Capital gain tax treatment, 150-year call option

By | September 21, 2016

Capital gain tax treatment, 150-year call option: The Mumbai Bench of the Income-tax Appellate issued a decision in a case involving a transaction involving a Singapore resident that entered into a “call option” agreement with a Mauritian company. The call option was granted for a period of 150 years to the Mauritian company, allowing it to sell the entire shareholding in an Indian company. The tribunal held that there was no alienation of shares under the call option agreement, but that a valuable and substantive right in the shares of the Indian company was given to a non-resident company and that this valuable right (or interest) in the shares constituted a capital asset. Thus, this transfer would be considered to be the transfer of an asset and assessable as “capital gain.” However¸ the capital gain was not taxable in India under provisions of the India-Singapore income tax treaty because the taxing right was assigned to the resident state (here, Singapore). The case is: Praful Chandaria. Read  KPMG September 2016 report [PDF 340 KB]

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