9911796707
TMI Blog2019 (3) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income for the assessment year 2012-13 declaring total income of Rs. 11.93 crore being the interest eared by the petitioner and offered the same to tax @ 10%, placing reliance on Article 11 of the Double Taxation Avoidance Agreement ("DTAA" for short) between India and Cyprus. It is undisputed that M/s. Wadhwa Residency Pvt Ltd is an associated enterprise of the petitioner and the receipt of interest income was subject to transfer pricing mechanism. The order of assessment came to be passed by the Assessing Officer on the petitioner's said return of income under Section 143(3) of the Income Tax Act, 1961 ("the Act) for short) on 23.3.2016. The income was taxed at 10%, as offered by the petitioner. In order to reopen such assessment, the Assessing Officer had issued the impugned notice. For doing so, the Assessing Officer had recorded following reasons:- "THE REASONS FOR INITIATING PROCEEDINGS U/S 148 FOR A.Y. 2012-13 The return of income for A.Y. 2012-13 was e-filed on 30.11.2012 declaring total income of Rs. 11,93,41,710/- On which assessee has deducted TDS of Rs. 1,19,34,170/. @ 10%. The return was processed u/s 143(1) on 31.12.2013. 2. The assessee compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a single employee and any substantial economic activity in Cyprus and working of the company is controlled by beneficial share holder of the company by hiring of services of working as directors from employees of IPS Mauritius by whom local address is given in Mauritius to beneficial owner of Assessee Company. 10. In the assessment proceedings, it is held that the assessee is not beneficial owner of this income on these tests and thus treaty benefits are denied to the assessee to the extent of interest income only in the present case. Interest income of Rs. 55,01,17,499/- is taxed at rate @ 20% as per provision of section 115A(1)(a)(ii) of I.T. Act, 1961 instead of 10% offered by the assessee. 11. In view of this, it was held that the assessee is not beneficial owner of this income on these tests and thus treaty benefits are denied to the assessee in respect of interest income. Interest income is taxed at the rate @ 20% as per provision of Section 115A(1)(a)(ii) of I.T. Act, 1961. 12. It is pertinent to note that during the assessment proceedings, order u/S. 143(3) r.w.s. 92CA(3) of the I.T. Act, 1961 for the A.Y. 2012-13 was passed on 23.03.2016. The assessing officer has not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer has recorded proper reasons. During the course of the assessment of the petitioner assessee for the subsequent assessment years, the entire issue was examined by the Assessing Officer at length and he has come to the conclusion that the assessee had wrongly claimed reduced rate of tax on the interest income. Thus, the formation of belief of the Assessing Officer in the present case is based on information available subsequent to the framing of assessment. He relied on several decisions reference to which would be made at an appropriate stage. 5. Having thus, heard the learned counsel for the parties, we may record that the impugned notice has been issued beyond the period of 4 years from the end of relevant assessment year. Under these circumstances, the additional requirement flowing from the first proviso of Section 147 of the Act that escapement of income chargeable to tax should be due to a failure on the part of the assessee to disclose truly and fully all material facts, must be satisfied. We may peruse the materials on record on such basis. 6. The perusal of the reasons recorded by the Assessing Officer would show that according to the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had provided following information and documents :- "A. At the outset, we wish to inform you that assessee is an investment holding company incorporated in Cyprus on 20 April 2011. The assessee has made investment in compulsory convertible debentures ("CCDs") of Wadhwa Residency Private Limited ("WRPL") amounting to Rs. 1,61,53,50,000 during the year under consideration. Further, the assessee has received interest on CCDs amounting to Rs. 11,93,41,705/- The assessee has earned interest on CCDs and has not earned any other income in India during the year under consideration. B. ........ 3. Copy of incorporation certification is enclosed as Annexure III 5. Copy of financial statements is enclosed as Annexure VI. Further, the assessee is a foreign company and made investment in India and therefore, the assessee is not required to prepare tax audit report. 7. The assessee has earned interest on CCDs from WRPL as follows:- AY 2011-12 - Nil. Investment was made in CCDs in AY 2012- 13 AY 2012-13 - Rs. 11,93,41,705 AY 2013-14 - Rs. 32,30,70,000 8. Copy of the agreement in respect of investment in CCDs of WRPL is enclosed as Annexure VII. 9. Directors of the assessee company ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d passed the the order of assessment on 23.3.2016 in which he has observed as under:- "4. The assessee i.e Precilion Holdings Limited is a company incorporated in Cyprus. The Principal activity of the assessee is to act as an investment holding company. 5. During the year, the assessee has received interest on compulsory convertible debentures amounting to Rs. 11,93,41,705/- from Wadhwa Residency Private Limited, which is Associated Enterprises of the assessee. 6. The Arm's length price of the international transaction as reported by the assessee has been accepted by the transfer pricing officer. The details furnished by the assessee have been verified and discussed. 7. In view of the facts of the case as discussed above, the total income of the assessee is assessed on the income of Rs. 11,93,41,705/- i.e income returned. 8. Assessed accordingly under Section 143(3) r.w.s. 92CA(3) of the Act at the total income of Rs. 11,93,41,710 (round off) as interest income. Give credit for TDS and taxes paid, if any after due verification. Charge interest as applicable. Issue D.N./R.O/ Challan accordingly." 9. It can thus be seen that the entire financial activity of the petitioner d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l material outside of the present assessment proceedings would not form a valid source of information permitting him to reopen assessment. If during the assessment of the later assessment year, the Assessing officer collects or chances upon new material which may have bearing on the assessment of the assessee, and in case where the assessment is sought to be reopened beyond four years, he can also establish lack of true and full disclosures on the part of the assessee, it may be open for him to reopen assessment of the earlier year. However, merely because in the later year, the Assessing Officer takes a different view on the basis of similar material, which may have been collected during such process, would not permit him to reopen the assessment. Under these circumstances, the Assessing Officer's reference to further exercise undertaken while carrying out scrutiny assessment for the assessment year 2014-15 during which he decided to tax the assessee at higher rate would not enable the Assessing Officer in the present case to reopen the assessment beyond four years. 11. We may now refer to the decisions cited by the learned counsel for the Revenue. In case of Raymond Woolen M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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