2013 (12) TMI 993 - AT - Income Tax

Liability to deduct tax at source Indirect transfer of shares - Held that - The learned CIT(A) entertained additional evidence and deleted the liability of deducting tax at source by relying on such additional evidence without confronting it to the Assessing Officer The issue was restored for fresh decision.

Summary

Issues involved:
Challenge against direction of CIT(A) regarding non-taxability of capital gains from indirect transfer of shares and liability under section 195 of the Act.

Analysis:
1. Issue of Non-Taxability of Capital Gains:
The case involved the appeal by the Revenue against the CIT(A)'s order concerning the non-taxability of capital gains arising from the indirect transfer of shares. The Assessing Officer (A.O.) contended that the income accrued in India to a company from the indirect transfer of shares was taxable under section 9(1)(i) of the Act. The A.O. held that the primary motive for acquiring the company was to obtain shares of another subsidiary. Despite the assessee's arguments against chargeability, the A.O. held the capital gain as chargeable to tax for the assessment year 2006-2007. However, the CIT(A) disagreed with the A.O. and absolved the assessee from liability to deduct tax at source based on additional evidence provided. The Tribunal noted the reliance on the judgment of the jurisdictional High Court and remitted the matter back to the A.O. for fresh consideration, allowing the assessee to present any fresh evidence in its defense.

2. Liability under Section 195 of the Act:
The A.O. held the assessee liable under section 195 for not deducting tax at source from the income chargeable to tax from an indirect payment to a non-resident. The A.O. determined the liability for payment of tax due to the indirect payment made to the non-resident. The CIT(A) overturned this decision based on additional evidence submitted by the assessee. The Tribunal found that the CIT(A) had entertained additional evidence without confronting it to the A.O., leading to the decision to set aside the CIT(A)'s order and remit the matter back to the A.O. for fresh consideration. The Tribunal emphasized the need for the A.O. to decide the issue afresh after allowing the assessee a reasonable opportunity to be heard and present any fresh evidence.

In conclusion, the Tribunal allowed the appeal for statistical purposes, setting the stage for a fresh consideration of the issues related to the taxability of capital gains from indirect share transfers and the liability under section 195 of the Act.