TaxTMI 
TaxTMI 
2015 (3) TMI 722
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.... Mr. Dhruv Khaitan and Mr. Piyush Khaitan (Indian residents) are the ultimate beneficiaries of the sale of the shares by the Petitioner. 3. The basic grievance of the Petitioner to the impugned order dated 30th April, 2014 is that it has been passed without considering its submission and to that extent is an order without reasons. The Petitioners also attempted to make submissions on merits of their application before us. However, we did not permit the Petitioner to make submission on merits, as in writ jurisdiction we are essentially concerned with the decision making process and not with the merits of the decision. Therefore, we have not considered the merits of the rival submissions made with regard to the dispute. This is best left done by the Authority constituted under the Act. 4. The Petitioner is a Company incorporated in Mauritius in February, 2000. The Petitioner is a tax resident in Mauritius. In terms of Article 13(4) of the Double Tax Avoidance Agreement (DTAA) between India and Mauritius, it is claimed that capital gains tax on sale of shares is not chargeable to tax in India. On 26th August, 2010, the Petitioner sold 15,890,326 equity shares of the Indian Company t....
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....the Revenue that the control and management of the Petitioner is in India and therefore not entitled to DTAA. Further, it was contended that the entire transaction was entered into for avoidance of tax. 8. The Petitioners responded to the Revenue's objections by pointing out that the control of the Petitioner's company is in Mauritius and out of a strength of 8 only 2 Directors on Board were Indian Residents. Besides, the source of funds of the Petitioner was from various equity investors and not from the two Indian Residents. It was also pointed out by the Petitioner before the Authority, that there was no design to avoid any income tax which would have been payable by the two Indian residents primarily because even according to the Revenue, they are ultimate beneficiaries of Innevworth Holdings Ltd. (IHL) to only approximately 40% of the shares in the Petitioner as held by IHL. The balance approximately 60% of the shares in the Petitioner is as held by New Wave Holdings Ltd. (NHL) an Mauritius entity whose ultimate beneficiaries is Kubera Cross Border Funds Ltd., whose fund is traded on the London Stock Exchange. 9. Thereafter, written submissions were filed by the Reve....
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.... referred as founders of Indian Company in the share holders agreement dated 31st March, 2009. The fact that Mr. Piyush Khaitan and Mr. Dhruv Khaitan are referred to as the founders of Indian Company has no bearing to decide the issue before the Respondent No.2. 7 Mr. Piyush Khaitan holds one share of Indian Company in his capacity as nominee of the Petitioner. The fact that Mr. Piyush Khaitan holds one share of Indian Company as nominee of the Petitioner has no bearing to decide the issue before the Respondent No.2. 8 Kubera is only a fund. The ultimate beneficiaries of Kubera have not been disclosed and it would be a matter of further enquiry by the Revenue. The statement that the ultimate beneficiaries of Kubera had not been disclosed and it would be a matter of further enquiry is again factually erroneous as it has been disclosed in more than one place that Kubera is a foreign private equity fund which is listed on the Alternate Investment Market in London Stock Exchange. Further, Kubera has also invested in various other companies in India. 9 The Petitioner relinquished the share application amount of Rs. 95.30 Crores lying with Indian Company as grant to it. The sta....
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....ed order gives no reasons which would indicate why the Petitioner's contention is not acceptable. We do appreciate that very detailed reasons need not be given for a prima facie view but some consideration must be evident from the order. This reasoning is absent in the impugned order. 12. The Supreme Court in CCT v. Shukla Brothers 2010 (4) SCC 785 has said that the doctrine of audi alteram partem has three basic essentials i.e. grant of hearing to the person likely to be affected, fair and transparent procedure to be provided by the authority and the authority must dispose of the issue before him by a reasoned/ speaking order. The Court also held that recording of reasons is an essential feature of providing justice and in fact is the soul of orders. Further, the Supreme Court in Kranti Associates (P) Ltd v. Masood Alam Khan[2010] 9 SCC 496 has summarized the principles for recording reasons as under: '(a) In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. (b) A quasi-judicial authority must record reasons in support of its conclusion. (c) Insistence on recording of reasons is ....