The Supreme Court has issued a stay on the Delhi High Court’s ruling regarding the Income Tax exemption for Capital Gains in the case of Blackstone Capital. The High Court had determined that the Capital Gains tax is not subject to income tax.
The Bench of Justice Pamidighantam Sri Narasimha and Justice Aravind Kumar, on 3rd January 2024 has issued notice to Blackstone Capital Partners Singapore, in revenue appeal against the Delhi High Court decision that quashed proceedings and reassessment on capital gains, considering the India-Singapore Double Taxation Avoidance Agreement ( DTAA ). And now, they have condoned the delay and stayed the decision of the Delhi High Court.
The Delhi High Court ruled in favour of Blackstone Capital Partners, asserting that the petitioner’s capital gains from the sale of Agile shares are not subject to taxation in India. The petitioner argued that these gains are exempt under Article 13(4) of the India-Singapore Double Tax Avoidance Agreement, supported by a Tax Residency Certificate ( “TRC” ).
A Division Bench comprising Justice Manmohan and Justice Manmeet Pritam Singh Arora observed that the revenue authorities cannot dispute the TRC issued by the foreign tax jurisdiction. They emphasised that the TRC serves as sufficient evidence for claiming treaty eligibility, residence status, and legal ownership. Consequently, the court held that no taxable income has evaded assessment in this particular case.
This reaffirms the earlier stance of the Delhi High Court Division Bench, reiterating the significance of the TRC as a valid and conclusive document in establishing treaty benefits and dismissing any claims of undisclosed income liable for taxation in the current scenario.
Further, the apex court also instructed the department not to collect the amount assessed to be collected from the respondent.
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