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II. International Taxation Case Law:
Sofina S.A. Vs. ACIT (International Taxation), I.T.A. No. 7241/Mum/2018, Date of Pronouncement: 05.03.2020, ITAT - Mumbai
In the case of Sofina, Hon’ble ITAT has held as under:-
1. Shares of a Foreign company having substantial assets in India
if transferred by a non resident to other then gain attributable to
such transfer is not taxable merely because the Company has substantial
assets in India.
2. While holding so the ITAT has interpretated the provisions of section 5(1) & 9
and held that both these section does not cover a non resident Company,
fiction of these section would only alter the residency status of a
Company,considering no corresponding provision exists under the India
Belgium DTAA. Explanation 5 to Section 9(1)(i) of the IT Act does not
define residence of a person and only deems shares of a foreign company
to be situated in India.
3. ITAT further held that expression used in Article 13(4) i.e directly and indirectly
is a see through provision and this article is related to transaction
of immovable properties. However the “see through provisions” are not
present in Article 13(5) of the India Belgium treaty. Hence the
transaction of transfer of shares cannot be couched in see through
provisions.
4. Lastly the ITAT held that unilateral amendment of domestic provisions would not override the provision of DTA and hence provisions of domestic law would not override the DTA provisions.
(Please click here for judgment)
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