Law:

Section:

Section 48, read with section 90 of the Income-tax Act, 1961 and article 24 of the Double Taxation Avoidance Agreement between India and Canada - Capital gains - Computation of - Whether article 24 seeks to prevent differentiation solely on ground of nationality and against nationals as such; under this clause State is not obliged to extend same privileges, which it accords to its own residents, to one who is not a resident and no discrimination can be said to have occurred on basis of nationality in such cases - Held, yes - Whether denial of benefit of second proviso to section 48 to a non-resident assessee while computing capital gains arising from sale of shares of Indian company would amount to discriminatory treatment in terms of article 24 - Held, no FACTS The applicant is a Canadian company. It is holding 74 per cent of the equity share capital in an Indian company, TGI. It entered into a share purchase agreement on 10-6-2008 with a partnership firm registered in India for transfer of its shareholding in TGI. It does not dispute that the income arising out of the transfer of shares is income deemed to accrue or arise in India and chargeable to tax as long-term capital gains. It, however, contends that it wishes to invoke the provisions of article 24 of the India-Canada DTAA providing protection against discrimination against nationals of the other Contracting State. It is submitted that the resident assessees are provided with a benefit to claim indexation benefit for the cost of acquisition, whereas the non-residents are denied the benefit on the basis of applicability of second proviso to section 48 and, therefore, there arises a situation where the Canadian companies holding shares in an Indian company are prevented from availing of the benefit of indexation in the computation of capital gains and this treatment tantamounts to discrimination of a Canadian national vis-a-vis Indian national. It, therefore, has sought advance ruling on the question as to whether denial of indexation benefit under second proviso to section 48 to non-residents will tantamount to discriminatory tax treatment under article 24 of the India-Canada DTAA. It has also sought…

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