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TrAnSfer of ASSeTS by nr To reSidenT indiAn noT To be deemed AS A meAnS of TAx AVoidAnCe

of any kind effected by any person in of assets, any capital sum whose payment is
relation to— in any way connected with such transfer or
associated operations.
(i) any of the assets transferred, or
In the above case, the income of non-resident
(ii) any assets representing, whether
directly or indirectly, any of the would be deemed to be the income of
assets transferred, or resident for all purposes of tax and would
be chargeable to tax in India. A bona fide
(iii) the income arising from any such transfer is not taxable.
assets, or
2.2 Decision of the ITAT - The issue before the
(iv) any assets representing, whether ITAT was whether section 93 was applicable
directly or indirectly, the accumu- to the facts of the case? The ITAT held as
lations of income arising from any under:
such assets;
u Section 93 is applicable where a resident
(c) “benefit” includes a payment of any has right to enjoy the income from
kind; assets transferred to non-resident, he
(d) “capital sum” means— shall be deemed to have received the
income which would be taxable;
(i) any sum paid or payable by way
of a loan or repayment of a loan u Emphasis of section is on consequences
; and flowing from transfer of assets and not
on transfer of assets;
(ii) any other sum paid or payable
otherwise than as income, being a u Section 93 is a deeming provision.
sum which is not paid or payable Deeming provisions are intended to
for full consideration in money or enlarge meaning of a particular word,
money’s worth.” which would otherwise not fall within
provision. Being a deeming provision
A perusal of section 93 would show the section 93 has to be strictly construed
section is an anti-evasion provision. The object and it is applicable only when situation
of this section is to prevent Indian residents specified in section exists.
from evading tax by transferring their assets
to non-residents while enjoying its income. u The ITAT held that the basic condi-
tion for applicability of section 93
Section 93(1)(a) is applicable in case following was transfer of assets from resident
conditions are met: to non-resident. This basic fact was

(a) There is transfer of assets from resident missing in the whole transfer. In this
to non-resident; case shares of Idea were transferred by
one non-resident (Cingular) to resident
(b) Due to such transfer (which may or (Tata) and that resident was unrelated
may not be accompanied by transfer of party. Hence, absence of transfer of
associate operations), the income from asset from resident to non-resident
such assets is payable to non-resident took transaction out of provisions of
(c) The resident has the power to enjoy section 93 was wrongly invoked by
the said income or any other income income-tax authorities.
of non-resident either in present or Accordingly, the ITAT reversed the order of
future. the CIT (A) and held that section 93 was
Section 93(1)(b) considers situation where not applicable to the facts of the case. It
resident receives, either before or after transfer

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January 20 To January 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 41 u 47