TaxTMI 
TaxTMI 
TaxTMI 
2020 (3) TMI 1242
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....(c) of India-Mauritius DTAA". 2."Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in directing the Assessing Officer to follow the decision of Hon'ble ITAT on Interest income from foreign currency loan and Securities, ignoring the fact that, in India, the assessee is involved in only FII activity and no banking license has been granted by the RBI to the assessee for banking activities in India thus, assessee is not involved in any bona fide banking activities which is one of the prerequisite to claim exemption under Article 11(3)(c) of India-Mauritius DTAA" 3. "Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in directing the Assessing Officer to follow the decision of Hon'ble ITAT on Interest income from foreign currency loan and Securities, ignoring the fact that, the assessee has not furnished any document demonstrating immediate source of funds and also the immediate application of the income to demonstrate that the interest income is beneficially owned by it and it is not a conduit company for the benefit of third person, which is one of the prerequisite to claim exemption under Article 1....
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.... No.1086/Mum/2018& 1087/Mum/2018 for assessment years 2009-10 & 2010- 11 decided by composite order on 30/03/2018, copy of order in ITA No.5411/Mum/2018 for assessment year 2012-13 decided on 20/08/2019 and copy of Tribunal order in ITA No.2213/Mum/2018 for assessment year 2013- 14 decided on 02/01/2019. In the impugned assessment year, the CIT(A) has granted relief to the assessee by following the order of Tribunal in assessee's own case for earlier assessment years. 3. Shri Sanjay Singh, representing the Department fairly admitted that the issue raised in the appeal by the Revenue was subject matter of appeal by the assessee before the Tribunal in the preceding assessment years. The ld. Departmental Representative further submitted that the Tribunal while adjudicating the issue has failed to take into consideration the fact that the assessee has not been able to show that it is a beneficial owner of the interest income. The ld. Departmental Representative filed written submissions to substantiate his point. The relevant extract of the same is reproduced herein below:- "4. It is submitted that benefit of Article 11(3) of the treaty would be available only if such interest incom....
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.... treaty benefits." 4. We have heard the submissions made by rival sides and have examined the orders of authorities below. We have considered the decisions of the Tribunal in assessee's own case in the preceding assessment years. We observe that in the case of present assessee taxability of interest income of foreign currency loans and securities is a perennial issue. This issue had come up for consideration before the Tribunal for the first time in assessee's case in assessment year 2011-12. The Tribunal after considering the facts of the case, CBDT Circular No.789 dated 13/04/2000 , Indo-Mauritius Tax Treaty and decision rendered by Hon'ble Bombay High Court in the case of Director of Income Tax vs. Universal International Music BV, 31 taxmann.com 223 held as under:- "3. The appellant before us is a limited liability company which is incorporated, registered and tax resident of Mauritius. During the previous year relevant to the assessment year under consideration, assessee had, inter-alia, earned interest income of Rs. 94,57,45,856/- from investments in debt securities made in accordance with the SEBI Regulations. In its return of income, the aforesaid interest income was....
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....8 (supra) only to the extent of the issue of 'beneficial ownership'. 4. In this background, we have heard both the parties on the issue of 'beneficial ownership' under Article 11(3)(c) of the India-Mauritius Tax Treaty qua the interest income of Rs. 94,57,45,856/- earned by the assessee. On this aspect, we find that the DRP required the assessee to explain as to how it fulfils one of the requirements of Article 11(3)(c) of the India Mauritius Tax Treaty which prescribes that such interest must be 'beneficially owned' by the assessee. As per the DRP, the aforesaid was one of the pre-requisites before Article 11(3)(c) of the India-Mauritius Tax Treaty could be applied to say that the interest income in question was not taxable in India. The DRP has reproduced the submissions put forth by the assessee wherein assessee asserted that the interest income of Rs. 94,57,45,856/- earned from investment in debt securities was beneficially owned by it. Assessee specifically drew attention of the DRP to CBDT Circular no. 789 dated 13.04.2000 which, inter-alia, prescribed that wherever a Certificate of Residence is issued by Mauritian authorities, such Certificate will constitute sufficient ev....
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....e. The Tribunal in the aforesaid decision, inter-alia, examined the provisions of Article 11 of the IndiaMauritius Tax Treaty and concluded that the assessee was indeed the 'beneficial owner' of such interest income. The relevant extract of the decision referred to reads as under :- "The doubts expressed by the DRP with regard to beneficial owner of the interest income are devoid of any legally sustainable basis. No case has been made out by the revenue for the beneficial owner of the interest income being entities other than Mauritian entities in question. In terms of article 11(3), interest arising in a Contracting State (i.e. India, in this case) shall be exempt from tax in that State (i.e. India) provided it is derived and beneficially owned by, inter alia, by any bank carrying on a bona fide banking business which is a resident of the other Contracting State (i.e. Mauritius). There is no dispute that Mauritian entities in question were carrying out banking business in Mauritius, and there is nothing on record to show, or even indicate, that the beneficial owner of interest income were not these Mauritian entities. The protection of article 11(1) cannot, therefore, be decline....
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....uch Certificate will constitute sufficient evidence for accepting the status of residence as well as beneficial ownership for applying the DTAC accordingly." [underlined for emphasis by us] Ostensibly, as per the clarification issued by the CBDT, wherever a Certificate of Residency is issued by the Mauritian authority, such Certificate will constitute sufficient evidence for accepting the status of residence as well as the beneficial ownership for applying the provisions of the India-Mauritius Tax Treaty. Thus, in our considered opinion, the aforesaid clarification by the CBDT supports the assertion of the assessee that based on the Certificate of Tax Residency issued by the Mauritian authority there is sufficient evidence to accept the position that the 'beneficial ownership' of the impugned interest income is with the assessee. 9. At this point, we may note that the CBDT Circular no. 789 dated 13.04.2000 (supra) is specifically in the context of incomes by way of dividend and capital gain on sale of shares. So, however, in our considered opinion, it would equally apply even in the situation before us where the application of the provisions of the India-Mauritius Tax Treaty ....