TaxTMI 
TaxTMI 
2011 (4) TMI 684
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....ising on sale of securities in India under the head "capital gain". All the assessees' filed a revised return of income reporting nil income and claiming refund of the taxes paid. The details in this regard are as follows: Appeal No. 1617/M/10 1618/M/10 1619/M/10 1620/M/10 Name of Fund Fidelity Group Trust for Employee Benefit Plans Fidelity Emerging Markets Collective Pool Funds Fidelity Investment Trust Fidelity International Discovery Fund Fidelity Investment Trust Fidelity Emerging Markets Funds Fidelity Investment Trust Fidelity Diversified International Fund Original return as capital gain - date of filing 17th Aug., 2004 17th Aug., 2004 17th Aug., 2004 17th Aug., 2004 - amount(in Rs.) 43,074,230 51,060,460 94,499,500 476,344,885 Revised Return as Business Income relying upon ruling of the AAR in the case of Fidelity Advisor Series VIII(2004) 271 ITR 1 and XYZ/ABC Equity Fund (2001) 250 ITR 194 - date of filing 25th March, 2005 25th March, 2005 25th March, 2005 25th March, 2005 - amount (in Rs.) Nil Nil Ni....
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....f which are similar to our case. The ruling delivered by the AAR is enclosed herewith as Annexure b. In this case, the AAR, after perusing certain parameters such as the objects for which the applicant was established, the frequency of trade etc. held that the income earned by Fidelity Advisor Series VIII was in the nature of business income. The AAR also considered whether the presence of the custodian in India would tantamount to the Fidelity Advisor Series VIII having a PE in India, and in this regard ruled in the negative. The AAR ruled that the income earned by Fidelity Advisor Series VIII was in the nature of business income and in the absence of PE in India its income from sale of securities was not taxable in India. The AAR has taken a similar view in the case of XYZ/ABC Equity Fund [2001] 250 ITR 194 (AAR). In view of the above, the Fund wishes to offer its income as business income and accordingly revise the RoI for the above mentioned assessment year. The revised RoI in Form No. 2 along with the computation of income is attached with this letter." 4. In the assessment proceedings the AO was of the view that the income of the assessees' for transactions in Indian Se....
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....e above background of facts that the question as to whether the assessees's can be said to be guilty of furnishing inaccurate particulars of income has to be decided. 7. The AO in imposing the penalty on the assessees' primarily relied on Explanation-1 to section 271(1)(c) of the Act. The AO held that the revised return filed by the assessees' obliterated the original return filed by the assessees' and the revised return was not correct and complete and, therefore, the assessees, are guilty of furnishing inaccurate particulars of income. The AO also held that the assessees' did not offer any bona fide explanation with regard to their claim. The AO also held that the assessees' did not file audit report under section 44AB of the Act, trading and P&L account and audited P&L Account and balance sheet. The AO also referred to the fact that in the past assessees' had been declaring income under the head capital gain and has changed the stand in the present assessment year without any valid reason. The AO also held that the assessees' on their own came to the conclusion that the income in question is business from business and that the assessees' did not have PE in India and that they....
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....ing his assertion to be contention arisen out of bona fide belief, which does not hold water. This view of learned AO manifests that there was bona fide belief on the part of appellant and at the same time it was based on judicial ruling in same type of fund that the its income could be assessed as business income. The assessee filed revised returns of income along with a letter which explaining the reasons for filing the return of income." 9. The CIT(A) further held that the assessees's made full disclosure of all material facts and that the assessment was a result of difference of opinion between the AO and the assessees' on a question of law and, therefore, the assessees' should be entitled to the benefits of Explanation-1 to section 271(1)(c) of the Act. The CIT(A) also relied on the decision of the ITAT, Mumbai in the case of Variable Insurance Fund Overseas Portfolio v. ADIT, IT Appeal No. 559 (Mum.) 2009 for A.Y. 2004-05, wherein on identical facts penalty was held to be not leviable. For all the above reasons the CIT(A) cancelled the orders of the AO imposing penalty. 10. Aggrieved by the orders of the CIT(A) the revenue has field the present appeals before the Tribun....
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....as drawn to the decision of the AAR in the case of Universities Superannuation Scheme Ltd., In re [2005] 275 ITR 434/145 Taxman 141 (AAR) (New Delhi) wherein it was held that (i) That the provisions of section 115AD would apply to an assessees' who has suffered losses on the transfer of securities. (ii) That being a special provision for FIIs, section 115AD will override the general provisions. Where Parliament so intended it provided, as in section 115-I, an option to be exercised by the assessees'. Absence of such a provision in the scheme of section 115AD indicates that no option is available to FIIs. By no principle of interpretation can such an option be read in section 115AD. For the reason that the applicant suffered capital loss in an assessment year, it cannot claim to opt out of section 115AD. (iii) Having regard to section 115AD(3) even in the case of FIIs, while computing capital gains arising from the transfer of short-term or long-term capital assets, being securities other than units referred to in section 115AB, the operation of the first and second provisos to section 48 has to be excluded section 115AD is a self-contained co....
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....decision of AAR in the case of one of the sister company namely Fidelity Advisors Series VIII, In re, [2004] 271 ITR 1/[2005] 142 Taxman 111 (AAR - New Delhi). In the said decision AAR expressed the following view. " The applicant, an investment company, registered under a statute of the USA, was a non-resident for the purposes of income-tax in India. It was set up to provide investors a continuous source of managed investments in securities. Its investments were mainly in equity securities under an investment scheme of a state in the USA. The applicant was registered with the Securities and Exchange Board of India (SEBI) in India and obtained a Foreign Institutional Investor (FII) licence as required by the regulations of the SEBI. It invested in listed Indian companies under the FII regime. It had a foreign global custodian, which appointed the Standard Chartered Bank (SCB) as the domestic custodian under regulation 16(1) of the SEBI (FII) Regulations, 1995. The applicant had made enormous sale transactions in respect of shares. The applicant applied to the Authority for an advance ruling on three questions, viz., (i) whether the income from the portfolio companies and the gai....
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....narrated the ruling in the case of Fidelity North Star Fund (supra). It is consequent to this decision that the assessees' withdrew its appeals against the assessment orders before the CIT(A). It is thus clear from the facts that the claim made by the assessees's in the revised return cannot be said to be not bona fide. 19. In a recent judgment of the Hon'ble Apex Court in Reliance Petroproducts (P.) Ltd. (supra). Their Lordships, after considering various decisions include Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519/161 Taxman 218 (SC) and Union of India v. Dharmendra Textile Processors [2008] 306 ITR 277/174 Taxman 571 (SC) have observed and held (page 158 head notes) as under: "A glance at the provisions of section 271(1)(c) of the Income-tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word "particulars" used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty o....