AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 598
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....w and facts of the case. 2. The learned Commissioner of Income Tax (Appeals)-II Kochi erred in holding that the units of equity oriented Mutual Funds and equity shares cannot be held to be the same. 3. The learned Commissioner of Income Tax (Appeals)-II Kochi ought to have considered the fact that the underlying instrument of any equity oriented Mutual Fund is nothing but a share and hence the gains arising from the sale of the underlying instrument, being the equity share results in Capital Gains. 4. The learned Commissioner of Income Tax (Appeals)-II Kochi erred in holding that as per the provisions of the India-UAE Double Taxation Avoidance Agreement the gain can be taxed only in the country of residence which ....
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....143(3) of the I.T.Act vide order dated 30.03.2015. The Assessing Officer held that the underlying instrument of any equity oriented mutual funds is nothing but a `share', and therefore, as per Article 13(4) of the Treaty, STCG would be taxable in India. Accordingly, he added a sum of Rs. 1,34,99,407. 4. Aggrieved by the above said addition under the short term capital gains, the assessee preferred an appeal to the first appellate authority. The assessee raised various contentions before the first appellate authority and the same was reproduced at pages 6 to 10 of the impugned order (portion of para 4.3 of the CIT(A) order). The CIT(A) decided the issue in favour of the assessee by holding that the short term capital gains derived by the ....
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....s per section 5(2) r.w.s. 9(1)(i) of the I.T.Act, transfer of a capital asset situated in India shall be deemed to accrue or arise in India. The income from transfer of units of an equity-oriented mutual funds situated in India is deemed to accrue or arrive in India and therefore is taxable in India even in the case of a non-resident. However, taxation in the case of non-resident is subject to the provisions of the relevant Treaty between India and the State of residency of the assessee. In the instant case, the provisions of India- UAE Treaty would be applicable. Section 90(2) of the I.T.Act states that the provisions of the Treaty shall apply to the extent they are more beneficial to the assessee as compared to the corresponding provision....
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....tate. 4. Gains from the alienation of shares other than those mentioned in paragraph 3 in a company which is a resident of a Contracting State may be taxed in that State. 5. Gains from the alienation of any property other than that referred to in paragraphs 1, 2, 3 and 4 above shall be taxable only in the Contracting State of which the alienator is a resident." (Emphasis supplied] 6.1 As per Article 13(5) of the Tax Treaty, income arising to a resident of UAE from transfer of property other than shares in an Indian company, are liable to tax only in UAE. On the other hand, Article 13(4) of the Tax Treaty provides that income arising to a resident of UAE from transfer of shares in an Indian company other than th....
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....ill not qualify as "shares" for the purpose of Companies Act, 2013. Further, under the Securities Contract (Regulation) Act, 1956, a security is defined to include inter alia - (a) shares, scrips, stocks, bonds, debentures, debenture stock or other body corporate; and (b) units or any other such instrument issued to the investors under any mutual fund scheme. 6.3 From the above definition of "securities", it is clear that "shares" and "units of a mutual fund" are two separate types of securities. Applying the above meaning to the provisions of the tax treaty, the gains arising from transfer of units of mutual funds should not get covered within the ambit of Article 13(4) of the tax treaty, and should consequently be cov....