BG Asia Pacific Holding Pte Ltd In re (2021) 125 taxmann.com 2 ( AAR )

S. 90: Double taxation relief – Assessee – Company being a tax resident of Singapore is eligible to the benefits of India-Singapore tax treaty with respect to sale of shares in Indian subsidiary – LOB clause is not applicable as such sale was pursuant to genuine business restructuring and MNC’s activity of being an investment holding company is a bonafide business activity – Hence, no capital gains on sale of shares of Indian subsidiary by a Singapore holding investment company.

Held by the AAR that (i) there is no provision in the India-Singapore tax treaty which provides that the benefits of tax treaty will be denied if the Company is merely a holding investment company; (ii) holding companies are essential for management of MNCs’ worldwide business interest and such an activity of being a investment holding company is a bonafide business activity; (iii) the affairs of the applicant company were not arranged with the primary purpose of availing tax treaty benefits as the investment was made prior to introduction of protocol exempting tax on capital gains and the control and management was located in Singapore and the decision to sell the investments in Indian entity is pursuant to a genuine business restructuring as such decision is not only for Indian entity but also for other foreign entities. (AAR No.1376 & 1377 of 2012, dt. 25-02-2021)