AI Drafter 
TaxTMI 
TaxTMI 
2007 (11) TMI 256
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.... of the share holders: a) Srinath Alamela 17500 Shares of Rs.10 each b) Jeff Slosar 17500 Shares of Rs. 10 each c) Issa Elkhoury 17500 Shares of Rs. 10 each d) A.S.Arun Kumar 150 Shares of Rs. 10 each e) Vasantha Srinivasan 150 Shares of Rs.10 each 4. In fact, the first three shareholders are non-residents and the remaining shareholders are resident Indians. It has further emerged that one shareholder Mr.Jeff Slosar, a USA resident, entered into an agreement with the applicant, M/s. Triniti Corporation, USA, on 13.9.2006, to transfer his shares in a phased manner. To be more eloquent, 25% of the shares, held by Mr.Jeff Slosar have been transferred on 1.11.2006 and the remaining shares are to be transferred in 44 (forty four) equal monthly instalments beginning from March'07. 5. Placed in the above factual matrix, the applicant, M/s. Triniti Corporation U.S.A., the purchaser of the shares from Mr.Jeff Slosar, has sought ruling, on the following questions: a) Whether Mr. Jeff Slosar, US Resident, transferor....
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.... to the applicant. According to Revenue, the capital gains did arise in the hands of Mr.Slosar and has to be assessed in the hands of M/s.T.A.S.L. as an agent for the transferor i.e. Jeff Slosar. 9. Countering the comments of the Revenue, the applicant's representative has, in his written arguments dated 24.5.2007, emphasized the fact that M/s. T.A.S.L., Hyderabad can't be regarded as an agent of Mr.Jeff Slosar and the capital gains tax is also not chargeable under section 9(1) of the Act, as the transfer of the shares had taken place outside India and the transaction was between two non-residents. 10.When the case was taken up for hearing on 28.5.2007, certain clarifications were sought from the applicant's Authorised Representative, Shri Anantha Padmanabhan and he sought time to consult and to make further submissions on the points raised. 11. At the further hearing, Shri K.C. Devdas, C.A., appeared on behalf of the applicant. As is evident from the recording of the proceedings on that date (26.7.2007), the applicant's Authorised Representative, argued for the legal position that in terms of the 'inclusive provision' as contained in section 163(1) of the Act,....
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....tal gains arising on the transfer of shares by Jeff Slosar a non-resident to Triniti Corporation USA in respect of shares held in Triniti Advanced Software Labs (P) Ltd., a company Registered in India is Taxable and the Applicant could be held as an Agent under the inclusive definition contained in Section 163(1) of the I.T.Act, 1961." 14. Further, the authorized representative has, as per the revised Annexure II to Form No.34C, required advance rulings from the Authority in regard to the following two questions only: "1. Whether on the facts and circumstances of the case the transfer of shares by Jeff Slosar, a US citizen and a US resident, to Triniti Corporation, a US company and both being non-residents is liable for capital gains tax in India in respect of shares in Triniti Advance Software Labs (P) Ltd - An Indian Company. 2. If the answer to the first question is in the affirmative, whether the Applicant could be regarded as an Agent within the meaning of the inclusive definition contained in section 163(1) of the I.T.Act, 1961 in respect of the liability to Capital Gains Tax." 15. Pursuant to the receipt of the written submissions and the Commissioner's further c....
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....ting provision of the Act, the capital gains becomes chargeable on an alternative basis viz. accrual or arisal basis in India, as the capital asset is or happens to be situated in India. 21. The insertion of the clause, i.e. the situs of the capital asset being in India, has been ushered in the statute to take care of the situations like transactions between two non-residents taking place outside India. In simple words, even if the transaction relating to a capital assets takes place outside India but if the capital asset is situated in India, the profits or gains thereon, is accruing or arising in India in consonance with the provisions of section 9(1)(i) of the Act and is thus assessable under the head 'capital gains' under the relevant provisions of Income Tax Act. 22. As such, inescapable inference is that the income under the head Capital Gains is deemed to have accrued or arisen in the hands of the non-resident transferor i.e. Mr.Jeff Slosar. 23. Further, it has conclusively been held that income dealt with in each clause of section 9(1) of the Act is distinct and independent of the other, and the requirement to bring income within each clause, are ....
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.... the non-resident, including a person who is treated as an agent under section 163; (ii) in respect of the income of a minor, lunatic or idiot, the guardian or manager who is entitled to receive or is in receipt of such income on behalf of such minor, lunatic or idiot; (iii) in respect of income which the Court of Wards, the Administrator-General, the Official Trustee or any receiver or manager (including any person, whatever his designation, who in fact manages property on behalf of another) appointed by or under any order of a court, receives or is entitled to receive, on behalf or for the benefit of any person, such Court of Wards, Administrator-General, Official Trustee, receiver or manager; (iv) in respect of income which a trustee appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise [including any wakf deed which is valid under the Mussalman Wakf Validating Act, 1913 (6 of 1913),] receives or is entitled to receive on behalf or for the benefit of any person, such trustee or trustees; (v) in respect of income which a trustee appointed under an oral trust receives or is entitled to receive on behalf or for the b....