TaxTMI 
TaxTMI 
2008 (2) TMI 24
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.... R U L I N G (By Mr. Rao Ranvijay Singh) The applicant, a resident Indian Co., is engaged in the business of plantation and manufacture of tea. The applicant submitted an application under section 245Q(1) of the Income-tax Act, 1961 (in short the Act) in the prescribed Form 34D for seeking advance ruling in relation to the determination of tax liability of a non-resident i.e. Moron Holdings, PLC, U.K pertaining to a transaction undertaken by the applicant with such non-resident. 2. As the facts stand out, the applicant purchased 15,20,000(Fifteen lakh twenty thousand) equity shares of Moron Tea Company (India) Ltd. from Moron Holdings PLC, U.K. a non-resident company as per the sale & purchase agreement (in short SPA) ex....
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....Whether on the stated facts and in law, the long term capital gain arisen to Morgan Holdings PLC on sale of originally acquired shares and bonus shares of Moran Tea Company (India) Limited are to be computed by applying Section 48 of the Income-tax Act without having regard to either the first or the second proviso to the Section?" 4. The application filed by the applicant seeking ruling on the aforesaid questions was admitted by the Authority under section 245R(2) of the Act as per an Order dated 4.12.2007 and the case was posted for hearing on merits. 5. Mr.V.S.Wahi, Advocate, appeared on behalf of the applicant and was heard. Nobody appeared on behalf of the revenue. However, comments on the application were furnished on behalf of the revenue. 6. Arguing the case, the learned counsel of the applicant has submitted that the Moron Holdings PLC U.K.(Seller), satisfies all the conditions requisite to attract the proviso to Section 112(1) of Act and therefore the tax on long-term capital gains arising on the sale of original sh....
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.... We have addressed ourselves carefully to the rival submissions made and are of the considered opinion that on almost similar facts, the case of TIMKEN FRANCE (Supra) was examined by this Authority at length. This Authority took the view that the benefit of the proviso to section 112(1) of the Act could not be denied to non-residents/foreign companies even if they are entitled to another relief in terms of the proviso to section 48 of the Act. The Authority also held that the proviso to section 112(1) of the Act was a special provision in relation to transfer of certain long-term capital assets viz listed securities, units etc. and there was no warrant to limit the 10 per cent effective rate provided therein as against the normal rate of 20 per cent only to the three categories of resident assesses specified in clause (a), (b) and (d). It may not be out of place to give the following extract from the Head Note of the ruling in the case of Timken France which is as under:- "In plain and peremptory words, the proviso to section 112(1) limits the rate of tax on long-term capital gains from the transfer of listed securities to 10 p....
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....We find no force in this contention. Sub-clause(ii) of clause (b) of Section 245N refers to a resident applicant who has entered into a transaction with a non-resident. In relation to the tax liability of such non-resident arising out of the such transaction, the resident applicant can very well file the application. It stands to reason that a resident applicant who is directly concerned with the issue of tax deduction at source in respect of payments made to the non-resident, is specified as one of the eligible applicants. 13. Ruling Therefore, in view of the discussion hereinabove, we answer the questions raised in the following manner:- Que.No.1 is answered by holding that the tax payable on a long-term capital gains arisen to Moron Holdings PLC on the sale of originally acquired shares of Moron Tea Company (India) Ltd. will be @ 10% in consonance with the proviso to section 112(1) of the Act. In other words, the question is answered in favour of the applicant. Que.No.2 is also answered in favour of the applicant by holding that even in respect of sa....
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....p; Dated 28th February 2008 (A) This copy is certified to be a true copy of the advance ruling and is sent to: • The applicant. • The Commissioner of Income-tax-III, Kolkata. • The Joint Secretary (FT&TR-I), M/Finance, CBDT, Bhikaji Cama Place, New Delhi. • The Joint Secretary (FT&TR-II), M/Finance, CBDT, Bhikaji Cama Place, New Delhi • Guard file.  ....