Description:
The court in this case, instead of being simply guided by the India-Mauritius DTAA granted weightage to real nature of transactions. The court based its ruling on the premise as to who is the real owner of shares, which in irrevocable terms is the USA based company. This ruling reminds us the ruling in Vodafone International Holdings B.V. v. UOI & Anr. (2010) 35 (I) ITCL 306 (Bom-HC): (2010) 193 Taxman 100 (Bom). In Vodafone case (supra) it was held that where share in a company incorporated outside India was transferred by a non – resident to another non-resident in such circumstances that such a transfer will involve transfer of stake in an Indian company a longwith various right and entitlements then such right and entitlement would constitute capital asset within the meaning of section 2(14). Further, the capital gain arising to the transferor non-resident would come within the ambit of section 9(1)(i) and such as income would be treated as income deemed to accrue or arise in India because what was transferred was control over an Indian company.
In that case also the court provided weightage to the real nature of transaction.
These cases prove that courts are now going by the substance of the transaction rather than the form of the same.
These are landmark rulings and interpret the law correctly and logically.
Source:
1. www.tpcc.in
2. The Tax Referencer .Volume121. Issue No.4, 26 Sept.2011, Page No.111.
Capital gains on sale of shares by non-Resident to another Non-Resident, taxable as capital gain where the sold shares of an Indian Company.
