CIT (IT) v. Augustus Capital Pte. Ltd. (2024) 296 Taxman 398 (Delhi)(HC)

S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection-Capital gains-Shares-Not liable to be assessed as capital gains-Explanations 6 and 7 to section 9(1)(i) has to be treated retrospectively as it have to be read along with Explanation 5 which operates from 1-4-1962-OECD Model Convention, Art. 13 [S. 260A]

The assessee, a Singapore based company, had invested in equity and preference shares of ‘A’, a company incorporated in and resident of Singapore. On 27-3-2015, the assessee sold its entire shareholding in ‘A’ to ‘J’ (an Indian company).  The Assessing Officer computed the long-term capital gains arising from the transfer of shares of ‘A’ and proposed addition. The assessee submitted that Explanation 7 of section 9(1)(i) ought to have been given retrospective effect. The DRP up held the addition. Tribunal deleted the impugned addition holding that Explanations 4 and 5 inserted via the Finance Act, 2012 would operate retrospectively with effect from 1-4-1962. On appeal High Court up held the order of Tribunal.  (AY. 2015-16)