TaxTMI 
TaxTMI 
TaxTMI 
2009 (3) TMI 40
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....e applicant over a period of time. The original shares were acquired in US Dollars long back i.e. in 1928. The applicant proposes to sell its equity interest in the Indian Company and for that purpose the applicant has entered into shares sale/purchase agreements with two identified buyers. The proposed transfer of shares will be, as stated, undertaken under a private arrangement and will be 'off market transactions', as permitted by RBI. The applicant has given details of the number and nature of shares proposed to be sold to two identified buyers. 2. On the above facts, the applicant seeks advance ruling from this Authority in respect of the following two questions: (1) Whether the long-term capital gains arising on the proposed sale of shares held in an Indian listed company by Four Star Oil & Gas Company (hereinafter referred to as the "Applicant") will be taxable at the rate of 10 percent as per the proviso to Section 112(1) of the Income Tax Act, 1961. (2) Whether the Applicant can avail the option of substituting Fair Market Value on April, 1, 1981 as the cost of acquisition for the bonus shares allotted to it before April, 1981 as per the provisions of Section 55(2)(b)(i....
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....erpretation to the proviso to section 112(1) would defeat the intention of the legislature. 6. It has also been contended by the Revenue that the decisions of the Authority for Advance Rulings given in favour of the applicant are likely to be contested before the Apex Court and, for the same, approval from the CBDT have already been obtained. In effect, the Revenue takes the stand that the rulings of this Authority in earlier cases i.e. Timken France (supra) and a few other cases need not be followed. 7. The learned counsel for the applicant has, on the other hand, contended that the lesser rate of 10 per cent is applicable to long-term capital gains derived by non-resident foreign companies as well, and the benefit of reduced rate is not to be confined to residents only. The argument, in this regard is, sought to be buttressed by the rulings of this Authority cited supra. 8. 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 a different relief in terms of....
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....of second proviso to section 48" means before giving effect to the 2nd proviso wherever it is applicable, but, the non-applicability of the 2nd proviso will not preclude the applicant to avail the relief of lower rate of tax of 10(ten) percent. This Authority also distinguished the decision of the Mumbai Income Tax Tribunal, as referred to above and differed with their view. Thus, the ruling of this Authority in Timken, France, SAS, squarely applies to the present case. Following that Ruling, the first question is answered in the affirmative i.e. in favour of the applicant. 2nd Question 10. The second question relates to the substitution of fair market value as on 1.4.1981 as the cost of acquisition of the bonus shares as per the provisions of section 55(2)(b)(i) read with section 55(2)(aa)(iiia) of the Act. These bonus shares have been allotted to the applicant before 1st April, 1981. The Revenue is of the view that the cost of the acquisition of the bonus shares, being a capital asset as specified in section 55(2)(aa) of the Act, is to be determined subject to the provisions of sub-clause(i) and (ii) of clause(b) under section 55(2)(b)(i) of the Act. As per Revenue, these bonus....
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....tion to the financial asset allotted to the assessee without any payment and on the basis of holding of any other financial asset, shall be taken to be nil in the case of such assessee; and (ab) In relation to a capital asset, being equity share or shares allotted to a share- holder of a recognized stock exchange in India under a scheme for demutualisation or corporatisation approved by a Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), shall be the cost of acquisition of his original membership of the exchange. Provided that the cost of a capital asset, being trading or clearing rights of the recognized stock exchange acquired by a shareholder who has been allotted equity share or shares under such scheme of demutualisation or corporatisation, shall be deemed to be nil. (b) in relation to any other capital asset,- (i) where the capital asset became the property of the assessee before the 1st day of April, 1981, means the cost of acquisition of the asset to the assessee or the fair market value of the asset on the 1st day of April, 1981, at the option of the assessee; (ii) where the capita....