TaxTMI 
TaxTMI 
2011 (11) TMI 15
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....ed subsequently into the present one, the change of name being recognized by the registrar of companies on 13.9.2004. The applicant is a non-resident under the provisions of the Income-tax Act and is a tax resident of Mauritius as contemplated by Article 4 of the India - Mauritius Tax Treaty. The applicant held equity shares constituting 50% of the equity share capital of Ardex Endura (India) Pvt. Ltd. Ardex India is an Indian company engaged in the business of manufacturing flooring adhesives. The applicant held 6,500,000 equity shares in Ardex Endura India and the amount of investment was Rs.65,000,000. The applicant proposes to sell its entire stake constituting 50% of the equity share capital of Ardex India, to another non-resident grou....
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....nce was to hold the shares of the Indian company on behalf of the parent company, Ardex Holdings UK Ltd. The source of all the funds of the applicant was the holding company. It was further put forward that the decision for selling the shares of the Indian company held by the applicant, was taken by the holding company. The applicant as a subsidiary, was expected to follow that decision in full. Reason for the creation of the applicant was that the holding company wanted to take advantage of the Indo-Mauritius Treaty offering exemption to capital gains arising from the proposed transfer. The applicant was created as an entity for this very purpose. In the circumstances, the veil had to be pierced. On so piercing the veil, it was clear that ....
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....of the applicant company. The allegation to the contrary was not correct. It was the applicant company that had made the investment in Ardex Endura (India) Pvt. Ltd and the investment was not made by the holding company. The applicant owns the shares of Ardex Endura (India) Pvt. Ltd., the applicant is the share holder therein. This was evident from the share certificates being produced. Investment in India was made legally and following the relevant procedure. The subsidiary was a separate legal entity and the beneficial ownership of the shares also vested in the subsidiary. There was therefore no justification in piercing the veil as contended by the Revenue. The tax treaty that had to be applied was the one between India and Mauritius and....
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....Mauritius from the alienation of shares would be taxable only in Mauritius and not in India in the absence of the applicant having a Permanent Establishment in India. The applicant had no place of business or an activity in India. Therefore, the gains that may arise to the applicant, was liable to be taxed in Mauritius and not in India. The ruling in E-trade Mauritius Ltd. (324 ITR 1) rendered by this authority is relied on. 6. It is true that the funds for acquisition of shares in the Indian company was provided by the principal, a company incorporated in the United Kingdom. The shares in the Indian company were first acquired in the year 2000. Subsequently further shares were acquired in the years 2001, 2002 & 2009. These shares a....
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.... sale of shares by the applicant to the German entity. We may be in a position to take note of the steps taken to bring about the present transaction to ascertain whether there was a scheme devised for avoidance of tax. But in a case of this nature, where the shares were held for a considerable length of time, before they are sought to be sold by way of a regular commercial transaction, it may not be possible to go into an enquiry on who made the original investment for the acquisition of the shares and the consequences arising there from. As we have stated, the contention of the Revenue is that it would be the treaty between the India and the UK that would apply and not the treaty between India and Mauritius in view of the beneficial owner....