PRAXAIR PACIFIC LIMITED Vs. DIRECTOR OF INCOME TAX
LAWS(AR)-2010-7-1
AUTHORITY FOR ADVANCE RULINGS
Decided on July 23,2010

Praxair Pacific Limited Appellant
VERSUS
Director of Income Tax (International Taxation) Respondents

JUDGEMENT

V.K. Shridhar, Member - (1.) THIS application for advance ruling has been filed by a non -resident company under Section 245Q(1) of the Income -tax Act, 1961(hereinafter referred as Act). The following facts are stated in the application.
(2.) THE applicant, Praxair Pacific Limited, is a company incorporated in Mauritius and is a tax resident of Mauritius. The applicant has a wholly owned subsidiary company in India, Praxair India Pvt. Ltd (Praxair India). The applicant is holding 237,286,500 equity shares representing 99.99% of the capital of Praxair India. The nominee of the applicant holds remaining 3 shares representing 0.01% of share capital. The applicant also holds 74% of the equity shares capital in Jindal Praxair Oxygen Company Private Limited (Jindal Praxair) and the balance 26% is held by JSW Steel Limited. The applicant is proposing to transfer 74% of the equity share capital in Jindal Praxair to its wholly owned subsidiary company, Praxair India. The consideration for the proposed transfer is stated to be determined on the basis of cost, unless a higher consideration is required under the pricing guidelines prescribed by the Reserve Bank of India as applicable for the transfer of shares. On the facts stated above, the applicant desires to ascertain whether, based on the nature of the proposed transaction, it can be held to have earned any income taxable in India. It is the contention of the applicant that the shares of Jindal Praxair held by it are capital assets and the proposed transfer of these to Praxair India would not be 'transfer' for the purpose of computing capital gains under Section 45 read with Section 47 (iv) of the Act. It is its claim that even under Article 13 of India -Mauritius tax treaty, the capital gains arising from transfer of such capital asset is not taxable in India. The applicant further claims that the shares of Jindal Praxair held by it cannot be treated as trading stock. Even if these are to be held as such, any income arising from transfer thereof cannot be brought to tax in India, as the applicant does not have a Permanent Establishment in India. It is also its claim that the provisions of Section 115JB dealing with minimum alternate tax (MAT) are not applicable to its case. Therefore, the applicant submits that there would neither be any requirement for withholding tax Under Section 195 nor of filing of tax returns Under Section 139 of the Act. The transfer pricing provisions Under Section 92 to 92F of the Act also will have no application with respect to the proposed transaction.
(3.) THE applicant has framed following nine questions for seeking advance ruling from this Authority: 1) Whether on the facts and circumstances of the case, the investment held by Praxair Pacific Limited (hereinafter referred to as the 'Applicant'), in equity shares of Jindal Praxair Oxygen Company Private Limited ('JPOCPL') would be considered as 'capital asset' under Section 2(14) of the Income -tax Act, 1961 ('the Act')? 2) If the answer to Query 1 is in the affirmative, based on the facts of the Applicant, would the transfer of equity shares of JPOCPL from the Applicant to its wholly owned subsidiary Praxair India Private Limited ('Praxair India'), be liable to tax in India in view of the exemption from capital gains and subject to conditions provided under Section 47(iv) of the Act? 3) Whether, on the facts and circumstances of the case, the Applicant will be entitled to the benefits of the Agreement for avoidance of double taxation and prevention of fiscal evasion entered into between the Government of the Republic of India and the Government of Mauritius ('Treaty')? 4) If the answers to Query 1 and Query 3 are in the affirmative, on the facts and circumstances of the case, whether the gain arising to the Applicant, is liable to tax in India having regard to the provisions of Article 13 of the Treaty? 5) If the answer to Query 1 is in the negative, whether the gains arising to the Applicant from the sale of equity shares of JPOCPL will be taxable in India in the absence of Permanent Establishment of the Applicant in India and in light of the provisions of Article 7 read with Article 5 of the Treaty? 6) If the answer to Query 4 or Query 5 is in the negative, whether the Applicant would be liable to tax under the provisions of Section 115JB of the Act? 7) Where, on the facts and circumstances of the case, the gains arising to the Applicant on account of the proposed transfer is not taxable in India under the Act or the Treaty, whether Praxair India, the transferee company, is required to withhold tax in accordance with the provisions of Section 195 of the Act? 8) On the facts and circumstances of the case, if the gains arising to the Applicant on account of the proposed transfer are not taxable in India, then, whether the Applicant is required to file any return of income under Section 139 of the Act? 9) On the facts and circumstances of the case, whether the proposed transfer of equity shares by the Applicant to Praxair India attracts the transfer pricing provisions of Section 92 to 92F of the Act?;


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