9911796707
TMI Blog2023 (2) TMI 1008X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the income tax Act in case their application is more beneficial. There is no dispute that GAAR is applicable to the assessment year under consideration which empowered the revenue to declare the subject transaction to be an impressible arrangement. As per section 101 of the ITA, domestic GAAR cannot be pressed into operation for denial of a tax benefit, where the case of an assessee falls within one of the conditions prescribed under Rule 10U of the IT Rules 1962. Thus in the case in hand the short term capital gain the tax on which is below the threshold set out in Rule 10 U (1) (a) (supra) further the impugned shares were acquired by the assessee on 22.08.2016 which is prior to the cut off date set out in Rule 10 U (1)(d) Assuming domestic GAAR provision are applicable but for the aforestated facts the treaty benefit cannot be denied to the assessee. AO / DRP have also invoked the doctrine substance over form to deny the benefit of Article 13 (4A). In our considered opinion the said doctrine is prior to the codification of domestic GAAR and the legislators were conscious enough when they were providing exemptions under Chapter X-A of the Act. Even the treatment of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the investments in DFHPL were made by the Appellant in 2016 and income arising on transfer thereof was specifically exempt from purview of General Anti-Avoidance Rule as contained in Chapter X-A of the ITA read with Rule 10 U (1) (d) of the Rules. 24. That the AO / DRP erred in denying the Appellant the benefit of Article 13 (4A) of the DTAA in disregarded to Rule 10U (1) (a) of the Rules, which exempts arrangements having tax benefit not exceeding INR 3,00,00,000/- from the purview of General Anti-Avoidance Rule contained in Chapter XA of the ITA. 26. That the AO/DRP erred in ignoring that the exemption from the applicability of the General Anti- Avoidance Rule, as contained in Chapter X-A of the ITA read with Rule 10U (1) (a) and or / (d) of the Rules, had an overriding effect over Article 24A of the DTAA, by virtue of section 90 (2A) of the ITA. 3. Representatives of both the sides were heard at length. Case records carefully perused. The relevant documentary evidences brought on record in the form of paper book duly considered in the light of Rule 18 (6) of the ITAT Rules. 4. Facts emanating from the record show that return of the assessee was selected for complete s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner is a bonafide entity and not a shell/conduit entity as it complies with the LOB clause to the India-Singapore DTAA as the expenditure has been incurred in Singapore and the same has been certified by an independent chartered accountant and accepted by the authorities in Singapore i.e. Income Tax authorities, Monetary Authority of Singapore. Accordingly, the allegation of treaty shopping is irrelevant in the present case as the India- Singapore DTAA has a limitation of benefit clause which the petitioner satisfies RESPONDENTREVENUE CANNOT GO BEHIND THE TRC 74. This Court is in agreement with the argument of learned senior counsel for the petitioner that the entire attempt of the respondent in seeking to question the TRC is wholly contrary to the Government of India's repeated assurances to foreign investors by way of CBDT Circulars as well as press releases and legislative amendments and decisions of the Courts in Union of India v. Azadi Bachao Andolan (supra) Vodafone International Holdings B.V. (supra), Commissioner of Income-tax (International Taxation)-3, Mumbai v. JSH (Mauritius) Ltd., (2017) 297 CTR 275 (Bom) and Sanofi Pasteur Holding SA (supra). 75. In fact w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entity which is treated as a company or body corporate under the taxation laws in force in the respective Contracting States . 82. Article 4 of the India-Singapore DTAA states that the term resident of a Contracting State means any person who is a resident of a Contracting State in accordance with the taxation laws of that State. As per Singapore tax laws, a company is resident in Singapore if the management and control of its business is exercised in Singapore. 83. The petitioner has a valid TRC dated 3rd February, 2015 from the IRAS Singapore evidencing that it is a tax resident of Singapore and thereby is eligible to claim tax treaty benefits between India and Singapore. 