Latest Advance Ruling may impact billion-dollar Vodafone takeover case
In tune with our tradition of bringing you the latest, today we bring you a ruling of the AAR that is bound to shake the Indian economic scene – a Ruling that was made available only yesterday – only TIOL and you have access to it, as of now.
TAXING capital gains has always been a tricky subject for the Revenue. If it ever involved two non-resident entities, it always proved to be a much trickier and harder nut to crack. Then came the insertion of the most crucial clause in the statute - the situs of the capital asset, a step to iron out the hiatus in the relevant provisions of the Income Tax Act. This was designed to take care of the transactions between two non-residents over the capital assets situated in India.
And this is what can be seen as the decider in the latest case decided by the Authority for Advance Ruling. A ruling was sought by a non-resident purchaser of the shares sold by another non-resident share-holder in a JV located in India. And what the Authority has held is going to be of far-reaching consequences for many high-value cases like the Vodafone. It said that since the situs of the capital assets, the shares in the Indian JV, happen to be India, no matter where does the deal take place, the profits and gains arising out of the deal will come within the ambit of Sec 9(1)(i), and will be assessable under the head 'capital gains' u/s 45(1).
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