The Supreme Court have to decide shortly whether the Indian authorities have the jurisdiction to levy tax in a transaction of transfer of shares of a company incorporated outside India by an NRI to another company abroad if the consequence of the transfer is change of control over a company in India.
The US-based General Electric Company moved the apex court challenging the Income Tax department’s notice demanding payment of capital gains tax for the sale of General Electrical Company (GECIS) Global shares to Mauritius-based GECIS Investment Co resulting in acquisition of change of ownership of Delhi-based Genpact India.
A bench headed by Chief Justice K G Balakrishnan issued notices issued to the Income Tax department to file its reply on the demand letter issued to the company on April 11 and October 10.
According to the petition filed by General Electric Company (GEC) and GE Capital International (Mauritius), there was no change in the ownership of the Indian assets (the shares in the Indian company) and hence there was no resultant gain taxable in India.
The petition filed through Vijayalakshmi Menon also stated that the entire share capital of Delhi-based Genpact India was acquired by the GE Capital International with Foreign Investment Promotion Board’s approval in 1998.