84. As early as March 30, 1994, CBDT issued Circular No. 682 in which it was emphasised that any resident of Mauritius deriving income from alienation of shares of an Indian company would be liable to capital gains tax only in Mauritius as per Mauritius tax law and would not have any capital gains tax liability in India. This circular was a clear enunciation of the provisions contained in the DTAA, which would have overriding effect over the provisions of Sections 4 and 5 of the Act by virtue of Section 90 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 789 dated 13.4.2000. Since this is the crucial Circular, it would be worthwhile reproducing its full text. The Circular reads as under.... xxx xxx xxx xxx 49. As early as on March 30, 1994, the CBDT had issued circular no. 682 in which it had been emphasised that any resident of Mauritius deriving income from alienation of shares of an Indian company would be liable to capita! gains tax only in Mauritius as per Mauritius tax law and would not have any capital gains tax liability in India. This circular was a dear enunciation of the provisions contained in the DTAC, which would have overriding effect over the provisions of sections 4 and 5 of the Income-tax Act, 1961 by virtue of section 90(1) of the Act. If, in the teeth of this clarification, the assessing officers chose to ignore the guidelines and spent their time, talent and energy on inconsequential matters, we think that the CBDT was justified in issuing 'appropriate' directions vide circular no. 789, under its powers under section 119, to set things on course by eliminating avoidable wastage of time, talent and energy of the assessing officers discharging the onerous public duty of collection of revenue. The circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hopping leads to other tax abuses . xxx 134. We may also refer to the judgment of Gujarat High Court in Banyan Berry v. CIT (1996) 222 ITR 831/84 Taxman 515 where referring to McDowell Co. Ltd.'s case (supra), the Court observed: ... The facts and circumstances which lead to McDowell's decision leave us in no doubt that the principle enunciated in the above case has not affected the freedom of the citizen to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection, within the framework of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity. (p. 850) This accords with our own view of the matter. xxx xxx xxx xxx 146. We are unable to agree with the submission that an act which is otherwise valid in law can be treated as non-est merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudice to the national interests, as ,perceived by the respondents. 87. It is a settled position of law that the Circulars issued by CBDT are binding on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of that contracting state and the Income Tax Authorities in India will not go behind the TRC and question his resident status . 91. Consequently, the Government of India vide Press Release dated 1st March, 2013 once again reiterated that TRC shall be treated as a sufficient condition for claiming relief under the DTAA. It is pertinent to mention that Press Release dated 1st March, 2013 was not Mauritius- specific and it clarified beyond doubt that the TRC produced by a resident of a contracting state would be accepted as evidence of tax residency, and the Income Tax authorities in India will not go behind the TRC and question the resident status of the assessee. Moreover, the proposed sub-Section 5 of Section 90 was not inserted in the Act. 10. In the light of the aforementioned pertinent findings of the Hon ble Jurisdictional High Court the tax residency certificate issued by the Singapore authorities are as under :- 11. In addition to the above the other most important factor which needs special consideration is that the two shares holders namely Sumit Nanda and Shikha Nanda are also residents of Singapore as per the tax residency certificates as under :- 12. Further the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tance over form to deny the benefit of Article 13 (4A). In our considered opinion the said doctrine is prior to the codification of domestic GAAR and the legislators were conscious enough when they were providing exemptions under Chapter X-A of the Act. 20. Even the treatment of the assessee company as Shell or conduit also do not hold any water in as much as the veracity of the expenditure incurred by the assessee in Singapore was a subject matter of tax scrutiny in Singapore and the same has been accepted to be genuine by the Singapore tax authorities as per tax assessment orders mentioned elsewhere. 21. To conclude it is not in dispute that the assessee has furnished a valid tax residency certificate issued by Inland Authority of Singapore, audited financial statements and return of income filed alongwith tax assessment orders by Singapore Tax Authority, therefore, in the light of the binding decision of the Hon ble Jurisdictional High Court of Delhi in the case of Black Stone Capital Partners (supra) we direct the AO to delete the impugned disallowance and allow the treaty benefit to the assessee as per the relevant provisions of the law/treaty. The grounds addressed before us ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
