HC ruling in Cairn - Is FDI back to centrestage?
Recently, Delhi HC in the case of Cairn UK [TS-510-HC-2013(DEL)] held that a non-resident seller is eligible for lower rate of 10% on capital gains, on off-market sale of listed shares, as per proviso to Sec 112(1). In arriving at this decision, the HC followed AAR ruling in Timken France SAS, which was also relied on by the Authority in six other cases. However the immediately preceding AAR Chairman took an opposite view, which was reversed by the High Court. Referring to SC ruling in Vodafone International Holding [TS-23-SC-2012], HC observed that there should be consistency and uniformity in interpretation of provisions as uncertainties can disable and harm governance of tax laws.
This once again brings to forefront the debate on whether there is indeed an interplay between FDI inflows and stability in tax regime. Should foreign investment be one of the criteria while deciding tax cases, or should Courts only strictly interpret the taxing provisions?