IN RE: XYZ INDIA Vs. STATE

JUDGEMENT

(1.) THE applicant is a company incorporated in India in the year 1953 under the Companies Act of 1913. It is a closely held Public Limited Company. 48.87 % of its share are held by XYZ (USA), 25.0696 by XYZ (Mauritius), 27.37% by company XYZ (S), Singapore and 1.76% by the general public. On 15.6.2010, the Board of Directors of the applicant has passed a resolution proposing a scheme of buy -back of its shares from existing shareholders in accordance with Section 77A of the Indian Companies Act. XYZ (Mauritius) which holds 25.0696 of shares in the applicant and incorporated on 6.4.2001 in Mauritius, proposes to accept the offer of buy -back. It acquired the shares in the applicant during the period 2001 to 2005 for Rs. 280 per share on the first occasion and Rs. 320 per share on the subsequent occasions. It is in that context that the applicant approached this Authority for Advance Ruling as to whether the capital gains that may arise, is chargeable to tax in India in the context of the Double Taxation Avoidance Convention between India and Mauritius and whether it will have the obligation to withhold tax in terms of Sec 195 of the Indian Income -tax Act.

(2.) IN its comments accompanying the letter dated 31.1.2011, the revenue raised the contention that there was a previous buy -back in the year 2008 and on a return of income filed by XYZ (M) which sold back some of its shares, the question was pending before the assessing officer and hence the entertaining of the application was barred by clause (i) of the proviso to section 245R(2) of the Act. In the letter dated 28.3.2011 it was contended that the whole of the transaction was designed to avoid payment of tax in India. This Authority did not specifically overrule the contention based on clause (i) of the proviso presumably because the transaction of 2008 though similar in nature, was a different transaction and hence that clause was not attracted. As regards the objection based on clause (iii) of the proviso, this Authority overruled the objection then raised based on the ultimate control said to be vesting in the American Company, but with a rider that it can look whether question of avoidance at a later stage, of the circumstances warranted it. Thus this Authority allowed the Application under Sec 245R(2) of the Act to give a ruling on the following questions: -

(3.) WE find some force in the contention of counsel for the Revenue that the question pending before the Authority was an identical one. We have in this case already overruled the objection either expressly or impliedly when we allowed the application under section 245R(2) of the Act. Moreover, this Authority has been taking the view that if the transaction is different the bar is not attracted. We do not think it necessary in this case to reconsider the question. Hence, we overrule the objection.