Law:

Section:

Section 112, read with section 48, of the Income-tax Act, 1961 - Capital gains - Tax on long-term capital gains - Assessment year 2008-09 - Whether benefit of lower rate of tax envisaged by section 112(1) is available to non-resident foreign companies also even if second proviso to section 48 is not applicable to them - Held, yes Section 48 of the Income-tax Act, 1961 - Capital gains - Computation of - Assessment year 2008-09 - Whether legal expenses distinctly related to and integrally connected with transfer of shares are admissible for deduction under section 48(i) - Held, yes - Whether legal fees, etc., paid to lawyers for filing petitions under sections 397 and 398 before CLB and for making appearance before CLB prior to passing of final order giving green signal for transfer of shares are also admissible for deduction - Held, no - Applicant, a non-resident company, entered into a joint venture agreement with an Indian company on 29-9-1997 and acquired 30 per cent of equity share capital of Indian company - Later on, various disputes arose among parties in course of operations of Indian company and applicant filed petitions before CLB - However, on suggestion of CLB, with a view of reaching an amicable settlement, promoters of Indian company agreed to purchase shares held by applicant which resulted in long-term capital gains to applicant - Applicant claims that in computing capital gains, deduction is admissible under section 48 on account of legal expenses incurred in relation to transfer of shares - Whether since facts on record do not present clear picture of expenditure incurred wholly and exclusively in connection with transfer of shares, issue has to be left open to Assessing Officer to quantify admissible amount in view of aforesaid legal position - Held, yes FACTS The applicant, a non-resident company, entered into a joint venture agreement with an Indian company on 29-9-1997 and acquired 29.95 lakh shares of the Indian company at a price of Rs. 21 per share. In course of operations of the Indian company, various disputes relating to joint venture agreement arose among parties, including the Indian company and the applicant and petitions were…

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