant executed a Share Purchase Agreement (SPA) whereby it sold these 50,765 shares of ORG-IMS to IMS-AG & Interstatistik AG (purchasers) for a consideration of USD 74,08,643. Earlier, in the proposed SPA, the sale consideration was of USD 70,00,000 plus additional payment. However, as per the executed SPA, the clause relating to additional payment was removed and the purchase consideration was revised to USD 74,08,643. Thus, 50765 shares of the Indian company ORG-IMS acquired at a cost of Rs 4,61,500 were sold for a consideration of USD 74,08,643. 3. In this background, the applicant seeks the ruling of this Au....
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....would be taxable in India. The applicant submits that under section 90(2) of the Act, an assessee has an option to be governed by the provision of the Tax Treaty, if they are more beneficial than the provision of the Act. India has entered into a tax Treaty with the Netherlands. The benefits of the Tax Treaty will be available to the applicant as it is a resident of the Netherlands as per Article 4(1) of the tax Treaty. Accordingly, the applicant would be eligible to claim benefit of the tax Treaty, where the same is favourable than the provision of the Act. The applicant submits that transfer of shares of ORG-IMS by the applicant would be governed by Article 13(5) of the Tax Treaty. Any capital gain earned by it would be taxable only in Netherlands. The said capital gain would not be taxable in India, as the shares of ORG-IMS are transferred to the purchasers who are residents of Switzerland. The applicant further submits that as per section 92 of the Act, any income arising from an international transaction has to be computed at the arm's length price. Sections 92 to 92F of the Act are merely machinery sections and would apply only where the transaction entered by the fo....
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....f any property other than that referred to in paragraphs 1,2,3 and 4 shall be taxable only in the State of which the alienator is a resident. However, gains from the alienation of shares issued by a company resident in the other State which shares from part of at least a 10 per cent interest in the capital stock of that company, may be taxed in that other State if the alienation takes place to a resident of that other State. However, such gains shall remain taxable only in the State of which the alienator is a resident if such gains are realized in the course of a corporate organization, re-organization, amalgamation, division or similar transaction, and the buyer or the seller owns at least 10 per cent of the capital of the other. 6. The provisions of paragraph 3 shall not affect the right of each of the States to levy according to its own law a tax on gains from the alienation of the shares or "jouissance" rights in a company, the capital of which is wholly or partly divided into shares and which under the laws of that State is a resident of that State,. Derived by an individual who is resident of the other State and has been a resident of the first-mentioned State in th....
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....evenue has also conceded the applicant's contentions to question Nos.1, 3 and 4. We accordingly answer question Nos.1, 3 and 4 in favour of the applicant. 9. Regarding filing of return of income, the applicant is of the view that as the income is not taxable in India, it is not under any obligation to file the return of income under section 139(1) of the Act. The learned Advocate argued that section 139(1) of the Act is merely a machinery section and would apply only where the transaction entered into by the foreign assessee is liable to be taxed in India. In this connection, reliance is placed on the AAR Rulings in the cases of Venenburg Group B.V., AAR No. 727 of 2006 and reported in 289 ITR 464; Dana Corporation, AAR No.788 of 2008 and reported in 321 ITR 178; Amiantit Intl.Holding Ltd., AAR No.879 of 2009 and reported in 322 ITR 678. It is submitted that in all these Rulings, the Authority took the view that section 139(1) is a machinery provision and would not apply in the absence of liability to tax. The learned Advocate further stated that the very purpose of coming before the AAR would be defeated if the applicant is faced with the hardship of filing of return. 10. In....