The Supreme Court today dismissed the Income Tax department’s (I-T) plea challenging the decision of the Authority of Advanced Rulings (AAR) that allowed French firm Timken France SAS to claim capital gains tax benefits.
A Bench headed by Justice S H Kapadia dismissed the Director of Income Tax’s plea on the ground of delay of over one year in challenging the AARs’ opinion. However, it left the question of law open to be decided in another similar matter.
The AAR had held that the tax payable by Timken France, which manufacturers anti-friction bearings and allied products, on long-term capital gains arising out of the sale of Indian company NRB Bearing shall not exceed 10 per cent of the amount of capital gains.
The Authority had decided in favour of the company on the ground that such benefit was given under Section 48 of the Income Tax Act in order to compensate non-resident Indian investors for lower earning in foreign currency on account of the decline of rupee value.
The income tax authorities sought the apex court’s interference as the issue was a recurring one and would apply to most non-resident investors.
Challenging the AARs’ ruling, they said its opinion was contrary to the Income Tax Appellate Tribunal’s decision which held that the legislature never intended to give the benefit to those cases where a long-term capital gain was required to be computed under the first proviso to Section 48 of the Income Tax Act.
