Orient Green Power Pte. Ltd., In re

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The Tax PublishersA.A.R. NO. 973 OF 2010 2012 TaxPub(DT) 2268 (AAR) : (2012) 346 ITR 0557 : (2012) 252 CTR 0123 : (2012) 210 TAXMAN 0339 : (2012) 075 DTR 0297 AUTHORITY FOR ADVANCE RULINGS (INCOME TAX), NEW DELHI P.K. BALASUBRAMANYAN, In re Orient Green Power Pte. Ltd., A.A.R. No. 973 of 2010 14 August, 2012 RULING The applicant is a company incorporated in Singapore. It holds 99.61% of the share capital in Orient Green Power Ltd., a company incorporated under the Companies Act, 1956 which is hereinafter referred to as OGPL India. The applicant also holds 49.75% of the share capital in Bharath Wind Farm Limited, (BWFL India, hereafter) a company incorporated under the Companies Act, 1956. The balance 56.25% shares in BWFL India is held by OGPL India. According to the applicant, it has transferred its 49.75% shares held in BWFL India, to OGPL India without consideration. The transaction is evidenced by a memorandum of gift dated 30-1-2010. Since the transfer was effected before the coming into force of section 56(2) (viia) of the Income-tax Act, the transaction was not taxable under the Act in terms of section 45 of the Act read with section 48 of the Act, since the transfer was one without consideration. The transaction which was a gift, was also exempted from the operation of section 45 of the Act, by virtue of section 47(iii) of the Act. The applicant was approaching this Authority for a Ruling on the relevant questions raised in the application. 2. This Authority allowed the application under section 245R(2) of the Act for giving rulings on the following questions: (1) On the facts and in the circumstances of the case, whether the transfer of Bharath Wind Farm Limited ('BWFL India') shares by Orient Green Power Pte Ltd ('OGPP Singapore') to Orient Green Power Company Limited ('OGPL India') without consideration, in order to consolidate its Indian operations, would be subject to tax under the Act in India in the hands of OGPP Singapore? (2) Without prejudice to the above, whether the transfer of BWFL India shares by OGPP Singapore to OGPL India without consideration would be covered under section 47(iii) of the Act and therefore not chargeable to tax in the hands of OGPP Singapore? (3) On the facts and in the circumstances of the case, whether the transfer pricing provisions contained in section 92 to 92F of the Act would be applicable to transfer of shares by OGPP Singapore to OGPL India for no consideration/without consideration? (4) Without prejudice to above, in the instance where the transfer of shares by OGPP Singapore to OGPL India is subject to the transfer pricing provisions whether the maximum price which can be paid to OGPP Singapore, as prescribed under the exchange control regulations and arrived at using Comptroller of Capital Issue ('CCI') guidelines, can be considered as the arm's length price for the purposes of the Act? (5) On the facts and circumstances of the case, if there is no income chargeable to tax in the hands of OGPP Singapore, whether OGPL India, the recipient of shares, is required to withhold tax in accordance with the provisions of section 195 of the Act, especially when there is no payment made by OGPL India to OGPP Singapore? (6) On the facts and in the circumstances of the case, if the transfer of shares is not taxable in India by virtue of Question No.1 and Question No. 2, whether OGPP Singapore, the applicant, is required to file any return of income under section 139 of the Act? 3. According to the applicant, the transaction cannot be said to have generated any taxable income to the applicant. Income must be understood as income chargeable to tax under the Act. The transaction was a transfer by way of gift. The investment in BWFL was held by the applicant as a capital asset. Since, no consideration passed for the transfer, the transaction could not be taxed under section 45 of the Act read with section 48 of the Act. Section 45 of the Act has to be read with section 48 of the Act. No gain could be computed in terms of section 48 of the Act. Hence on the principle of the decision in CIT v. B.C. Srinivasa Setty 1981 TaxPub(DT) 902 (SC) : (1981) 128 ITR 294 () accepted in subsequent decisions, the transaction is not taxable under the Act. Even otherwise, being a gift, it is exempt from the operation of section 45, the charging section under the Act, by virtue of section 47 (iii) of the Act. Since the transaction is not chargeable to tax under the Act, section 92 has no application. There is also no obligation to withhold any an tax in terms of section 195 of the Act or to file a return of income in terms of section 139 of the Act. SUBSCRIBE FOR FULL CONTENT

