9911796707
TMI Blog2024 (8) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... s for sale / transfer of shares have been executed by the Mauritian resident directors. Tax authorities below have failed to rebut the statutory evidence of the TRC with cogent evidence, and merely on the basis of suspicion and inferences, the assessee is held to be engaged in treaty shopping. The fact that the assessee had no funds of its own was due to the nature of its operation as investment platform and certainly when any gain is made out from the dis-investment, the benefit has to be transferred to those who had initially invested trusting the fund management skill of assessee. No doubt, the assessee is a dropdown entity associated with the entities operating in Cayman Island, but that does not taint the genuine activities as investment platform and the doctrine of substance over form cannot be stretched to the extent, that merely because the assessee has associated enterprises operating from the Cayman Island, the investments which were made in a prestigious Indian company, in a initial years of its growth, would also become tainted. Lastly, the minuscule percentage of the fund of the assessee, invested in India, as compared to the investments it has made across various econ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment holding companies floated in various jurisdictions like Singapore and Mauritius. The Company has further stated that it has nine unique Portfolio Investments (the Portfolio Investments ). Assessee was also asked to furnish tax residency certificate of its directors, which assessee has completely failed to furnish despite giving many opportunities. it was observed that all the correspondence are made with Steven Boyd and none of the other two directors are involved in any of the discussion regarding strategic sale of investment and valuation negotiations. Al the e-mails are addressed to Mr. Steven Boyd, who was present in USA during the whole time and finalized the sale of shares from there only (some sample e-mails are attached as 'Annexure A') One of the directors, Dilshad Rajabalee has been Senior Manager and Associate director at Sanne Group from April 2003 till present. Sanne Group is a provider of asset management services. It was listed on the London Stock Exchange and was a constituent of the FTSE 250 Index until it was acquired by Apex Group in August 2022. It is the same entity from which the assessee company has taken office space on lease. There is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax at domestic rates. Dividends received from an Indian company were also not taxable in the hands of the recipient till A/Y 2020-21 provided that the Indian company has paid dividend distribution tax ( DDT ) in India. Under the current treaty between Mauritius and Singapore, subject to certain conditions, an entity which is a tax resident in Mauritius, but has no branch or permanent establishment in Singapore, is not subject to tax on its Singaporean source dividend, interest income, or royalties (if the Mauritius shareholder is the beneficial owner of such income) and should not be subject to capital gains tax in Singapore on the sale of securities. The assessee company is subject to tax in Mauritius at the rate of 15% on its net income. As per the tax return filed by the assessee company, the assessee has not paid any taxes in Mauritius and no provision for tax expense has been made in the financial statements for the year ended December 31, 2020, as the Company has no tax liability. By making these types of arrangements, assessee has indulged in treaty shopping and tax avoidance practices and did pay any taxes in Mauritius, India, China, Singapore and Cayman Islands. Under a Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a judicial creation applied in many countries. 4. DRP had passed following directions; 4.1.4 Panel has carefully considered the rival averments as mentioned above. The panel takes note of the AO's remarks that the assessee failed to discharge its primary onus by not furnishing some documents including the tax residency certificate of its directors and any evidence showing whether any remuneration was paid to Dilshad Rajabalee as Director. Hence, the aspect of claiming the control and management of the company's affairs remains unestablished by the assessee. Further, the Panel remains conscious of the AO's observations that the treaty abuse may occur when a taxpayer resident of a third country takes advantage of the favorable tax positions of a treaty that would not normally be available to him. Considering all the above, the Panel does not find any grounds to disagreeing with the AO's proposal for taxing the capital gains in accordance with section 112 of the IT Act as made at para no. 11 of the draft order. However, the Panel takes note of the assessee's submission dated 23.03.2023 by which the assessee has enclosed a copy of judgment passed in 5 cases, not rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed under the Mauritius laws which are required to be fulfilled for determining 'management and control' of an entity in Mauritius for the assessment year under consideration: a. The company shall have at least 2 directors, resident in Mauritius, who are appropriately qualified and are of sufficient caliber to exercise independence of mind and judgement b. The company shall maintain at all times its principal bank account in Mauritius c. The company shall keep and maintain or is keeping and maintaining, at all limes, its accounting records at its registered office in Mauritius d. The company shall prepare, or proposes to prepare or prepares its statutory financial statements and causes or proposes to have such financial statements to be audited in Mauritius. 5.2 Following are the additional conditions which have been complied with by the assessee:- a. The company has or shall have office premises in Mauritius; and b. The company employs or shall employ on a full-time basis at administrative/ technical level, at least one person who shall be resident in Mauritius. Assesses has also obtained an expert opinion from a legal counsel in Mauritius wherein the legal counsel has af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as clarified by the Finance Ministry vide Press release dated 1 March 2013 clarified that a TRC provided by a non-resident will be accepted as sufficient evidence to avail relief under a fax treaty and that the tax authorities will not go beyond the TRC to question the residential status of the non-resident, thus, further fortifying the position laid down by the Hon'ble Supreme Court in aforesaid judgements. Ld. Senior counsel has relied judgment of the jurisdictional Hon ble Delhi High Court in Blackstone Capital Partners (Singapore) v. ACIT, Delhi [TS-41- HC-2023 (DEL)], to submit that based on the rulings of the Hon'ble Supreme Court, CBDT Circulars and Ministry of Finance Press Release, Hon ble High Court has categorically held that the TRC is statutorily the only evidence required to be eligible for the benefit under the DTAA and the Revenue's attempt to question and go behind the TRC is wholly contrary to the Government of India's consistent policy and repeated assurances to foreign investors. He further has relied judgment of co-ordinate bench in case of MIH India (Mauritius) Ltd. v. ACIT, Delhi, [TS-888- ITAT-2022 (DEL)], where Bench did no appreciate the at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment platform for making investments located in various countries and the funds for the investments comes across various jurisdiction which inter alia includes retirement, trusts, schools, colleges, universities, insurance companies. During the year of incorporation itself, the Appellant made investment worth approximately USD 66.037 crores (INR 4,030.087 crores) across various jurisdictions. 13. The Appellant has an office space in Mauritius, where all its accounting records, registers, books of accounts and other statutory records are maintained. In addition to its qualified board of directors, it has employees based out of Mauritius. The Appellant filed its return of income in the country of residence i.e. Mauritius, for the period relevant to AY 2020-21 wherein the Appellant has stated that the place of central management and control of the Appellant is in Mauritius. 14. The Appellant prepares and continues to prepare financial statements which are audited by an accounting firm in Mauritius and filed on an annual basis with the authorities in Mauritius. The Appellant files its income-tax return with the Mauritius tax authorities on a year-on-year basis. For the year ende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... executed by the Mauritian resident directors. 19. Thus, we are of the considered view that tax authorities below have failed to rebut the statutory evidence of the TRC with cogent evidence, and merely on the basis of suspicion and inferences, the assessee is held to be engaged in treaty shopping. The fact that the assessee had no funds of its own was due to the nature of its operation as investment platform and certainly when any gain is made out from the dis-investment, the benefit has to be transferred to those who had initially invested trusting the fund management skill of assessee. 20. No doubt, the assessee is a dropdown entity associated with the entities operating in Cayman Island, but that does not taint the genuine activities as investment platform and the doctrine of substance over form cannot be stretched to the extent, that merely because the assessee has associated enterprises operating from the Cayman Island, the investments which were made in a prestigious Indian company, in a initial years of its growth, would also become tainted. 21. Lastly, the minuscule percentage of the fund of the assessee, invested in India, as compared to the investments it has made across ..... X X X X Extracts X X X X X X X X Extracts X X X X
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