Khushi J. Prajapati
The Income Tax Appellate Tribunal (ITAT), Delhi held that the income derived from the transfer of a capital asset was not taxable within the provisions of Section 9(1)(i)(a) of the Income-tax Act, 1961.
The bench observed that the Nikesh Arora, the appellant, had received compensation for the termination of rights and interests in Indian companies Snapdeal and Ola Cab. The most important question was whether or not this income should be taxed as per Indian law.
The Tribunal further held that it was not taxable in India because the income earned from the termination of rights and interests in Indian companies did not fall within the definition of a “transfer of a capital asset” as defined by section 9 (1) (i) (a) of the Act. In this case, the Tribunal pointed out that the appellant’s rights and interests were not directly related to share ownership but were also related to those shares, and, therefore, their termination did constitute a transfer of a capital asset within the meaning laid down by this applicable statute.
The ITAT’s decision made it clear that termination of contractual rights or interests that do not involve direct transfers of shares or any other capital assets does not give rise to tax liability under specific provisions set out under Section 9 (1) (i)[a] within the Income-tax Act.
Facts
The appellant, Nikesh Arora, filed an appeal against the final assessment order dated March 14, 2022, under section 143(3) read with section 144C(13) of the Income-tax Act, 1961. The dispute centers around the taxation of gains arising from the termination of certain rights and interests associated with shares of Indian companies, specifically Snapdeal and Ola Cab. These gains were settled in cash as per a termination agreement. The key argument from the appellant was that these gains should not be taxable in India, as they did not arise from the direct sale or transfer of shares but from the extinguishment of associated rights and interests. The appellant contended that these rights and interests were not “assets” under the purview of Indian tax law, and therefore, the gains should not be subject to Indian taxation
Case Details
Court: Income Tax Appellate Tribunal, Delhi Bench ‘D’, New Delhi
Judges: G.S. Pannu, Vice-President and Saktijit Dey, Vice-President
Case No.: ITA No.1008/Del/2022
Assessment Year: 2017-18
Case Name: Sh. Nikesh Arora (Appellant) vs. DCIT, International Taxation (Respondent)
