9911796707
TMI Blog2024 (12) TMI 1111X X X X Extracts X X X X X X X X Extracts X X X X ..... ope of the power which stands placed in the hands of the Commissioner by virtue of Section 263 and has come to the firm conclusion that the Order-in-Revision was clearly unsustainable. No substantial question of law Commissioner is clearly rendered unsustainable on a more fundamental plane. As is evident from the extracts of the order passed in revision, the principal allegation appears to have been that the device adopted by Genpact India was intended to avoid the payment of DDT as contemplated u/s 115-O. Undisputedly, that dividend would have to be one which would have been declared by Genpact India. We are, however, and in the present case, concerned with an assessment proposed to be made in the hands of Headstrong HCS, now known as Genpact Consulting Pte. We thus find ourselves unable to appreciate how a perceived liability in the hands of Genpact India could be viewed or considered as being relevant for the purposes of formation of opinion that the assessment of Genpact Consulting was erroneous and prejudicial to the Revenue. The appellants have failed to establish that even if the view as expressed by the Commissioner were assumed to be correct, any additional tax liability w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal position, it is not possible to make an opinion and therefore, the argument of change in opinion is infructuous? F) Whether the Ld. ITAT erred in setting aside the order dated 31.03.2021 passed u/s 263 of the I.T Act, 1961 without appreciating the facts of the case? G) Whether the Ld. ITAT erred in ignoring the fact that this was a case of no inquiry/Lack of inquiry, hence the order of the AO was erroneous and prejudicial to the interest of the revenue? 2. From the facts which appear to be undisputed and are so recorded and reflected in the order of the Tribunal, we note as follows. We are concerned with Financial Year [FY] 2014-15, when the respondent-assessee, which was stated to be a tax resident of Singapore and held a valid Tax Residency Certificate [TRC] , transferred 14,86,025 equity shares held in Genpact India to its wholly owned Indian subsidiary, Empower Research Knowledge Services Private Ltd. [Empower India]. It is pertinent to note that Empower India is now known as Genpact India Pvt. Ltd. The sale of the shares was for a total consideration of USD 1,397,263,241/- and was affected in two tranches, on 28 January 2015 and 25 March 2015. 3. The Tribunal also refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O failed to refer the report to valuer to check the veracity of the claims, and thus, accepted the valuation report on face value Headstrong Consulting Singapore Pte Ltd. has shown short term Capital Gain income amounting to Rs. 84,85,53,83,465/- and has claimed this as exempt income u/s 47 (iv) and Indo-Singapore DTAA. The AO has not examined the transaction in detail and even the basic facts were not examined and thus AO accepted the exempt income claim of the assesse i.e. exempt short term Capital Gain income amounting to Rs. 64,85,53,83,445/- which is prejudicial to the interest of revenue. 5. Proceeding further to analyze the transaction itself, it has rendered the following observations: - In this regard, it is pertinent to point out that the assessee is not being denied the benefits of any treaty or of section 47 (iv) of the IT Act. The assessee has camouflaged/misrepresented the facts of its case because of which the whole transaction is being denied. The Genpact group through the transaction in question has created fictitious liability in the accounts of Empower Research Knowledge Services Pvt. Ltd. effectively increasing bogus expenses and taking out money as principal re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oup was a sham transaction, therefore, there was no capital gain which can satisfy the substance over form' principal. (viii) As per the assessee's contention no. (xi xiv) above, the assessee has claimed that the undersigned has initiated proceeding under section 263 to make fishing and roving inquiries. The assessee has quoted various case laws like Parashuram Pottery Works Co. Ltd v. ITO, CIT vs. Vikas Polymers, CIT vs Anil Kumar Sinha, etc. The crux of all these cases is that it is only in cases of lack of inquiry , and not inadequate inquiry , that would give the right or occasion to the Commissioner to pass order under section 263 of the Act. In this regard the undersigned would title to point out that fishing and roving inquiry refers to asking questions which are not at all connected with the subject matter. As such the assessee is advised to go through the show-cause notice once again. The exact nature of the transaction, how the AO failed to make relevant