2022 (8) TMI 81 - AT - Income Tax

Beneficial tax rate under section 112(1) - sale of the equity shares - HELD THAT - As examined the decision of the Hon ble Jurisdiction High Court in case of Cairn UK Holdings Ltd. 2013 (10) TMI 430 - DELHI HIGH COURT we find, the Hon ble Delhi High Court after analyzing the provisions of section 48 and 112(1) of the Act has concluded that the assessee is entitled to avail the beneficial tax rate u/s 112(1) of the Act. Thus, in view of the aforesaid binding precedent of the Hon ble Jurisdictional High Court, we do not find any infirmity in the decision of learned Commissioner (Appeals).

Summary

Issues:
- Dispute over the tax rate on capital gain from the transfer of equity shares.
- Interpretation of the proviso to section 112(1) of the Act.
- Applicability of reduced tax rate under section 112(1) of the Act.
- Consideration of the decision of the Hon'ble Jurisdictional High Court in a similar case.

Analysis:
The appeal before the Appellate Tribunal ITAT DELHI involved a dispute between the Revenue and the assessee regarding the tax rate applicable to the capital gain arising from the transfer of equity shares during the assessment year 2012-13. The assessee transferred equity shares of Cairn India Ltd. to Twin Star Mauritius Holdings Ltd., resulting in a long-term capital gain. The purchaser deducted tax at a rate of 20%, but the assessee claimed a reduced tax rate of 10% under the proviso to section 112(1) of the Act, seeking a refund of excess TDS. The Assessing Officer disallowed the claim, leading to an appeal before the Commissioner (Appeals).

During the proceedings, the learned Commissioner (Appeals) ruled in favor of the assessee, directing the capital gain to be taxed at the rate of 10%. The assessee relied on a decision of the Hon'ble Jurisdictional High Court in a similar case involving Cairn UK Holdings Ltd., which supported the entitlement of the assessee to the reduced tax rate under section 112(1) of the Act. The Tribunal noted that the Hon'ble Delhi High Court had previously concluded that the assessee could avail of the beneficial tax rate under section 112(1) after analyzing the relevant provisions of the Act.

Considering the binding precedent of the Hon'ble Jurisdictional High Court and the interpretation of sections 48 and 112(1) of the Act, the Tribunal upheld the decision of the learned Commissioner (Appeals) and dismissed the ground raised by the Revenue. The appeal was ultimately dismissed, affirming the applicability of the reduced tax rate to the capital gain in question. The judgment highlighted the importance of legal precedents and statutory provisions in determining tax liabilities and entitlements in such cases.

The order was pronounced in the open court on 8th July 2022, with Shri Saktijit Dey, Judicial Member, and Dr. B.R.R. Kumar, Accountant Member, presiding over the case. The legal representatives for the parties involved were Sh. Percy Pardiwalla, Senior Advocate, representing the Appellant, and Ms. Sapna Bhatia, CIT (DR), representing the Respondent.