Page 45 - Corporate_Professional_Today

TrAnSfer of ASSeTS by nr To reSidenT indiAn noT To be deemed AS A meAnS of TAx AVoidAnCe
Tata paid tax on capital gain arising to it on
sale of shares. However, Apex did not pay
any tax in view of the provisions of Article
13 of the India-Mauritius tax treaty (DTAA).
Subsequently, during the course of assessment
proceedings of Tata, the AO invoked the
provisions of section 93 of the ITA. He
held that capital gain on sale of shares in
the hands of Apex was to be taxed in the
hands of Tata.
The CIT (A) confirmed the order of the AO.
Tata filed an appeal before the ITAT. The
issue before the ITAT was whether the
provisions of section 93 could be invoked
in the instant case.
2.1 Relevant provision of law:
2.1-1 Section 93 of the ITA - The relevant
provisions of section 93 of the ITA are
reproduced below:
“Avoidance of income-tax by transactions
resulting in transfer of income to non-
residents.
93. (1) Where there is a transfer of
assets by virtue or in consequence
whereof, either alone or in conjunction
with associated operations, any income
becomes payable to a non-resident, the
following provisions shall apply—
(a) where any person has, by means
of any such transfer, either alone
or in conjunction with associated
operations, acquired any rights by
virtue of which he has, within the
meaning of this section, power to
enjoy, whether forthwith or in the
future, any income of a non-resident
person which, if it were income of
the first-mentioned person, would
be chargeable to income-tax, that
income shall, whether it would or
would not have been chargeable to
income-tax apart from the provisions
of this section, be deemed to be in- (b) “associated operation”, in relation
come of the first-mentioned person
for all the purposes of this Act;
152 January 20 To January 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 41 u 46
(b) where, whether before or after any
such transfer, any such first-men-
tioned person receives or is en-
titled to receive any capital sum
the payment whereof is in any
way connected with the transfer
or any associated operations, then
any income which, by virtue or
in consequence of the transfer, ei-
ther alone or in conjunction with
associated operations, has become
the income of a non-resident shall,
whether it would or would not have
been chargeable to income-tax apart
from the provisions of this section,
be deemed to be the income of the
first-mentioned person for all the
purposes of this Act.
(2) Where any person has been charged
to income-tax on any income deemed
to be his under the provisions of this
section and that income is subsequently
received by him, whether as income or
in any other form, it shall not again be
deemed to form part of his income for
the purposes of this Act.
(3) The provisions of this section shall
not apply if the first-mentioned person in
sub-section (1) shows to the satisfaction
of the Assessing Officer that—
(a) neither the transfer nor any associated
operation had for its purpose or for
one of its purposes the avoidance
of liability to taxation; or
(b) the transfer and all associated op-
erations were bona fide commercial
transactions and were not designed
for the purpose of avoiding liability
to taxation.
(4)(a) “Assets” includes property or
rights of any kind and “transfer” in
relation to rights includes the creation
of those rights;
to any transfer, means an operation