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Vide (2021] 431 ITR 87 the AAR confronted a scheme of internal restructuring involving a transaction of transfer of shares between non-resident entities at no consideration. The applicant contended that in this situation the computation provision fails so no capital gains tax . Further it claimed the same in the nature of gift hence covered under section 47(iii) of the Income-tax Act. Finally it also claimed that as shares are transferred by way of gift no income arises to the applicant and the transferor and therefore the transaction is not subjected to transfer pricing provisions as well.
Rejecting the stance the AAR held that the transfer was without any commercial logic or substance and fell under scheme for tax avoidance.
In the final go it left a note that an applicant can manage its business affair in any manner it likes but the tax authorities will have to apply appropriate tax provisions under the Act. An applicant can transfer shares at no consideration but in case of international transaction the provisions of sections 92 to 92F would be applicable and arm’s length price has to be ascertained.

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