2009 (7) TMI 32

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... by it in the said company constituted 26.55% of the entire capital of Zensar and such shares were held for more than 12 months.  These shares were listed on the Bombay Stock Exchange and the National Stock Exchange. On 4th July, 2007, the applicant sold its entire shareholding to an Indian company, namely, Jubilee Investments and Industries Limited (for short "Jubilee") and a Cyprus company, namely, Pedriano Investments Ltd. (for short "Pedriano")  for a consideration of Rs. 195/- per share. A copy of the Share Purchase Agreement dated 1.3.2007 has been annexed to the application. 2. It may be submitted at this juncture that the name of Pedriano has not figure in the Share Purchase Agreement. The applicant clarifies that the Pe....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....pping and they can be dealt with together. 3. The answer to the questions calls for interpretation of the first proviso to section 112(1) of the Income-tax Act, 1961 (Act). The contention of the applicant is that the income from capital gain arising from the transfer of shares answering the description of listed securities held for more than 12 months is liable to be taxed at 10% irrespective of the non-applicability of the second proviso to section 48 (which provides for the benefit of indexation). It is submitted that the proviso to section 112(1) applies to both residents and non-residents as the proviso does not make any distinction between these two categories of assessees. In other words, the non-resident foreign company is not disent....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....xx xx xx xx xx xx xx xx [Provided that where the tax payable in respect of any income arising from the transfer of a long-term capital asset, being listed securities or unit or zero coupon bond, exceeds ten per cent of the amount of capital gains before giving effect to the provisions of the second proviso to section 48, then, such excess shall be ignored for the purpose of computing the tax payable by the assessee.  xx xx xx xx xx xx xx xx xx" 5. There is no doubt that the shares held by the applicant in Zensar answer the description of listed securities as defined by the Explanation to section 112(1) read with Securities Contracts (Regulations) Act. What needs to be considered therefore is whether the applicant could invoke the be....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....of listed securities to 10 per cent, but, with an important rider that the quantum of capital gains should be arrived at without taking into account the formula laid down in the second proviso to section 48 based on the indexed cost of acquisition.  In other words, while computing the capital gains on the listed securities held for more than 12 months, do not give effect to the calculation spelt out in the second proviso to section 48 wherever it is applicable, or to put it in a different language, let not the indexation formula enter into the computation process - that is the mandate of controversial phrase in the proviso to section 112(1). It does not say - deny the concessional rate of tax to the category of assesses who are not eli....