Case nº A.A.R. No. 800 of 2009 of Authority for Advance Rulings, July 23, 2009 (case Fujitsu Services Ltd. Vs DIT)

JudgeFor the Appellant: P.J. Pardiwalla, Sr. Adv., M. Prakash Kumar, Adv.
PresidentP.V. Reddi, Chairman
Resolution DateJuly 23, 2009

Court Information AAR Cases
Judgment Date 23-Jul-2009
Party Details Fujitsu Services Ltd. Vs DIT
Case No A.A.R. No. 800 of 2009
Judges P.V. Reddi, Chairman
Advocates For the Appellant: P.J. Pardiwalla, Sr. Adv., M. Prakash Kumar, Adv.
Acts Income-tax Act, 1961 (Act) - Section 112(1)


P.V. Reddi, Chairman

1. The applicant is a non-resident Company incorporated in United Kingdom. It is engaged in the siness of information technology services. The applicant acquired the shares in Zensar Technologies Limited (for short 'Zensar'), an Indian company by making payments in foreign currency between 1963 and 1994, after obtaining RBI's approval. The applicant states that the shares held by it in the said company constituted 26.55% of the entire capital of Zensar and such shares were held for more than 12 months. These shares were listed on the Bombay Stock Exchange and the National Stock Exchange. On 4th July, 2007, the applicant sold its entire shareholding to an Indian company, namely, Jubilee Investments and Industries Limited (for short "Jubilee") and a Cyprus company, namely, Pedriano Investments Ltd. (for short "Pedriano") for a consideration of Rs.195/- per share. A copy of the Share Purchase Agreement dated 1.3.2007 has been annexed to the application.

2. It may be submitted at this juncture that the name of Pedriano has not figured in the Share Purchase Agreement. The applicant clarifies that the Pedriano is a wholly owned subsidiary of Petrochem International Limited (Petrochem). Petrochem a company incorporated in India is a wholly owned subsidiary of Jubilee which is one of the purchasers of shares and a party to the Share Purchase Agreement. As per the said agreement, the applicant had agreed to sell the shares of Zensar to the purchaser or to its affiliates. In view of the wide definition of "affiliate", the applicant submits that any entity that is controlled by the purchaser or under common control along with the purchaser will satisfy the definition and therefore Pedriano qualifies as an affiliate of Jubilee and became eligible to buy the shares.

The tax was deducted by Jubilee and Pedriano from the sale consideration @ 20%, though according to the applicant, the correct rate applicable to long term capital gain is 10%. The following questions are framed for seeking advance ruling from this Authority:

    1. Whether on the stated facts and in law, the rate of tax applicable on the long...

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