Section 112

Section 112 — the law in short

What the courts have decided on section 112, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Tiger Global Eight Holdings v Dy CIT ITATHelps taxpayerNo later treatment found
  The AO says my Mauritius holding structure is treaty shopping. Is my TRC enough to answer that?
  It is enough unless the officer rebuts it with evidence. The TRC is statutory evidence of residential status, so the burden is on the Assessing Officer to displace it with cogent material; holding the assessee to be treaty shopping on suspicion and inferences did not meet that standard, and the Article 13(4) exemption was allowed.
• Deivanayagam Maruthini v. DDIT (International Taxation), Chennai (ITAT Chennai) — bonus shares issued on original shares subscribed to in convertible foreign exchange are themselves a 'foreign exchange asset', so the s.115E concessional rate applies to the gain on selling them ITATHelps taxpayer
  My NRI client subscribed to shares of an Indian company in convertible foreign exchange, later received bonus shares on them, and has now sold only the bonus shares. The assessing officer says bonus shares were not acquired with foreign exchange, so they are not a foreign exchange asset and the concessional rate under section 115E is not available. Is he right?
  No, on this Tribunal's reasoning. It held that there can be no differentiation between the definition of 'foreign exchange asset' as applied to section 115E and as applied to section 115F, and that bonus shares issued on original shares acquired in convertible foreign exchange are covered by section 115C(b) — so the long-term capital gain on selling the bonus shares takes the concessional rate under section 115E. The orders of the lower authorities were set aside and the Assessing Officer was directed to give the assessees the benefit of the concessional rate.
• In re Mohsinally Alimohammed Rafik Advance RulingHelps taxpayerSuperseded by amendment
  I am an Indian citizen who has lived in Dubai for years and I hold Indian shares and debentures. Can I claim the India-UAE treaty on my dividends, interest and capital gains?
  Yes. The Authority ruled that the applicant, a non-resident who had lived in Dubai for seventeen years, was a resident of the UAE for the India-UAE agreement. Article 4(1) asks whether a person is liable to tax under a State's laws because of a nexus with it, not whether tax is in fact collected; and on the tie-breaker his permanent home, his closer personal and economic relations and his habitual abode were all in Dubai. Gains on his Indian movable property were therefore taxable only in the UAE under article 13(3), dividends capped at 15 per cent under article 10 and interest at 12.5 per cent under article 11. When the assets were acquired made no difference.
• Statutory position — section 112A: the long-term rate and the exempt slice, before and after 23 July 2024 CBDT Circulars & InstructionsCuts both ways
  My client sold listed equity shares twice in FY 2024-25 — once in June 2024 and once in September 2024. What rate and what exempt threshold apply to each lot?
  Two different rates apply inside the same previous year, but only ONE exempt slice. For a transfer BEFORE 23 July 2024 the section 112A rate is ten per cent; for a transfer ON OR AFTER 23 July 2024 it is twelve and a half per cent. The exempt slice is one lakh twenty-five thousand rupees for the whole of the previous year — the proviso to section 112A(2)(i) says in terms that the limit applies on the AGGREGATE of the long-term capital gains under both sub-clauses — so it is not split between the two rate blocks and the pre-23-July lot does not get a separate one lakh rupee slice. The one lakh rupee figure governs transfers up to 31 March 2024 only. Both changes were made by the Finance (No. 2) Act 2024 with effect from 23 July 2024.
• Statutory position — section 2(42A): only two holding periods from 23 July 2024 CBDT Circulars & InstructionsCuts both ways
  Is a listed bond still a long-term asset only after three years, and what about units of a listed business trust? My client transferred both in late 2024.
  From 23 July 2024 there are only two holding periods: twelve months for all listed securities and twenty-four months for everything else. The thirty-six month period is gone, so units of a listed business trust move from thirty-six months to twelve, and bonds, debentures and gold move from thirty-six months to twenty-four; unlisted shares and immovable property stay at twenty-four.
• Statutory position — section 115UA: what a REIT or InvIT passes through, what it pays at the maximum marginal rate, and the 2023 carve-out CBDT Circulars & InstructionsCuts both ways
  My client holds units in a listed REIT. Which part of what the trust distributes is taxable in his hands, and what does the trust itself pay tax on?
  Section 115UA(1) makes the distributed income of a business trust retain, in the unit holder's hands, the same nature and proportion it had in the trust's, and section 115UA(3) charges to tax in the unit holder's hands the distributed income which is of the nature referred to in clause (23FC) or clause (23FCA) of section 10 — broadly, interest and dividend from the special purpose vehicle, and rent from directly held property. Everything else forming the trust's own total income is charged in the trust's hands at the maximum marginal rate under section 115UA(2), subject to sections 111A and 112; and since 1 April 2024 sub-section (3A) removes the character-retention rule altogether for a sum charged under section 56(2)(xii).

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.