TaxTMI 
TaxTMI 
2021 (4) TMI 985
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....ent (DTAA). 3 That on the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in holding that the interest income is chargeable to tax in India on accrual basis irrespective of its receipt by the Appellant and thus denying benefit of Article 11 of the DTAA, which provides taxation of interest income upon its receipt by the non-resident. 4 That on the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in holding that the legal precedents wherein treaty benefits have been granted basis Tax Residency Certificate ('TRC') are not applicable to the Appellant's case. 5 That on the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not following the Rule of Consistency as laid down by the Hon'ble Supreme Court in the case of Radhasoami Satsang vs. CIT (1992) 193 ITR 321. 6 The above grounds of appeal are independent and without prejudice to one another. 7. The appellant prays for leave to add, alter, amend and/or modify any of the grounds of appeal at or before the hearing of the appeal. 2. Briefly stated facts of the case are that, the assess....
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....come at the rate of 40 % along with surcharge and cess. The Ld. CIT(A) has summarized the basis of finding of the Assessing Officer as under: "6.9 find that the AO has not considered the appellant company as beneficial owner of the interest so accrued based on following observations: a) As per the shareholders information, assessee has mentioned that 100% beneficial ownership of the shares is with Myddleton Holdings Limited which is a Gibraltar based company. b) The balance sheet of the assessee is NIL. There is neither any asset nor liability. Even the investment in CCDs of Eden Estates Private Limited has not been mentioned. c) The main director of the assessee company who files returns, replies and any other statutory filings Mr. Maurice Moses Benady is based in Gibraltar. d) All the filings in respect of the company are done by him from the IP addresses at Gibraltar. e) Moreover, the assessee has no funds or assets of its own. f) The bank account of the company is based in Gibraltar International Bank which is the only account as per the return of income." 4.1 The Ld. CIT(A) concurred with the finding of the Lear....
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....y of the other Contracting State; or ii. the Central Bank of the other Contracting State or any agency or instrumentality (including a financial institution) wholly owned by the other Contracting State or political sub-division or local authority thereof; a. b. interest arising in a Contracting State shall be exempt from tax in that Contracting State to the extent approved by the Government of that State if it is derived and beneficially owned by any person other than a person referred to in sub-paragraph (a), who is a resident of the other Contracting State provided that the transaction giving rise to the debt claim has been approved in this regard by the Government of the first mentioned Contracting State. 4. The term "interest" as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from Government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as i....
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....terest income thereon for its own exclusive benefit, and not for or on behalf of any other entity. The mere fact that the investment was funded using a portion of an interest-free shareholder loan and share capital does not affect the appellant's status as the "beneficial owner" of interest income, as the entire interest income was the sole property of the appellant. In this context, we may refer to para 10.2 of the OECD Commentary (2017] on Article 11 (Interest) of the 'Model Tax Convention' to appreciate the meaning of "beneficial owner" and the same reads as under : "Where the recipient of interest does have the right to use and enjoy the interest unconstrained by a contractual or legal obligation to pass on the payment received to another person, the recipient is the 'beneficial owner' of that interest" The issue is simple because the mere fact that the CCDs were funded using monies received by the appellant from its immediate shareholder does not make the arrangement a back-to-back transaction. The appellant had the absolute control over the funds received from its immediate shareholder. Further, in the instant case the appellant wholly as....
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....ited Cyprus India Holding of investments Construction 100 100 1,466 1,466 Airwat Developers Private Ltd 75 75 19,460,000 19,460,000 19,461,466 19,461,466 As at 31 March 2016, the Company holds 2.976.005 11% Fully Compulsory Convertible Debentures (FCCDs) of Rs. 100 with a maturity of 10 years (i.e. 3 April 2017 and 23 April 2019) in Eden Real Estate Private Limited the details of which are as follows: Name of issuer Country of incorporation Interest rate 31/03/2016 Number of debentures 31/03/2015 Number of debentures 31/03/2016 US$ 31/03/2015 US$ Eden Real Estates Private Limited India 11% 2,976,005 2,976,005 2,672,169 2,672,169 2,672,169 2,672,169 Eden Real Estates Private Limited carrys on a business of property development in India. The Fully Compulsory Convertible Debentures can be converted into redeemable preference shares or into equity shares at the maturity date. Post conversion, such shares may either be redeemed at par value or conver....