The Delhi Bench of Income Tax Appellate Tribunal (ITAT), has held that Long Term Capital Gain (LTCG) arises from the transfer of the share of a closely held company and is chargeable to tax at the rate of 10%.
The assessee, M/s. Cairn UK Holding Ltd. transferred equity shares of Cairn India Ltd. (CIL) to Twin Star Mauritius Holdings Ltd. in an off-market transaction and earned a long-term capital gain of Rs.1,21,38,22,15,541/-. The purchaser of equity shares deducted tax at source by applying the rate of 20% on the amount of capital gain.
During assessment proceedings, the appellant applied the tax rate of 10% on the capital gain by taking recourse to the proviso to section 112(1) of the Act and claimed a refund of the excess TDS. The Assessing Officer disallowed the claim. The Commissioner (Appeals) agreeing with the submissions made by the appellant, directed the Assessing Officer to tax the capital gain at the rate of 10%. Hence, revenue filed an appeal before ITAT.
The counsel for the appellant by relying on the decision of the jurisdictional High Court in the case of Cairn UK Holdings Ltd. Vs. DIT contended that the assessee is entitled to claim the benefit of reduced tax rate under section 112(1) of the Act.
The Coram of Mr. Saktijit Dey, Judicial Member, and Dr. B.R.R. Kumar, Accountant Member has held that “we find, the Hon’ble Delhi High Court after analyzing the provisions of section 48 and 112(1) of the Act has concluded that the assessee is entitled to avail the beneficial tax rate under section 112(1) of the Act. Thus, in view of the aforesaid binding precedent of the Hon’ble Jurisdictional High Court, we do not find any infirmity in the decision of learned Commissioner (Appeals)”.
Mr. Percy Pardiwalla appeared on behalf of the assessee and Ms. Sapna Bhatia appeared for the revenue.
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