TaxTMI 
TaxTMI 
2020 (1) TMI 218
X X X X Extracts X X X X
X X X X Extracts X X X X
....rd of India (SEBI). For the year under consideration, the assessee filed its return of income on 28th September 2012, declaring nil income. In the course of assessment proceedings, the Assessing Officer noticing that the assessee has earned interest on debt securities and foreign currency loans to India Corporate, called upon the assessee to explain why such income has not been offered to tax in India. In response, it was submitted by the assessee that it being a tax resident of Mauritius is governed by India-Mauritius Double Taxation Avoidance Agreement. It was submitted, the assessee being a tax resident of Mauritius and carrying on bonafide banking business, the interest income in India will not be taxable in terms of Article-11(3)(c) of the Tax Treaty, as the assessee is a beneficial owner. In this context, the assessee also referred to the CBDT Circular no.789 dated 13th April 2000. The Assessing Officer, however, did not find merit in the submissions of the assessee and brought the interest income to tax. Being aggrieved, the assessee went in appeal before the first appellate authority. 4. The learned Commissioner (Appeals), however, relying upon his decision in assessee's o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cordance with the SEBI Regulations. In its return of income, the aforesaid interest income was claimed not taxable in India on the strength of Article 11(3)(c) of the India-Mauritius Double Tax Avoidance Convention (hereinafter referred to as 'India-Mauritius Tax Treaty'). The said exemption was denied by the Assessing Officer in the assessment order passed u/s 143(3) r.w.s. 144C(13) of the Act dated 28.01.2016, which was in conformity with the directions of the Dispute Resolution Panel (DRP). Pertinently, the exemption was denied on the ground that the requisite conditions prescribed in Article 11(3)(c) of the India-Mauritius Tax Treaty were not fulfilled by the appellant-assessee inasmuch as - (i) the interest was not "derived" by the assessee; (ii) that interest was not "beneficially owned" by the assessee; and, (iii) that the assessee ought to be carrying on bona fide banking business, which it did not. All the aforesaid issues were taken up by the assessee in appeal before the Tribunal, which vide order dated 16.12.2016 (supra) accepted the pleas of the assessee so far as the first two aforestated conditions were concerned. In other words, the Tribunal held that the interest....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te of Residence is issued by Mauritian authorities, such Certificate will constitute sufficient evidence for not only accepting the status of residence, but also the beneficial ownership in order to apply the provisions of India-Mauritius Tax Treaty. Further, in support of such a plea, assessee also relied on the judgment of the Hon'ble Bombay High Court in the case of DIT vs Universal International Music B.V, [2013] 31 taxman.com 223 which held that a company incorporated under the laws of Netherlands and holding valid Tax Residency Certificate issued by the Netherland authorities was to be construed as the beneficial owner of the Royalty income received from the Indian company and was accordingly held entitled to the benefits of Article 12 of the Double Taxation Avoidance Agreement between India and Netherlands. It was pointed out that assessee had obtained Tax Residency Certificate from the Mauritian Revenue authorities, a copy of which was also filed before the DRP. On the aforesaid basis, assessee sought to explain the fulfilment of the condition of 'beneficial ownership'. The DRP, however, rejected the plea of the assessee as according to it, no documents were placed by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me were not these Mauritian entities. The protection of article 11(1) cannot, therefore, be declined on the facts of the present case. We are, therefore, of the considered view that the income embedded in these interest payments are not taxable in India. Accordingly, the assessee did not have any tax withholding obligations, u/s 195, in respect of these payments, and, as a corollary thereto, disallowance u/s 40(a)(i) was not justified." 6. On the aforesaid basis, it is pointed out that following the decision of Chennai Bench of the Tribunal in the case of Hyundai Motor India Ltd. it is, therefore, to be held that assessee was indeed the 'beneficial owner' of the interest income in question also. 7. On the other hand, the ld. DR appearing for the Revenue, has merely reiterated the discussion made by the DRP in its order, which we have already noted in the earlier paras and is not being repeated for the sake of brevity. 8. Article 11(3)(c) of the India-Mauritius Tax Treaty, inter-alia, prescribes that interest income arising in a contracting state shall be exempt from tax in that state provided it is derived and beneficially owned by any bank carrying on a bona fide banking b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the situation before us where the application of the provisions of the India-Mauritius Tax Treaty is sought to be applied for considering the taxability of interest income as per Article 11(3)(c) of the India-Mauritius Tax Treaty. We say so by drawing strength from the judgment of the Hon'ble Bombay High Court in the case of Universal International Music B.V (supra). The issue before the Hon'ble High Court was relating to the taxability of Royalty income in the context of IndiaNetherlands Double Taxation Avoidance Agreement. In the said decision also, CBDT Circular no. 789 dated 13.04.2000 (supra) was held applicable in the context of Royalty income. Thus, in our considered opinion, even in the context of the impugned interest income, Circular no. 789 dated 13.04.2000 (supra) of the CBDT is applicable while applying the provisions of Article 11(3)(c) of the India-Mauritius Tax Treaty. On this aspect itself we uphold the plea of the assessee that assessee is the 'beneficial owner' of the impugned interest income on the strength of the Tax Residency Certificate issued by the Mauritian authorities. 10. Moreover, in the context of element of interest income earned by the a....