From: editor@itatonline.org <itatonline.org@gmail.com>
Date: Wed, Apr 4, 2012 at 11:05 AM
Subject: Message from EGroup of SolapurCAs AAR Taxes "Capital Gains" On Shares' Buy-Back As "Dividend"
To: editor@itatonline.org
The following important judgement is available for download at itatonline.org.
In re A Mauritus (AAR)
Selective buy-back of shares in lieu of dividend is a "colourable transaction"
The Applicant's shares were held 48.87 % by a US company & 25.06% by a Mauritius company. The rest was held by a Singapore company and the public. The Mauritius company was ultimately held by another US company. Since 1.4.2003, when s. 115-O was introduced, the Applicant did not (to avoid DDT) distribute dividend. Instead, it let its reserves grow and offered a buy-back in the year 2008. The buy-back was accepted only by the Mauritius company, in whose hands the capital gains u/s 46A, were not assessable under the India-Mauritius DTAA. The other shareholders did not accept the offer. A second offer was proposed which also was accepted only by the Mauritius company and not by the other shareholders. The Applicant sought a ruling on whether the gains as a result of the buy-back would be capital gains u/s 46A in the hands of the Mauritius company and exempt under Article 13 of the India-Mauritius DTAA. HELD by the AAR;
Regards,
Editor,
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