V.N.U. INTERNATIONAL B.V. Vs. DIRECTOR OF INCOME TAX

JUDGEMENT

(1.) THE applicant, VNU International B.V., is a company incorporated in the Netherlands. The applicant states that it is a tax resident of the Netherlands and does not have any permanent establishment in India. It is a subsidiary of the Nielsen Company B.V. The applicant holds 100 per cent shares of AC Nielsen ONG -MARG Pvt Ltd. (ACNOM), a company incorporated in India. It is stated that ACNOM is a solution provider of syndicated and non syndicated information services in India that examines health care, consumer products, financial, retail, and business to business and media performance trends. ORG -IMS Research Pvt. Ltd. (ORG -IMS) is an Indian company which had entered into a scheme of arrangement with ACNOM in the year 2003 whereby the pharmaceutical industry retail research business of ACNOM got demerged. In the year 2004, the applicant transferred 50% shares of ORG -IMS to IMS -AG, a company incorporated in Switzerland. After the said transfer, the applicant was left with 50,756 shares of ORG -IMS. The details of acquisition of 50,765 shares of ORG -IMS held by the applicant as per letter dated 25.03.2010 are as under:

(2.) THE applicant executed a Share Purchase Agreement (SPA) whereby it sold these 50,765 shares of ORG -IMS to IMS -AG & Interstatistik AG (purchasers) for a consideration of USD 74,08,643. Earlier, in the proposed SPA, the sale consideration was of USD 70,00,000 plus additional payment. However, as per the executed SPA, the clause relating to additional payment was removed and the purchase consideration was revised to USD 74,08,643. Thus, 50765 shares of the Indian company ORG -IMS acquired at a cost of Rs. 4,61,500 were sold for a consideration of USD 74,08,643.

(3.) ON the facts and circumstances of the case, whether IMS AG would be liable to withhold taxes under Section 195 of the Act and if so, on what amount would the tax have to be deducted?