The Tax PublishersA.A.R. NO. 973 OF 2010
2012 TaxPub(DT) 2268 (AAR) : (2012) 346 ITR 0557 : (2012) 252 CTR 0123 : (2012) 210 TAXMAN 0339 : (2012) 075 DTR 0297

AUTHORITY FOR ADVANCE RULINGS (INCOME TAX), NEW DELHI

P.K. BALASUBRAMANYAN,

In re Orient Green Power Pte. Ltd.,

A.A.R. No. 973 of 2010

14 August, 2012

RULING

The applicant is a company incorporated in Singapore. It holds 99.61% of the share capital in Orient Green Power Ltd., a company incorporated under the Companies Act, 1956 which is hereinafter referred to as OGPL India. The applicant also holds 49.75% of the share capital in Bharath Wind Farm Limited, (BWFL India, hereafter) a company incorporated under the Companies Act, 1956. The balance 56.25% shares in BWFL India is held by OGPL India. According to the applicant, it has transferred its 49.75% shares held in BWFL India, to OGPL India without consideration. The transaction is evidenced by a memorandum of gift dated 30-1-2010. Since the transfer was effected before the coming into force of section 56(2) (viia) of the Income-tax Act, the transaction was not taxable under the Act in terms of section 45 of the Act read with section 48 of the Act, since the transfer was one without consideration. The transaction which was a gift, was also exempted from the operation of section 45 of the Act, by virtue of section 47(iii) of the Act. The applicant was approaching this Authority for a Ruling on the relevant questions raised in the application.

2. This Authority allowed the application under section 245R(2) of the Act for giving rulings on the following questions:

(1) On the facts and in the circumstances of the case, whether the transfer of Bharath Wind Farm Limited ('BWFL India') shares by Orient Green Power Pte Ltd ('OGPP Singapore') to Orient Green Power Company Limited ('OGPL India') without consideration, in order to consolidate its Indian operations, would be subject to tax under the Act in India in the hands of OGPP Singapore?

(2) Without prejudice to the above, whether the transfer of BWFL India shares by OGPP Singapore to OGPL India without consideration would be covered under section 47(iii) of the Act and therefore not chargeable to tax in the hands of OGPP Singapore?

(3) On the facts and in the circumstances of the case, whether the transfer pricing provisions contained in section 92 to 92F of the Act would be applicable to transfer of shares by OGPP Singapore to OGPL India for no consideration/without consideration?

(4) Without prejudice to above, in the instance where the transfer of shares by OGPP Singapore to OGPL India is subject to the transfer pricing provisions whether the maximum price which can be paid to OGPP Singapore, as prescribed under the exchange control regulations and arrived at using Comptroller of Capital Issue ('CCI') guidelines, can be considered as the arm's length price for the purposes of the Act?

(5) On the facts and circumstances of the case, if there is no income chargeable to tax in the hands of OGPP Singapore, whether OGPL India, the recipient of shares, is required to withhold tax in accordance with the provisions of section 195 of the Act, especially when there is no payment made by OGPL India to OGPP Singapore?

(6) On the facts and in the circumstances of the case, if the transfer of shares is not taxable in India by virtue of Question No.1 and Question No. 2, whether OGPP Singapore, the applicant, is required to file any return of income under section 139 of the Act?

3. According to the applicant, the transaction cannot be said to have generated any taxable income to the applicant. Income must be understood as income chargeable to tax under the Act. The transaction was a transfer by way of gift. The investment in BWFL was held by the applicant as a capital asset. Since, no consideration passed for the transfer, the transaction could not be taxed under section 45 of the Act read with section 48 of the Act. Section 45 of the Act has to be read with section 48 of the Act. No gain could be computed in terms of section 48 of the Act. Hence on the principle of the decision in CIT v. B.C. Srinivasa Setty 1981 TaxPub(DT) 902 (SC) : (1981) 128 ITR 294 () accepted in subsequent decisions, the transaction is not taxable under the Act. Even otherwise, being a gift, it is exempt from the operation of section 45, the charging section under the Act, by virtue of section 47 (iii) of the Act. Since the transaction is not chargeable to tax under the Act, section 92 has no application. There is also no obligation to withhold any an tax in terms of section 195 of the Act or to file a return of income in terms of section 139 of the Act.