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TMI Blog2020 (1) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 - - - Dated:- 20-12-2019 - Shri Saktijit Dey, Judicial Member And Shri Manoj Kumar Aggarwal, Accountant Member For the Assessee : Shri Niraj Sheth For the Revenue : Shri Avaneesh Tiwari ORDER PER SAKTIJIT DEY, J.M. The aforesaid cross appeals arise out of order dated 16th July 2018, passed by the learned Commissioner of Income Tax (Appeals) 56, Mumbai, pertaining to the assessment year 2012 13. ITA no.5411/Mum./2018 Assessee s Appeal 2. In grounds no.1 and 2, the assessee has challenged the addition of interest income of ₹ 225,96,13,605, and ₹ 392,77,64,878, earned on foreign currency loan given to Indian Corporates and on debt securities respectively. 3. Brief facts are, the assessee, as stated by the Assessing Officer, is a Limited Liability Company incorporated and registered in Mauritius. The assessee is a Foreign Industrial Investor (FII) duly approved by the Securities Exchange Board of India (SEBI). For the year under consideration, the assessee filed its return of income on 28th September 2012, declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. 6. The learned Departmental Representative, though, agreed that the issues are decided in favour of the assessee by the Tribunal in other assessment years, however, he relied upon the observations of the Assessing Officer and learned Commissioner (Appeals). 7. We have considered rival submissions and perused the material on record. Facts on record reveal that identical issue came up for consideration before the Tribunal in assessee s own case in various other assessment years. In fact, learned Commissioner (Appeals) while deciding the issue has himself followed his own orders passed in the assessment years 2010 11 and 2013 14. While deciding the issue in the assessment year 2011 12, the Tribunal in ITA no.1708/Mum./2016, dated 2nd July 2018, has held in the following manner: 3. The appellant before us is a limited liability company which is incorporated, registered and tax resident of Mauritius. During the previous year relevant to the assessment year under consideration, assessee had, inter-alia, earned interest income of ₹ 94,57,45,856/- from investments in debt securities made in accordance with the SEBI R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal dated 16.12.2016 (supra) was recalled u/s 254(2) of the Act vide order dated 10.01.2018 (supra) only to the extent of the issue of beneficial ownership . 4. In this background, we have heard both the parties on the issue of beneficial ownership under Article 11(3)(c) of the India-Mauritius Tax Treaty qua the interest income of ₹ 94,57,45,856/- earned by the assessee. On this aspect, we find that the DRP required the assessee to explain as to how it fulfils one of the requirements of Article 11(3)(c) of the IndiaMauritius Tax Treaty which prescribes that such interest must be beneficially owned by the assessee. As per the DRP, the aforesaid was one of the pre-requisites before Article 11(3)(c) of the India-Mauritius Tax Treaty could be applied to say that the interest income in question was not taxable in India. The DRP has reproduced the submissions put forth by the assessee wherein assessee asserted that the interest income of ₹ 94,57,45,856/- earned from investment in debt securities was beneficially owned by it. Assessee specifically drew attention of the DRP to CBDT Circular no. 789 dated 13.04.2000 which, inter-alia, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . to the assessee was disallowed u/s 40(a)(i) of the Act on the ground that the payer therein, i.e. Hyundai Motor India Ltd. had not deducted the requisite tax at source. The Tribunal in the aforesaid decision, inter-alia, examined the provisions of Article 11 of the IndiaMauritius Tax Treaty and concluded that the assessee was indeed the beneficial owner of such interest income. The relevant extract of the decision referred to reads as under :- The doubts expressed by the DRP with regard to beneficial owner of the interest income are devoid of any legally sustainable basis. No case has been made out by the revenue for the beneficial owner of the interest income being entities other than Mauritian entities in question. In terms of article 11(3), interest arising in a Contracting State (i.e. India, in this case) shall be exempt from tax in that State (i.e. India) provided it is derived and beneficially owned by, inter alia, by any bank carrying on a bona fide banking business which is a resident of the other Contracting State (i.e. Mauritius). There is no dispute that Mauritian entities in question were carrying out banking business in Mauritius, and there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntext, the CBDT Circular no. 789 dated 13.04.2000 (supra) of the CBDT is quite eloquent, whose relevant content reads as under :- 2. ..................It is hereby clarified that wherever a Certificate of Residence is issued by the Mauritian Authorities, such Certificate will constitute sufficient evidence for accepting the status of residence as well as beneficial ownership for applying the DTAC accordingly. [underlined for emphasis by us] Ostensibly, as per the clarification issued by the CBDT, wherever a Certificate of Residency is issued by the Mauritian authority, such Certificate will constitute sufficient evidence for accepting the status of residence as well as the beneficial ownership for applying the provisions of the India-Mauritius Tax Treaty. Thus, in our considered opinion, the aforesaid clarification by the CBDT supports the assertion of the assessee that based on the Certificate of Tax Residency issued by the Mauritian authority there is sufficient evidence to accept the position that the beneficial ownership of the impugned interest income is with the assessee. 9. At this point, we may note that the CBDT Circular no. 789 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntical, respectfully following the decisions of the Tribunal in assessee s own case, as referred to above, we hold that the interest income earned by the assessee is not taxable in India as the assessee is a beneficial owner as per Article 11(3)(c) of the India Mauritius Tax Treaty. Accordingly, grounds no.1 and 2 are allowed. 9. Apropos ground no.3, the assessee has filed a letter dated 23rd September 23rd September 2019, expressing the intention not to press this ground. Accordingly, this ground is dismissed as not pressed. 10. In ground no.4 the assessee has challenged levy of interest under section 234B of the Act. 11. The learned Counsel submitted, assessee being a non resident, the obligation is on the payer to deduct tax at source. Therefore, he submitted, the assessee cannot be fastened with the liability of interest under section 234B of the Act on account of failure of the payer to deduct tax at source. He submitted, while deciding identical issue in assessee s own case in the assessment year 2013 14 the Tribunal has expressed this view. 12. The learned Departmental Representative submitted, levy of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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