The Commissioner Of Income Tax-2 v. Mitsubishi Motors Corporation

$~8 *IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 741/2016 THE COMMISSIONER OF INCOME TAX-2..... AppellantThrough Mr. Ruchir Bhatia, Sr. St. Counsel. ..... Appellant Versus MITSUBISHI MOTORS CORPORATION..... RespondentThrough Mr Rupesh Jain and Mr. Anshul Sachar,Advs. CORAM:HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE NAJMI WAZIRI O R D E R%22.11.2016 The question of law urged in this appeal under Section 260A ofthe Act is as to whether in the circumstances of the case, invocation ofproviso to Section 112(1) of the Income Tax Act, 1961 (hereinafterreferred to as ‘the Act’,for short)by the Income Tax AppellateTribunal (ITAT) in applying the lower tax @ 10% was justified. The assessee was incorporated under the laws of Japan with itshead office in Tokyo and engaged in the business of development,design, manufacture, assembly, sales and purchase, importing andother transactions relating to automobiles and its component parts. Ithas reported various streams of income. Only income under the head“Capital gains” was, however, offered for tax. The assessee has soldthe shares of Eicher Motors Ltd. in a buy back arrangement for a consideration of Rs.27.96 crore.The cost of acquisition of thoseshares was worked out to Rs.9.94 crore resulting in the long termcapital gains of` 18.01 crore.The assessee offered these to taxunder the head “Capital gains” in terms of the proviso to Section112(1) of the Act. The AO turned down the assessee’s claim andimposed a higher rate of tax @ 20%. The Dispute Resolution Panel(DRP) held that the ruling of this Court in Kairn UK Holdings Ltd. v.Director of Income-tax (2013) 359 ITR 268 (Del) was applicable andaccordingly reduced the assessee’s liability by applying the proviso toSection 112(1) of the Act. The ITAT confirmed that ruling. The learned counsel urged that the proviso to Section 112(1) ofthe Act applies and the lower rate of taxation is attracted if and only ifthe assessee does not secure any advantage on account of foreignexchange fluctuations under first proviso to Section 48.It issubmitted that in this case, the assessee did benefit from the foreignexchange fluctuations and was therefore barred from claiming benefitunder Section 112(1). This Court notices that the assessee’s claim was examined bythe ITAT which based its decision entirely on the judgement in KairnUK Holdings Ltd. (supra).This Court examined the interfacebetween Section 48 and Section 112(1) of the Act and concluded thecase in favour of the assessee that, like in the case of Kairn UKHoldings Ltd. that despite deriving foreign exchange benefits, themain benefit under Section 112(1) of the Act could not be denied.Since there is a previous ruling by this Court which we havedisinclined to disagree with the impugned order, no question of law arises. The appeal is therefore dismissed. S. RAVINDRA BHAT, J NOVEMBER 22, 2016/acm NAJMI WAZIRI, J