Tata Industries Ltd. v. ACIT (2018) 168 ITD 340/ 164 DTR 17/ 192 TTJ 541 (Mum) (Trib.)

S. 93 : Transactions resulting in transfer – Non-residents -Capital gains- For invoking S.93 to tax a resident, there should be transfer of assets by a resident to non-resident, and not where a non-resident had transferred assets to a resident- DTAA- India – Mauritius [ S. 90, 201(1), 201(IA) , Art ,13(4) ]

AT&T group formed a Joint Venture with Birla group and made investment through its Mauritius company Apex. Apex was holding shares of an Indian company Idea. Later on, assessee-TIL acquired entire shareholding of Apex and, thus, Apex became wholly owned subsidiary of assessee . During relevant year, Apex sold shares of Idea to a Birla group company . The AO invoked the provision of S. 93 and held that capital gains out of sale of shares by ‘Äpex” had to be taxed in the hands of the assessee. CIT( A) also confirmed the order of the AO .On appeal the Tribunal held that since in instant case, a non-resident company had transferred property i.e. shares to a unrelated resident company, deeming provision of S. 93 could not be invoked .As far as applicability of tax treaty provision vis-a-vis S. 93 was concerned, DTAA would prevail over local Act, as provided in S.90(2) (AY. 2007 -08)