India Opportunity Fund I F.C.R De Regimen Comun Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that capital gain arising out of sale of shares not taxable in the hands of foreign company since holding is less than 10% hence Article 14(4) of DTAA between India and Spain cannot be applied.
Facts- The assessee is a VC Fund Incorporated under the laws of Spain and is tax resident thereof. The assessee is engaged in investing business in sectors such as Internet, communication, technology, engineering, health & clean technologies. The assessee did not have any permanent establishment or any office in India.
The assessee filed the return of income for AY 2021-22 on 15.03.2022 declaring income of Nil. In the computation of income, the assessee has shown Long Germ Capital Gain (LTCG) of Rs. 27,62,12,014/- and a Short Term Capital Loss (STCL) of Rs. 65,80,977/- on sale of shares of IMI Investments Two Ltd. and claimed the same as exempt u/s. 90/91 of the Act and Article-14 of India-Spain DTAA. However, AO brought to tax the net capital gain amounting to Rs. 26,96,31,037/- as LTCG. Being aggrieved, the present appeal is filed.
Conclusion- The value of immovable property as a percentage of total assets of the assessee does not exceed 50% either based on book value or as per the Fair Market Value. Therefore, Article-14(4) of India-Spain DTAA cannot be applied in assessee’s case on this count.
