The Assessee, ‘eBay Singapore Services Private Limited’[1], a Singapore incorporated company, holding a valid Tax Residency certificate in Singapore, had transferred shares of Flipkart Singapore (Singapore entity) to another Singapore-based company and claimed exemption under the India–Singapore DTAA. Tax officer denied the exemption contending that the assessee’s management and control was situated in USA and not Singapore; therefore, the benefit was denied.
Upon further appeal to the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT), the ITAT ruled that capital gains arising to a Singapore tax resident from sale of shares of a Singapore company (which derives ‘substantial value’ from Indian assets) fall under the residual clause i.e. Article 13(5) of the India – Singapore tax treaty (Tax Treaty) and hence, the income from the sale of such shares is not taxable in India. ITAT noted as under:
- the capital gains in question cannot be held as chargeable to tax in India, as it allocated exclusive taxing rights to the State of Residence of the alienator (i.e. Singapore) in respect of the gains from sale of shares.
- The assessee had submitted a valid TRC and that the sale of shares of, Flipkart Singapore, to another Singaporean entity, was not taxable in India.
- The ITAT concurred with the assesse’s contention that while Indian domestic law deems indirect transfers of Indian assets to be taxable in India, such deeming provisions cannot override treaty allocation.
- Further the Article 13(5) of the DTAA allocates taxing rights over such residual category gains exclusively to the State of residence of the alienator, i.e. Singapore.
- The ITAT underscored that unlike certain other treaties (India-Mauritius and India-Cyprus) which expressly confer source-state taxing rights on shares deriving value from immovable property or local assets, the India–Singapore DTAA does not contain such ’look-through clause’.
Accordingly, the gains could not be held chargeable to tax in India.
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[1] eBay Singapore Services Private Limited v. DCIT, [TS-1343-ITAT-2025(Mum)]