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2007] 294 ITR 513 [2007] 164 TAXMAN 354 (AAR - NEW DELHI) AUTHORITY FOR ADVANCE RULINGS, NEW DELHI Timken France, In re* JUSTICE P.V. REDDI, CHAIRMAN AND A. SINHA, MEMBER A.A.R. NO. 739 OF 2006 OCTOBER 1, 2007 Section 112, read with section 48, of the Income-tax Act, 1961 - Capital gains - Tax on long-term capital gains - Whether benefit of proviso to section 112(1) cannot be denied to non-residents/foreign companies who are also entitled to a different relief in terms of first proviso to section 48 - Held, yes - Whether eligibility to avail benefit of indexed cost of acquisition under second proviso to section 48 is not a sine qua non for applying reduced rate of 10 per cent prescribed by proviso to section 112(1) - Held, yes - Whether proviso to section 112(1) does not make any distinction between original and bonus shares - Held, yes - Whether once it is held that under proviso to section 112(1), benefit of lower rate of tax is not to be denied to non-residents in respect of long-term capital gains arising from transfer of original shares, it follows that same interpretation will hold good in case of bonus shares as well - Held, yes Circulars and clarifications : Circular No. 554, dated 13-2-1990; Circular No. 636, dated 31-8-1992 Interpretation of statutes : Rule of legislative intention : rule of purposive construction. FACTS The applicant, a non-resident company, was engaged, inter alia, in the business of manufacturing anti-friction bearings and allied products and providing services relating thereto. During the financial year 1986-87 it acquired the shares of a listed Indian company by making payment in foreign currency. Subsequently, over the years, the applicant also received bonus shares from the said company. Both the original and bonus shares were held by it for more than one year; thereafter, the same were sold to the Indian promoters of said Indian company for certain consideration. The applicant sought advance ruling of the Authority on the questions of law as to whether the tax payable on the long-term capital gains arising on sale of : (1) originally purchased shares of the Indian company will be 10 per cent of the amount of capital gains as…

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