Computation of capital gains is embedded in concept of valuation and merely for this reason question of capital gain arising in application cannot be held to be barred by clause (ii) of proviso to section 245R(2).
ALLIANCE DATA LUX FINANCING S.A.R.L., IN RE
(2021) 110 CCH 0059 IAAR
Short Overview:
Advance rulings.
Taxability of dividend in kind
Present application was filed wherein question was raised whether receipt of dividend-in-kind (i.e. shares of N VCJN) by Applicant from A shall not be chargeable to tax under provisions of Act
Held that there is no issue of valuation involved in questions raised by applicant in present application
Concept of valuation is inherently embedded in any question of capital gains
But what is required to answer in present application is whether applicant is liable to pay any capital gains tax on transfer of shares of NVCJN and on receipt of dividend-in-kind
It is only question of “principle of taxability” that is to be decided and not mechanism of computation of capital gains
Court is not concerned with quantum of capital gains that will be derived in present transactions—Issue of valuation or fair market value of shares transferred are relevant for computation of capital gains tax
Assessing Officer will be free to determine fair market value of property in case it is held that applicant is liable to pay capital gains tax
It was held in case of Worldwide Wickets that computation of capital gains is embedded in concept of valuation and merely for this reason question of capital gain arising in application cannot be held to be barred by clause (ii) of proviso to section 245 R(2)
As regarding transaction designed prima-facie for avoidance of tax, Department has not made out any case as to how transaction was designed for avoidance of tax
Issue of taxability on which objection has been raised is already in present application
Assessee’s application allowed.