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2012 (4) TMI 50 - AAR - Income TaxDTAA between India and Netherlands - Capital gain - release and relinquishment of tenancy rights - The applicant is a Dutch citizen since 1984 and holds a card of Person of Indian Origin since 6.10.2003 - As regards the amount received on release of tenancy rights, the tenancy rights are in respect of real estate and would be gains derived from alienation of immovable property. As the immovable property is situated in India, the gains are taxable in India under Article 13.1 of the DTAA Regarding capital gain - since the value of the shares is derived principally from immovable property situated in India, the same are taxable under Article 13.4 of the DTAA in India - TDS already paid on the sale of shares is to be allowed credit against any tax demanded by the Revenue, upon its proper verification - Ruling is given
Issues:
1. Tax liability under Indian Tax Laws and laws of Netherlands for release of tenancy rights and sale of shares. Analysis: The applicant, a Dutch citizen with Person of Indian Origin card, sought clarification on tax liability under Indian and Dutch laws for releasing tenancy rights and selling shares. The questions referred to the Authority for Advance Rulings were: 1. Taxability of amount received for releasing tenancy rights under capital gains and whether it should be taxed in India or Netherlands. 2. Whether capital gains tax on sale of shares should be paid in Netherlands and if TDS on share sale in India should be refunded. The applicant argued that gains from share sale should be taxed in Netherlands as per Double Taxation Avoidance Agreement (DTAA) Article 11, while admitting that tenancy rights' gains are taxable in India under Article 6 of DTAA. The Revenue raised concerns about the property valuation, TDS details, and fair market value determination. During the hearing, neither the applicant nor the revenue appeared. The Authority clarified that the questions did not require determining fair market value. The first question pertained to taxing amount received for releasing tenancy rights as gains from alienation of immovable property in India under Article 13.1 of DTAA. The second question addressed capital gains on sale of shares, taxable in India under Article 13.4 of DTAA since the shares' value was derived mainly from Indian immovable property. The ruling stated that the amount for releasing tenancy rights is taxable in India under Article 13.1 of DTAA, and capital gains on share sale are taxable in India under Article 13.4 of DTAA. The TDS paid on share sale should be credited against any tax demanded by the Revenue after verification. In conclusion, the ruling clarified the tax liabilities for the applicant under Indian Tax Laws and the DTAA concerning the release of tenancy rights and sale of shares, emphasizing the taxable nature of gains derived from immovable property in India and providing guidance on the treatment of capital gains under the DTAA.
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