The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that Long-Term Capital Gain (LTCG) on sale of shares by Mauritius Company is not liable to be taxed in India.
Superb Mind Holdings Ltd., 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.
The assessee transferred 69,999 shares of M/s. Pearl Retail Solutions Ltd. to M/s. LEI Singapore Holdings Pvt. Ltd. for a consideration of Rs. 40,02,37,407. LEI Singapore Holdings Pvt. 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.
It was 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. 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 two member 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.
The ITAT 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.
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