Transfer of shares of Indian company to Singapore Company, by a Mauritius company having no PE, not taxable in India- AAR

Brief of the Case

Authority for Advance Rulings held In the case of Dow AgroSciences Agricultural Products Ltd, Mauritius that the Article 13 of the Indo-Mauritius DTAA which deals with the taxation of capital gains is not applicable in the present case. The reason is that the applicant does not have a PE in India. There is no material on record brought forth by the Revenue that the applicant has a PE in India. It was suggested that the presence of DAS India itself should be taken to be PE. We do not think that such a broad proposition can be pressed in service for the finding that the applicant has PE in India. No material has been brought before us to that effect. Hence there would be no question of any taxation of Indian Law on the capital gains arising from the proposed transfer of shares of DAS India by the applicant to the DAS Singapore.

Facts of the Case

The applicant is a company incorporated in Mauritius and it is a part of Dow group of companies. Dow Agrosciences India Private Limited (DAS India), a company incorporated in India, is a part of Dow Group and is engaged in manufacturing and trading of pesticides and insecticides. The Applicant had acquired 61,836,990 shares of Rs 10 each in DAS India for an amount of Rs. 618, 369, 900, during the period sep.1995 to January, 2005. The applicant proposes to transfer these shares in favour of a Dow Group Entity Singapore. This transfer is pleaded with an objective of the group re-organization.

DAS Mauritius proposes to contribute shares held in Dow India as its capital in DAS Singapore. By virtue of this, DAS India would become 100% subsidiary of DAS Singapore. The Applicant also state that it does not have an office, or employee or agents in India and hence no permanent establishment in India as per Article 5 of the India Mauritius Double Taxation Avoidance Agreement. It is reiterated by the applicant that it is not required to maintain any books of accounts in India as prescribed in Section 211 of the Companies Act, 1956 and further it is not required to comply with the propositions of Section 594 of theCompanies Act, 1956 relating to companies incorporated outside India provisions and establishing of places of business in India.

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