2024 (9) TMI 1058 - HC - Income Tax

Reopening of assessment - Investment in the equity shares of Indian subsidiary of the writ petitioner - whether a capital account transaction? - HELD THAT - As decided in Angelantoni Test Technologies 2024 (1) TMI 426 - DELHI HIGH COURT wherein held that the fundamental premise of the Respondent that the above investment by the Petitioner in the shares of its subsidiary amounted to income which had escaped assessment was flawed. The question of such a transaction forming a live link for reasons to believe that income had escaped assessment is entirely without basis and is rejected as such. Thus, reassessment proceedings set aside - Decided in favour of assessee.

Summary

Issues:
Challenge to Income Tax Assessment for AY 2019-20 regarding investment in equity shares of Telenor India.

Analysis:
The High Court heard arguments from both parties regarding the challenge to the Income Tax Assessment for the Assessment Year 2019-20 concerning the investment made by the petitioner in the equity shares of Telenor India. The petitioner, a Singapore-based company, invested 1466 crores in Telenor India. The Assessing Officer issued a notice under Section 148A(b) of the Income Tax Act, 1961, alleging unexplained sources of funds for the investment. The petitioner submitted various documents to support the investment, including a Foreign Inward Remittance Certificate and other relevant financial statements. The petitioner contended that the investment in equity shares should not lead to income escapement unless there is evidence of round-tripping, and highlighted the importance of the submitted documents. The court acknowledged the need for further examination in the matter and issued a notice to the respondent.

The court referred to a previous judgment in Angelantoni Test Technologies SRL case, emphasizing that investment in shares of an Indian subsidiary is a capital account transaction and does not constitute income. Citing the Nestle SA case, the court reiterated that such investments are not to be treated as income, as confirmed by the CBDT. Based on this legal precedent, the court found the impugned notices and order issued by the Assessing Officer to be unsustainable. Consequently, the court allowed the writ petition and quashed the notices and order related to the Income Tax Assessment, providing relief to the petitioner in this matter.