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TMI Blog2014 (5) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... fter taking into consideration the fluctuation in exchange rate - if proviso to Section 112(1) is applied, then almost all assessees covered by the first proviso to Section 48 would be liable to pay tax @ 10% only and not @ 20% on long-term capital gains - 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 behind the proviso to Section 112(1) itself is somewhat debatable, except that the legislative intention was to tax long-term capital gain on listed shares, bonds and units @ 10%, without benefit of indexation under second proviso to Section 48 of the Act – the applicant will be entitled to benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Background facts highlighted for seeking ruling are as follows: The Applicant is a Mauritius company, having its registered office at International Financial Services Limited, IFS Court, Twenty Eight, Cybercity, Ebene, Mauritius incorporated on 17 December 2010, and registered under the Mauritius Companies Act, 2001. The control and management of the affairs of the Applicant is situated outside India and therefore, qualifies as a non-resident company under the provisions of the Income-tax Act, 1961 ( the Act ). The Applicant passed a board resolutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares acquired upto August, 2003) of Patni (as it has now transpired) to the applicant. iSolutions held the aforesaid 1,82,55,396 shares of Patni for a period of more than 12 months for affecting such sale, iSolutions has entered into a Share Purchase Agreement dated January 10, 2011. The applicant is now approaching this Hon ble Authority to determine the rate at which tax ought to have been deducted under section 195 of the Act from the payment made to iSolutions for the purchase of equity shares of Patni. 3. The rival submissions need not detain us, in view of the fact that the decision of this Authority in Cairn UK Holdings Ltd. was set aside by the Hon ble Delhi High, in Writ Petition (Civil) No.6751 of 2012 by Judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the first proviso and they are entitled to benefit of cost of indexation which neutralize inflation. It is a misnomer and wrong to state that inflation alone contributes and is the determinative factor in exchange rate fluctuation. No doubt, a country with persistent low inflation can expect rising currency value as purchasing power increases in relation to other currencies with high inflation rate, but it is equally true that countries with typically higher inflation rate might not see corresponding or equal depreciation in their currency value. Inflation by itself cannot be the sole or even a primary factor in exchange rate depreciation. Current account deficit and public debt, terms of trade, political stability, economic performanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsequence of the proviso to Section 112(1) and the interpretation given by us, but this cannot be a ground to contextually read the proviso to Section 112(1) differently. The said proviso is applicable to listed securities or units or zero coupon bonds. Long-term capital gain is not payable on listed securities sold through stock exchanges as STT is payable. First proviso to Section 48 is applicable on sale of shares or debentures in Indian company, whether or not the said shares or debentures are listed or not. Thus, proviso to Section 112(1) is more restrictive and will not necessarily apply in all cases covered by the first proviso to Section 48. Secondly, the proviso to Section 112(1) is not applicable to debentures. Nevertheless, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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