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2020 (12) TMI 344
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....in law, the order passed by CIT (A)-9, New Delhi (hereinafter referred to as CIT (A)), is contrary to the facts and bad in law. 2. That on the facts and circumstances of the case and in law the CIT (A) was not justified in sustaining the addition made by the A.O. of Rs l,67,50,000/- received from Kstart LLC of Mauritius on account of issue of shares by appellant company by holding that the same is unexplained credit u/s 68 of the I T Act on the basis of surmises and conjectures. 2.1 The CIT-A has erred in not considering the submission of appellant which proves the identity, creditworthiness of the investor and genuineness of the transaction. Documents include audited financial statements of Kstart LLC, Certificate of Incorporation of Kstart LLC granted by ROC Mauritius, Bank Statement of Kstart LLC, Income Tax return filed with Mauritius Authority, List of directors for the financial year 2015-16. 3. That on the facts and circumstances of the case and in law the Id. CIT (A) was not justified in not adjudicating on the ground taken by the appellant that the order passed by the Id. AO is not in accordance with the direction given by the Id. Addl. CIT u/s 1....
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....pplies only in the case where the money is received from a resident. In the present case it was stated that the money has been received from a non-resident therefore, those provisions do not apply. The assessee submitted the relevant copy of the bank statement of K start LLC to show that the transaction has been entered into through banking channel. With respect to the quantum of the premium it was shown that it was decided by the company internally on the basis of the valuation report. Assessee also filed the details of RBI approval and foreign Inward remittance certificates (FIRC). However, assessee stated that it will not be possible to share the balance-sheet et cetera of the investor as it will show the holding portfolio of the investor. It was stated that this is a case of an investment by a fund in a start-up in the normal business course. 6. The learned assessing officer noted that assessee has not submitted the complete copy of the bank statement of Kstart LLC of Mauritius but enclosed only copy of extract of DBO transaction summary of account number 02MCR502499 maintained by K start LLC with Deutsche Bank showing only for transactions on 3/2/2016. He further noted that....
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....of proceeds of share is not genuine. Therefore assessee was asked to show cause why the above sum shall not be added u/s 68 of the income tax act. 8. In response to the above letter the assessee once again explained the detailed fact about the receipt of the money stating that it is an investment by the K start LLC into a start-up which is on behalf of Kallari capital. It was stated that it has received investment firm of that private equity venture for Indian start-ups. It was also explained that K start LLC would only earn income from sale of investment and therefore that is the only source of income. With respect to the bank statement it was stated that the money is transferred from Kallari capita to K start LLC as and when the investment is approved by Kallari Capital in India in start-ups. Assessee also mentioned that it is an innovative financial service platform that combines healthcare and FinTech to provide health saving solution to its clients. It is that kind of a company that K start LLC through Kallari capital proposes to build their investment portfolio. It was further stated that from the perusal of K start LLC's financial statements it can be seen that they have ....
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.... ii. the investor M/s K start LLC was incorporated on 1/12/2015 and this is the first year of the investor company iii. the assessee company has issued 10,000 equity shares to 2 different individuals at par and the rate of Rs. 10 per share iv. he considered the resolution passed at the meeting of the assessee company, explanatory statement pursuant to Section 102 of The Companies Act 2013 on issue of preferential shares, details of the shareholders resolution passed and the resolutions of the board meeting of the appellant company and thereafter noted that two shareholders have renounced their right in the issue of 20,000 compulsorily convertible cumulative preference shares and thereafter renouncement made by them resulted into investment from K start LLC. Based on this sum of Rs. 1.67 crores was received in the bank account of the assessee maintained with the Yes bank on 3/2/2016 towards allotment of 20,000 compulsorily convertible cumulative preference shares of Rs. 10 each at a premium of Rs. 827.50 on 05/2/2016. v. The assessee has not furnished copies of all correspondence that took place between the assessee and K start LLC of Mauritius regard....
