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TMI Blog2024 (2) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... auritius. As stated, the assessee is an investment holding company incorporated under the Mauritius Companies Act, 2001 on 12th January, 2006. The assessee also holds a valid Tax Residency Certificate (TRC) for the year under consideration. As observed by the Assessing Officer, though, for the assessment year under dispute the assessee has filed a return of income on 29.09.2016, however, such return was not subjected to scrutiny. Subsequently, information was received from Income Tax Officer, Ward-2(2)(1), International Taxation, New Delhi that an Indian company, i.e., M/s. Logix Soft-tel Pvt. Ltd. has remitted an amount of Rs. 162 crores to the assessee towards purchase of shares of M/s. Noida Cyber Park Pvt. Ltd. without withholding any tax. Based on the information received, the Assessing Officer verified the records and found that as per the returns filed by the assessee for past assessment years, it is continuously claiming loss. Taking note of the fact that, on one hand, the assessee is claiming loss, on the other hand, the remittance of Rs. 160 crores was made to the assessee without deduction of tax. The Assessing Officer reopened the assessment under section 147 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the objections of the assessee. 5. Before us, learned Senior Counsel appearing for the assessee submitted that reopening of assessment under section 147 of the Act is invalid, as there is no escapement of income. Drawing our attention to the reasons recorded for reopening of assessment, a copy of which is at page 9 of the paper-book, learned counsel submitted that as per the reasons recorded, assessment has been reopened obviously for the reason that the assessee having received huge amount of Rs. 162 crores is claiming huge losses year after year and has not offered the amount of Rs. 162 cores to tax. He submitted, the allegations of the Assessing Officer in the reasons recorded that the assessee has failed to make full and true disclosure of its income is totally misplaced, as in the return of income furnished for the year under consideration, the assessee has shown the gain from sale of shares in India, including the sale of shares of Noida Cyber Park Pvt. Ltd. He submitted, since, the assessee is a tax resident of Mauritius capital gain, is not subject to tax in India under India - Mauritius DTAA, as shares were purchased prior to 01.04.2017. Further, he submitted, Rs. 162 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following decisions: 1) Commissioner of Customs (Import) Mumbai Vs. Dilip Kumar & Co. (2018) 95 Taxmann.com 327. 2) Mathuram Agrawal Vs. State of Madhya Pradesh (1999) 8 SCC 667 3) Indian Banks' Association Vs. Devkala Consultancy Services [2004] 4 JT 587 4) Consumer Online Foundation Vs. Union of India (2011) 5 SCC 360 5) Sulltana Begum Vs Prem Chand Jain (1997) 1 SCC 373 7. Finally, he submitted, when two interpretations are possible, the views favourable to the assessee needs to be adopted. For such proposition, he relied upon the following decisions: 1) CIT Vs. Vegetable Products Ltd. 88 ITR 192 (SC) 2) CIT Vs. J.K. Hosiery Factory, 159 ITR 85 (SC) 8. Without prejudice, learned counsel submitted, the assessee, being a tax resident of Mauritius holding a valid TRC is entitled to treaty benefits. He submitted, there is not disputed between the parties that the shares, sales of which, resulted in capital gain were purchased by the assessee prior to 01.04.2017. Thus, he submitted, in terms of Article 13(4) of India - Mauritius DTAA, long-term capital gain arising on sale of shares is exempt. He submitted, as per CBDT Circular No. 789, TRC is the determinative fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions. Therefore, at the very outset, we will proceed to address the issue from that perspective. 14. Undisputedly, the assessee is a tax resident of Mauritius holding a valid TRC and is engaged in the business as an investment holding company having a Category 1 global business licence issued by the competent authority in Mauritius. It is a fact on record that the assessee is in existence since January, 2006 and has been carrying on business activities. In terms with its objects, the assessee has invested in shares of various Indian companies through Foreign Direct Investment (FDI) route. For the year under consideration, the assessee had sold shares of four Indian companies, including the shares of Noida Cyber Park Pvt. Ltd. Before the Assessing Officer, the assessee had claimed exemption on capital gain arising on sale of shares by taking shelter under Article 13(4) of India - Mauritius tax treaty. However, both the Assessing Officer and learned DRP have rejected assessee's claim by holding that assessee being a mere paper company is not entitled to treaty benefits. 15. In our view, the reasoning, on which, the departmental authorities have denied assessee's claim of benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he benefit provided under Article 13(4) of the tax treaty. Interestingly, though, the Assessing Officer has made various allegations regarding the status and genuineness of the assessee while denying benefit under Article 13(4) of the tax treaty, however, while computing the capital gain he has allowed set off of long-term capital loss of Rs. 18,86,42,123/- relating to the assessment year 2012-13. This fact shows that the Assessing Officer to certain extent has accepted the genuineness of the activities carried on by the assessee, i.e., investment in shares of Indian companies. Thus, in the aforesaid view of the matter, we hold that the assessee is entitled to claim exemption under Article 13(4) of the tax treaty qua the capital gain arising on sale of shares. Therefore, the amount in dispute is not taxable in India. Ground no. 4 is allowed. 19. Insofar as ground nos. 1, 2 and 3 are concerned, in view of our decision in ground no. 4, they have become academic and do not require adjudication at this stage. However, the issues are kept open. 20. Ground no. 5, being consequential in nature, does not require adjudication. 21. In the result, the appeal is partly allowed, as indicated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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