INTERNATIONAL TAXATION – Case Law Update
CA Tarunkumar Singhal & CA Sunil Lala
INTERNATIONAL TAXATION Case Law Update A] HIGH COURT JUDGMENTS I. Ta x Avo i d a n c e – W h e t h e r t r a n s fe r o f s h a re s i n a n I n d i a n listed company by US holding co t o S i n g ap o re g ro u p c o, w i t h o u t c o n s i d e r a t i o n , i s n o t t a x a bl e i n I n d i a ? H e l d : Ye s – W h e t h e r i n v i ew o f t h e f a c t t h a t eve n i f c o n s i d e r a t i o n w a s c h a r ge d , t h e long term capital gains exemption would be available on sale of listed shares under section 10(38) of the Act and hence there was no merit in Revenue's contentions regarding " t a x avo i d a n c e " a n d " t re a t y shopping"? Held : Yes DIT vs. Goodyear Tire and Rubber Company [TS-82-HC-2013 (Del.)] Facts 1. Goodyear Tire & Rubber Company, a company resident in USA, proposed to transfer 75% of its shareholding in Goodyear India Limited, an Indian company to its wholly owned subsidiary, Goodyear O r i ent C o mpan y ( Pt e ) Ltd., a Si ngapore company.
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2. Both the USA as well as Singapore company had approached the Hon’ble AAR for a ruling as regards the taxability in India with respect to the above transfer of the shares. 3. The Hon’ble AAR ruling in favour of the petitioner held that there would be no tax liability on either the USA company or the Singapore company on transfer of shares without consideration. It further observed that even if the transfer was for consideration the same would be exempted from income-tax in view of the specific provisions of section 10(38) r.w. section 98 of the Act. 4. Aggrieved, the Revenue filed an appeal to the Hon’ble High Court. 5. The Revenue contended that the proposed scheme was designed for tax avoidance in India. It was submitted that the Singapore Holding company could later claim capital gains tax exemption under India-Singapore Double Taxation Avoidance Agreement (“the DTAA”) on sale of Indian companies shares. Judgment 1. The Hon’ble High Court ruling in favour of the Goodyear upheld the Hon’ble AAR ruling.
The Chamber's Journal April 2013
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