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....tius which is the proof of the identity ii. permanent account number allotted by the income tax Department iii. financial statement of K start LLC for the year ended on 31st of December 2016 iv. Bank statement of K start LLC reflecting transfer of funds aggregating to US dollars 2,45,962.54 to the appellant's account v. foreign inward remittance certificate dated 5/2/2016 certifying receipt of funds aggregating to Rs. 1,67,50,000 through normal banking channels vi. KYC form dated 4/2/2016 issued by the bank confirming the information about the non-resident investor vii. form number FC GPR dated 8/3/2016 filed with the reserve bank of India intimate in receipt of equity shares/preference shares Under automatic route or FIPB approval within 30 days viii. letter dated 13/file/2016 received from RBI acknowledging filing of form number FC GPR ix. form number PAS 3 filed with the registrar of Companies regarding allotment of shares by the appellant to K start LLC x. brief write-up about K start LLC and Kallari capital xi. tax residency certificate of K start LLC issued by Mauritius tax authorities ....
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....n held that the assessing officer has made detailed enquiry by seeking information from Switzerland tax authorities through proper channel Under the exchange of information provision the addition could not have been made u/s 68 of the income tax act. He further relied upon the decision of Saurashtra Ferrous private limited versus Deputy Commissioner Of Income Tax 55 taxmann.com 344 wherein it has been held that assessee was required to discharge initial burden of proof placed upon it u/s 68 in respect of loan received in form of debentures even if it was received from a foreign company. He submitted that assessee has already discharged its onus. He further relied upon the decision of the honourable Bombay High Court in Principle Commissioner Of Income Tax versus Aditya Birla telecom Ltd 105 taxmann.com 206 wherein it was held that when there was no suspicious movement of funds and all necessary permissions and clearance were granted by the government of India and other government authorities for such investment merely because investor was investing a huge amount on Multi corporate bodies were involved in entire process of collecting funds same cannot be made subject to income tax u....
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.... is ready to be launched commercially in February 2016. He also submitted an investment memorandum of the assessee company. Before us assessee also submitted a project plan in the form of financial due diligence conducted by PricewaterhouseCoopers and are legal due diligence by a law firm Shardul Amarchand Mangaldas. He submitted that above information clearly shows that all the requisite parameters for investment are in place. 18. We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also considered the various information furnished by the assessee before the learned AO as well as information received by the learned assessing officer under exchange of information provisions. The facts clearly shows that assessee has got an investment from Kstart LLC, Mauritius as a contribution towards issue of 20,000 compulsorily convertible preference shares having face value of Rs. 10 each at a premium of Rs. 827.50 per share. For this proposition the bank account of K start LLC with Deustch bank account number 02 MCR502499 shows that a sum of US dollar 2,45,962.54 were transferred on 3 February 2016 in the bank account of the assessee co....
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....Asia and India Google incorporation and Varsha Rao head of global operation at home rental startup Airbnb. Further as per information received by foreign tax and tax research division of government of India under the exchange of information under article 26 of the Double Taxation Avoidance Convention between India and Mauritius, Kstart LLC was having three different directors. As per the directors report of K start LLC, it is to operate as an investment holding company. It has investment as its fair market value having the cost of US dollar 33,51,414 and equity of class A shareholders of US dollar 35,31,823. A note to financial statements of the report clearly shows that Kstart LLC is a limited liability company and subsidiary of kalalri capital III, LLC of Mauritius private limited life Co Ltd by shares. With respect to the income stream of K start LLC, it is also stated that company is organized for the purpose of realizing returns through long-term capital appreciation of investments made by the company, primarily in technology and service companies located in with significant business activity in having Nexus to the Indian subcontinent. Therefore the only stream of income of....
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....ighed on the scale of evidence available on the record and the discharge of burden by the assessee on the basis of the documents on facts and circumstances of the each case. 20. Further looking at the provisions u/s 56 (2) (viib), it clearly applies to the resident and not to a sum received from a non-resident. Therefore, this section does not apply to the impugned transaction. 21. Therefore, looking at the various evidences produced by the assessee, evidences obtained by the learned assessing officer in terms of article 26 of the Double Taxation Avoidance Convention between India and Mauritius, the annual financial statement of the investor, the background of the investor as mentioned in the financial statements, the amount of investments made by the investor in other companies across the globe, the amount of share capital introduced by the holding company of the investor, the financial operations of the investor deciphered from the financial statements of the investor, Financial and Legal Due diligence by investors, we do not find that there is an iota of doubt about the creditworthiness and genuineness of the about transaction of allotment of 20,000 compulsorily convertibl....