enquiries regarding it and how the order passed by the AO was erroneous as far as being prejudicial to the interest of the revenue has all been enunciated in the show-cause notice. Some of the excerpts from the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and surplus without paying dividends distribution tax. Furthermore, the interest expense claimed on an artificial liability (funds were never used in the business of Genpact India now merged with Genpact India Pvt. Ltd) is also reducing the taxable profits of Genpact India Pvt. Ltd. year after year starting from financial year 2014-15 and thus the interest payment on artificial liability cannot be allowed as business expense under the provision of Income Tax Act, 1961. Payment of interest on artificial liability is resulting in lowering of business profits and thus lowering of effective rate of tax. It is surprising that an entity has to bear the liability to pay the funds alongwith interest without having got any benefits or utilized the borrowed funds. This clearly indicates that it is an colourable device to avoid paying taxes in India. After amalgamation of ERKS with Genpact India. the investments of ERKS into the shares of Genpact India amounting to Rs. 9,131,72,51,438/- has been taken to goodwill account in newly formed entity ERKS n k a Genpact India Pvt. Ltd. If, Genpact India now merged into ERKS, had to declare dividend to the holding companies/share holders i.e. Headstr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions erroneous , erroneous assessment and erroneous judgment have been defined in Black's Law Dictionary. According to the definition, erroneous means involving error; deviating from the law . Erroneous assessment refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, erroneous judgment means one rendered according to course and practice of court, but contrary to law, upon mistaken view of law; or upon erroneous application of legal principles . 12. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the Revenue. An order can be said to be prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the court it would be open to the courts to examine whether the relevant objective factors were available from the records called for and examined by suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipal allegation appears to have been that the device adopted by Genpact India was intended to avoid the payment of DDT as contemplated under Section 115-O. Undisputedly, that dividend would have to be one which would have been declared by Genpact India. We are, however, and in the present case, concerned with an assessment proposed to be made in the hands of Headstrong HCS, now known as Genpact Consulting Pte. We thus find ourselves unable to appreciate how a perceived liability in the hands of Genpact India could be viewed or considered as being relevant for the purposes of formation of opinion that the assessment of Genpact Consulting was erroneous and prejudicial to the Revenue. 10. Before us, the appellants have failed to establish that even if the view as expressed by the Commissioner were assumed to be correct, any additional tax liability would have been foisted upon Genpact Consulting. 11. We take note of an identical position which obtained in the case of Genpact Luxembourg S.A.R.L. vs. Assistant Commissioner of Income Tax, Circle 1(3)(1), International Taxation, New Delhi and Anr. 2024 SCC OnLine Del 5514 and which had assailed the initiation of Section 148 proceedings. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntity which had either declared or paid the dividend. Viewed in that context, even if the payment were to be assumed to be dividend, the liability to pay tax thereon could have only been foisted upon the company which had declared, distributed or paid the same. That in the facts of the present case and even if the allegation laid by the respondents were to be accepted would have been GIPL. 15. We also note that the issues emanating from the order of the CIT (IT) under Section 263 of the Act presently forms subject matter of challenge in Commissioner of Income Tax (International Taxation)-2 v. Genpact Consulting Singapore Pte Ltd. (Earlier known as Headstrong Consulting Pte. Ltd.). While issues relating to the merits and the validity of the view taken by the CIT (IT) would have to be examined in that pending appeal, the same would clearly not sustain the action for reassessment which is impugned herein. 16. We accordingly allow the instant writ petition and quash the impugned notice under Section 148A (b) dated 11 March 2022, impugned order under Section 148A (d) dated 29 March 2022 and the consequential notice issued under Section 148 dated 30 March 2022. On an overall conspectus o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
