9911796707
TMI Blog2014 (5) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 1) Whether on the stated facts and law, the tax is required to be withheld by the Applicant under section 195 of the Income-tax Act, 1961 on purchase of 1,82,55,396 equity shares of Patni Computer Systems Ltd (hereinafter referred to as 'Patni'), being listed security, from iSolutions, Inc. USA at 10.56 per cent (inclusive of surcharge and cess) of the amount of long term capital gains arising to iSolutions, Inc. as per the proviso to section 112(1) of the Income-tax Act, 1961? 2) Whether on the stated facts and in law, the tax is required to be withheld by the Applicant under section 195 of the Income-tax Act, 1961 on purchase by it of 1,59,20,264 shares (included in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yerawada, Pune, Maharashtra. It is engaged in the business of providing information technology services and business solutions. Patni is listed on the Bombay Stock Exchange Limited, National Stock Exchange of India Limited and New York Stock Exchange. * iSolutions, incorporated on 1st October, 1999, and registered under the Company Laws of USA has its office at 1105, North Market Street, Suite 1300, Wilimington DE 19801. * iSolutions purchased the original equity shares of Patni in foreign currency. The bank statements of Mr.Anirudh Patni and Mrs.Poonam Patni (original share holders/promoters from whom iSolutions purchased the shares) reflect the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent had purchased an asset being a share or debenture with foreign currency, converted into Indian rupee. It stipulates that on transfer or sale of the said share or debenture the consideration received in Indian rupee should be reconverted into the same foreign currency. Sale and purchase of shares has to be in Indian rupee, the legal tender in India, but the foreign investor had brought in foreign currency and, therefore, logically and naturally for him, the gain should be computed in foreign currency. The said investor would like to convert the sale consideration received in Indian rupee into foreign currency. This would reflect the true gain or income earned. For a non-resident who has utilized/brought in foreign currency for purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by exchange rate fluctuation indulge in hedging. X X X 31. As already stated above, the first proviso to Section 48 ensures that a non-resident, who utilized his foreign currency, is taxed after taking into consideration the fluctuation in exchange rate. Indian rupee can and has in past appreciated against foreign currencies. In such cases, the long-term capital gains payable can increase. On the contrary we are not aware of occasions of deflation in India in last two decades and it would be incorrect to hold that the Legislature while enacting the second proviso had in mind or assumed that there would be deflation. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t applicable to debentures. Nevertheless, the proviso to Section 112(1) is applicable to units and zero coupon bonds, which are not covered by the first proviso to section 48 of the Act. Second proviso to Section 48 is not applicable on transfer of long-term capital asset being bond, debenture other than the capital index bond. Zero coupon bonds are, however, specifically made eligible for benefit under the proviso to Section 112(1). X X X It is clear from the aforesaid discussion that it is not possible to decipher and clearly elucidate the exact legislative purpose and object behind the proviso to Section 112(1) in a categorical and unambiguous manner. The purpose and object b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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