TaxTMI 
TaxTMI 
2010 (3) TMI 926
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....,573. These shares were purchased by the assessee in the financial year 1995-96 for Rs. 6,35,000. The long-term capital gain of Rs. 8,78,93,419 on sale of these shares was claimed to be exempt under clause (4) of article 13 of the Double Taxation Avoidance Agreement between India and Mauritius. The assessee has also earned Rs. 33,96,111 from sale of equity shares of BFL Software which has also been claimed to be exempt. Vide questionnaire dated November 5, 2004, the assessee was asked to explain the taxability of capital gains and to explain in detail the basis of treating this income as exempt. The assessee, vide reply dated December 7, 2004, submitted as follows : " The assessee is a company incorporated under the laws of Mauritius. Due to its incorporation, it is liable to pay taxes in Mauritius. A tax residence certificate has also been issued by the Financial Services Commission, Mauritius confirming that the assessee is a tax resident of Mauritius. Copy of the residence certificate issued by the Incometax Department, Mauritius vide Ref. No. 25002289/6/93/225/RB/21 is enclosed herewith as annexure 3 for your kind perusal. Capital gains : The assessee is a company i....
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.... Contracting State means any person who under the laws of the State, is liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of similar nature. Therefore, the residential status will be determined on the basis of domicile, residence, place of management or any other criterion of similar nature and if because of these criteria a person other than an individual is a resident of both the Contracting States, then it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated. Thus, capital gains of the assessee was held to be taxable in India only if it has a permanent establishment in India. In this regard, statement on oath of Shri M. F. Qureshi who is director of M/s. NAK Consultants Pvt. Ltd., the stock broking company through which all the above shares were sold was recorded. The relevant portion of the statement is reproduced below : Q. 1 Please identify yourself? Ans. I am Shri MF Qureshi, S/o. Shri Abdul Waheed. Q. 2 What is your designation in M/s. NAK Consultants Pvt. Ltd. and since when are you working in this company ? Ans. I am director in M/s. NAK Consul....
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.... sale of shares were placed only by Shri Suresh Rajpal on telephone. In case these telephone calls were made from India, then the effective place of management of the company would be in India itself. Hence, the assessee was required to furnish copy of passport of Shri Rajpal for the financial year 2001-02. The Assessing Officer stated that despite being given adequate opportunities, copy of passport of Shri Suresh Rajpal was not furnished vide questionnaire dated February 4, 2005, the assessee was asked as follows : "You are required to furnish copy of passport of Shri Suresh Rajpal for the financial year 2001-02 failing which it will be presumed that he was a resident of India during the period. The Assessing Officer stated that despite this final opportunity, copy of passport of Shri Suresh Rajpal was not furnished." In view of the above observation, the Assessing Officer held that the effective place of management of the company in the financial year 200102 is held to be in India. Following were the reasons for the same: (1) Shri Suresh Rajpal is the owner of 99 per cent. shares of the company. All the orders for sale of shares were placed by him. He is not a citize....
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....ssing Officer also observed that the place of effective management of the assessee in the financial year 2001-02 was in India. In view of clause (3) of article 4 reproduced above, where the assessee is a resident of both India as well as Mauritius, it shall be deemed to be resident of the Contracting State in which place of effective management is situated, i.e., India. Thus, the assessee is held to be a resident of India and its capital gains on account of sale of shares is liable to be taxed as per the Income-tax Act. The learned authorised representative relied on the proposition laid down by the co-ordinate Bench in the case of Radha Rani Holding P. Ltd. v. Asst. Director of Income-tax [2007] TIOL-335-ITAT-DEL order dated May 30, 2007 in I. T. A. No. 2094/Del/2006, wherein it was held that in case of non-resident company, since all the meetings of the board of directors were held in Singapore and control and management of the company was situated in Singapore and to support the residency certificate of the Singapore Government was furnished, the assessee was treated as non-resident in India, therefore not liable to tax. In this regard, the contention of the learned Departmen....
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....y was given to the assessee for placing all these documentary evidences before the lower authorities, but in spite of the same, nothing was produced. On the other hand, the learned authorised representative contended that neither the Assessing Officer nor the Commissioner of Income-tax (Appeals) has been able to substantiate the allegation that the control and management of the assessee is situated in India with any documentary evidence. For this purpose, reliance was placed on the provisions of section 114 of the Indian Evidence Act, 1872 and it was submitted that as per the said provisions, in case any party rebuts the general presumption that the board meeting of a Mauritius company would have been held in Mauritius, then the onus to prove such allegation is on the party making the allegation. Further contention of the learned authorised representative was that the assessee-company is incorporated in Mauritius and has its office in Mauritius, hence the general presumption shall be that the board meetings of the assessee were held in Mauritius and the control and management is also in Mauritius. As per the learned authorised representative, since the Assessing Officer and the Com....