Question before AAR was whether the tax payable by the Applicant on the long term capital gains arising on the sale of equity shares being listed securities, will be 10% (plus surcharge and cess) of the amount of capital gains as per the proviso to S. 112(1) of the Act.
AAR granted benefit of proviso to S. 112(1) to the Applicant and upheld 10% tax rate for long-term capital gains arising on sale of listed shares pursuant to share transfer agreement with Indian partners in order to sell its stake in HHML by placing reliance upon Delhi High Court ruling in Cairn UK Holding Ltd (2013) 359 ITR 268 (Delhi ) (HC) and AAR ruling in Pan-Asia iGate Solutions (2014) 364 ITR 331 (AAR).
Honda Motors Co. Ltd., In re (2018)401 ITR 382/ 253 Taxman 402/ 301 CTR 159/ 163 DTR 113 (AAR)
S. 112 : Tax on long term capital gains -Foreign company on long-term capital gains arising on sale of equity shares of an Indian company being listed in securities, will be 10 per cent (plus surcharge and cess) of amount of capital gains as per proviso to S. 112(1)-DTAA- India -Japan [ S.45, Art. 4,13 ]