IN RE : ARDEX INVESTMENTS MAURITIUS LTD., PRICE WATER HOUSE COOPERS PVT. LTD Vs. STATE

JUDGEMENT

(1.) THIS is an application under section 245Q(1) of the Income -tax Act by the applicant, a company incorporated under the law of Mauritius. It was formerly known as Norcros Investments (Mauritius) and the name was changed subsequently into the present one, the change of name being recognized by the registrar of companies on 13.9.2004. The applicant is a non -resident under the provisions of the Income -tax Act and is a tax resident of Mauritius as contemplated by Article 4 of the India - Mauritius Tax Treaty. The applicant held equity shares constituting 50% of the equity share capital of Ardex Endura (India) Pvt. Ltd. Ardex India is an Indian company engaged in the business of manufacturing flooring adhesives. The applicant held 6,500,000 equity shares in Ardex Endura India and the amount of investment was Rs. 65,000,000. The applicant proposes to sell its entire stake constituting 50% of the equity share capital of Ardex India, to another non -resident group company known as Ardex Beteiligungs - GmbH Germany at fair market value prevailing at the time of the proposed sale. The applicant wanted an advance ruling on the following questions.

(2.) WHETHER on the stated facts and in law, the Applicant would be entitled to receive the sale proceeds of shares of Ardex Endura (India) Pvt. Ltd., without deduction of income -tax at source?

(3.) IT is thus seen that the main stand of the Revenue is that the applicant or its predecessor in Mauritius, was simply created as a facade to made investment in India by a company in the UK and this was with the obvious intention of avoiding the liability to be taxed under the India United Kingdom Treaty and to take advantage of the India Mauritius Treaty. The funds for purchase having proceeded from the principal in the UK, the beneficial ownership of the shares vested with the company in the UK and that the shares are sought to be sold to a subsidiary in Germany, by the principal in UK and that the treaty that governed was the one between India and the UK.