ITO Vs Godrej Agrovet Limited (ITAT Mumbai)
Lower TDS @ 11.54% on LTCG of Non-Resident Shareholders Upheld: Mumbai ITAT Dismisses Revenue’s s.201 Appeal
The Mumbai Bench of the ITAT dismissed Revenue’s appeal and upheld the order of CIT(A), holding that TDS @ 11.54% on long-term capital gains arising to non-resident individual shareholders from transfer of shares was correct and in accordance with section 112(1)(c)(iii).
The case arose from proceedings u/s 201, where the AO treated Godrej Agrovet Limited as an assessee in default for allegedly short-deduction of TDS on remittances made to non-resident shareholders on acquisition of shares of Creamline Dairy Products Ltd. (unlisted) and Astec Lifesciences Ltd. (listed). The AO held that TDS ought to have been deducted at higher rates, invoking section 206AA and disputing the application of concessional rate under section 112, and consequently raised demand of ₹2.37 crore including interest u/s 201(1A).
The Tribunal affirmed the findings of CIT(A) that:
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Section 112(1)(c)(iii) clearly prescribes a 10% tax rate on LTCG for non-resident individuals, and when surcharge & cess are added, the effective TDS rate of 11.54% is legally justified
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The first & second provisos to section 48 deal with mode of computation of capital gains and do not override the concessional rate mechanism provided u/s 112
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The assessee had deducted tax on capital gains and not on gross consideration, which is consistent with settled judicial principles
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In cases where discrepancies or factual verification were required, the CIT(A) rightly directed verification and recomputation, rather than confirming blanket demand u/s 201
Rejecting Revenue’s reliance on BASF Aktiengesellschaft and its challenge to the corrigendum issued by CIT(A), the Tribunal held that the appellate directions were fully in consonance with law. Accordingly, Revenue’s appeal for AY 2016-17 was dismissed in toto
FULL TEXT OF THE ORDER OF ITAT MUMBAI
