NEW DELHI: In a major relief for eBay Singapore Services, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that short-term capital gains of Rs 2,257.91 crore arising from the sale of Flipkart Singapore’s shares are not taxable in India, holding that the benefit of the India–Singapore Double Taxation Avoidance Agreement (DTAA) applies in this case.
The ITAT bench observed that under Article 13(5) of the India–Singapore DTAA, gains from the alienation of shares are taxable only in the state of residence of the alienator — in this case, Singapore.
eBay Singapore had sold shares of Flipkart Singapore to another Singapore-based company, FIT Holdings, and claimed exemption from Indian taxation under the treaty. The company submitted a valid Tax Residency Certificate (TRC) from Singapore.
The tax department, however, argued that the “real management and control” of eBay Singapore was in the US, and that the gains should be taxable in India under Section 9(1)(i) read with Explanation 5 of the Income Tax Act, which deems indirect transfers of Indian assets as taxable.
Rejecting the department’s contention, ITAT held that while domestic tax law may deem such indirect transfers taxable, the provisions of the DTAA — being more beneficial under Section 90(2) — would prevail. The tribunal emphasised that the India–Singapore treaty does not include a ‘look-through’ clause, unlike India’s treaties with Mauritius or Cyprus, which allow taxation of gains derived from shares linked to local assets.
Referring to the pending Supreme Court case involving Tiger Global International II Holdings, the tribunal noted that unless the tax department establishes that the transaction was a layered or colourable device, the preliminary observations of the apex court in that case would not apply here.
ITAT concluded that the transaction “does not fall within the ambit of clause (2) or clause (4B) of Article 13,” and that under Article 13(5), taxing rights over such residual capital gains rest solely with Singapore.
Senior Advocate Porus Kaka, assisted by Manish Kanth, appeared for eBay Singapore, while Special Counsel Parag Vyas represented the revenue department.
