Benefits of lower tax rates of 10 per cent as per proviso to section 112(1) is not available where shares of listed company are sold in off-market mode

Cairn U.K. Holdings Ltd. In re (AAR) The relief provided for by the proviso to Section 112 is intended to cover cases where effect of inflation is not provided for. That is why the proviso specifies that the calculation of 10% of the Capital Gain should be “before giving effect to” indexation. ‘Before giving effect to’ connotes that effect has otherwise to be given. That means, the asset must be one qualified for indexation under the second proviso to Section 48 of the Act. There is no justification in not giving effect to the words used in the proviso. Nothing stood in the way of the legislature in specifying that all assets will qualify for protection. That has not been done. On the scheme of the provisions and the level playing field sought to be achieved, the natural way of understanding the proviso is to confine its operations to assets not covered by the first proviso to Section 48 and the assets specified in the proviso to Section 112 itself.

The applicant is not eligible to avail the benefit of lower rate of tax of 10% on the capital gains on the sale of shares of an Indian company to a foreign company in off-market mode

AUTHORITY FOR ADVANCE RULINGS (INCOME-TAX) NEW DELHI

Cairn U.K. Holdings Ltd., In re

Please become a Premium member. If you are already a Premium member, login here to access the full content.