Long Term Capital Gain On Sale Of Shares By Mauritius Company Is Not Liable To Be Taxed In India: ITAT

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that long-term capital gain on sale of shares by Mauritius Company is not liable to be taxed in India.

The bench of Vikas Awasthy (Judicial Member) and Naveen Chandra (Accountant Member) has observed that the assessee had claimed long-term capital gains arising from the sale of shares as exempt from tax in light of Article 13(4) of India-Mauritius DTAA. LEI Singapore Holdings Pte. Ltd. deducted tax at source on the payments made to the assessee. The assessee is seeking a refund of the withholding tax deducted on the aforesaid transaction. A similar transaction of transfer of shares of Pearl Retail Solutions Pvt. Ltd. was undertaken by the assessee in AY 2018-19. The assessee claimed refund of TDS deducted on sale of shares.

The assessee is registered in Mauritius and is holding a tax residency certificate of Mauritius. The assessee is in the business of making investments. The assessee had made an investment in an Indian company, namely Pearl Retail Solutions Pvt. Ltd. The assessee purchased 204199 shares in AY 2011-12 and 1,10,800 shares of the company in AY 2012-13. During the period relevant to the assessment year under appeal, the assessee transferred 69,999 shares of M/s. Pearl Retail Solutions Ltd. to M/s. LEI Singapore Holdings Pte. Ltd. for a consideration of Rs. 40,02,37,407. LEI Singapore Holdings Pte. Ltd. deducted tax at source on the payments under Section 195 of the Income Tax Act. The assessee claimed a refund of TDS so deducted.

The assessee's claim of refund of TDS has been rejected by the department.

The assessee submitted that the transfer of shares during the relevant period is the continuation of the transaction that started in AY 2018-19. In AY 2018-19, the assessee had sold 2,45,000 shares of the same company for a consideration of Rs. 74,15,54,375. In order to substantiate that the issue in appeal is identical to the one considered by the Tribunal in AY 2018-19, he referred to the show cause notice issued by the AO dated 29.08.2022.

The tribunal held that since the investments were made by the assessee, a Mauritius company holding a valid TRC, the resultant capital gain is not liable to be taxed in India.

Counsel For Appellant: Salil Aggarwal

Counsel For Respondent: Vijay B Vasanta

Case Title: M/s. Superb Mind Holdings Ltd. Versus Assistant Commissioner of Income Tax

Case No.: ITA No.1832/DEL/2023

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