Recently the AAR in the case of Banca Sella SPA ("the
Assessee"), dealt with the issue of tax implications arising
on amalgamation of two Italian companies, which resulted in
transfer of a branch office in India to the amalgamated company,
under the Income-tax Act, 1961 ("the Act") and the
India-Italy Double Taxation Avoidance Agreement ("Tax
Treaty") and held that in the absence of consideration flowing
to the amalgamating company, the transfer cannot be taxed as
capital gains in India.
The Assessee together with its Holding company and other Group
companies, holds another Italian company, SSBS. The Assessee
holds 15% in SSBS (prior to its amalgamation) and the balance is
held by other Group entities. The Group was carrying out business
in India through one of its subsidiaries (SSIPL) incorporated in
India. On 15 February 2010, SSIPL transferred the information
technology business to the Indian branch of SSBS (set up in January
2010) on a going concern basis, for a
