SC stays income tax notice against General Electric
December, 15th 2007
The Supreme Court on Friday stayed the notices issued by the Income Tax department demanding payment of capital gains tax from US-based General Electric Company for sale of GECIS Global shares to GECIS Investment Co.
A bench headed by Justice A B Bhan stayed the demand notices issued by the department on April 11 and October 10 this year after General Electric Company (GEC) and GE Capital International (Mauritius) challenged the jurisdiction of the tax authorities to initiate any action.
The petitioners alleged that a demand notice cannot be raised on a transaction related to transfer of shares of a company incorporated outside India by a non-resident to another non-resident, despite that leading to a change in ownership in India.
According to GEC, where there was no change in the ownership of the Indian assets (the shares in the Indian company) there was no resultant gain taxable in India.
The petition filed through Vijayalakshmi Menon stated that entire share capital of Delhi-based Genpact India was acquired by the GE Capital International (Mauritius) with Foreign Investment Promotion Board's approval in 1998.
Following this, a Security Purchase Agreement (SPA) was entered dated November 7, 2004.
Pursuant to the SPA, GE Capital and certain nominee shareholders gifted the GECIS shares to GECIS India Investments and GECIS India holding, respectively, the petition said, adding that GECIS Investments Co had acquired 99.1 per cent of the preferred stock and 60 per cent of the nominal common stock of a newly organised GECIS Global (Luxembourg) which represented the transfer of a capital asset situated outside India.