Exchange of Information restricted by treaty fiscal-year nexus; information for AY 2017-18 cannot be compelled, extension denied.

Treaty protocols limit the scope of exchange of information to transactions or fiscal years beginning after specified dates, so information relating to fiscal years before those cut-off dates cannot be compelled; applying the IndiaSwiss and IndiaHong Kong treaty protocols, information for fiscal years prior to 01.04.2011 (Swiss) and prior to the dates specified for Hong Kong cannot be used to extend the limitation period, and therefore the assessing officer could not require information for Assessment Year 2017-18 nor claim the one-year extension under the statute's explanation clause.

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Issues: Whether the Assessing Officer could obtain extension of the limitation period under clause (ix) of the Explanation to Section 153B of the Income-tax Act, 1961 by making a reference to the Foreign Tax and Tax Research Division (FT&TR) relying on Article 26 of the IndiaHong Kong treaty, so as to enable assessment for AY 2017-18.

Analysis: The Court compared the protocol provisions appended to the IndiaSwitzerland agreement and the IndiaHong Kong agreement. The protocol to the IndiaSwitzerland agreement (Article 14) limited applicability to information relating to fiscal years beginning on or after the first day of January following the signature of the Amending Protocol. Clause 5(c) of the protocol to Article 26 of the IndiaHong Kong agreement permits disclosure of information that precedes the date on which the Agreement has effect only insofar as that information is foreseeably relevant to a fiscal year or taxable event following that date. Applying the taxable event/assessment year concept, the Court concluded that the IndiaHong Kong protocol permits exchange of information relevant to financial years beginning on or after 01.04.2019 (or at best transactions with taxable event on or after 30.11.2018). The material relied on by the AO pertained to Assessment Year 2017-18, which falls outside the period for which the IndiaHong Kong protocol authorises exchange of information relevant to subsequent fiscal years. Consequently, the reference to FT&TR was legally impermissible for the purpose of extending limitation under clause (ix) of the Explanation to Section 153B.

Conclusion: The Assessing Officer could not validly obtain the benefit of extension of limitation under clause (ix) of the Explanation to Section 153B of the Income-tax Act, 1961 by reference to FT&TR for information relating to AY 2017-18; the reference was improper and the appeals fail in favour of the assessee.

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