TaxTMI 
TaxTMI 
2023 (6) TMI 805
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.... the ld. Counsel, we have considered the documentary evidences brought on record in light of Rule 18(6) of IITAT Rules. 4. We have given thoughtful consideration to the orders of the authorities below. 5. Briefly stated, the facts of the case are the assessee is a public company incorporated under the laws of Mauritius in 2010 and operates as an investment holding company. For the purposes of Indian tax laws, the assessee is a non resident company and is a tax resident of Mauritius under Article 4 of the India Mauritius Tax Treaty. 6. The assessee holds a valid tax residency certificate issued in Mauritius for the period under consideration. The assessee also holds a valid global business license issued by the Financial Services Commission in Mauritius. 7. The assessee filed its return of income electronically on 30.10.2017. The total income of the assessee was computed as under: A INCOME FROM CAPITAL GAINS / (LOSS) 1 Total Taxable Income under head Long Term Capital Gains / Loss - Unlisted Long Term Capital Gains on sale of shares of Youngmonk Technologies Pvt. Ltd. (unlisted shares) (Refer Note to Computation) Less; Exempt under provisions ....
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....ed online electronically in E-proceeding' facility through your account in e-filing website of Income Tax Department d) Para(s) (a) to (c) are applicable if you have an account in e-filing website of Income Tax Department. Till such an account is created by you, assessment proceedings shall be carried gut either through your e-mail account or manually (if e-mail is not available) e) In cases where order has to be passed under section 153A/153C of the Income Tax Act, 1961 read with section 143(3), assessment proceedings; would be conducted manually. Yours faithfully Sd/- Mikesh Kumar Sinha Circle Intl. Tax 3(1)(2)Del 9. The assessee filed detailed reply which reads as under: 15 November 2019 By email Assistant Commissioner of income Tax Circle Int. Tax (1)(2) Civic Centre, Minto Road New Delhi-110002 India Dear Sir Re: SAIF Partners India IV Limited (hereinafter referred to as the "Company" or the "Assessee") Permanent Account Number : AAOCS8595D Assessment Year : 2017-18 Financial Year : 2016-17 Subject: Notice dated 8 ....
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....(2)(b), section 43B, section 40(a)(ia) of the Act shall hold no applicability on the Company. Further, the Company has availed no deductions under Chapter VI- A of the Act. 1. In response to query no. 7 The details of directors of the Company during the relevant AY along with their addresses are duly disclosed in the ITR form. The relevant extracts of the ITR Form are enclosed as Annexure 4. 2. In response to query No. 12 The Company has received no orders under section 195(2) of the Act from the payers during the relevant AY. 3. In response to No. 23 and No. 24 The Company maintains no bank accounts in India. 4. In response to No. 28 The copy of Form 26AS for AY 2017-18 is enclosed as Annexure 5. 5. In response to No. 35 The assessment proceedings under the Act are initiated for the first time during the relevant AY for the Company. 6. In response to No. 10, No. 25, No. 37 7. As stated above, the Company has no business operations in India and holds no bank account in India. During the relevant AY, the Company received (i) payment with respect to share transfer and (ii) dividend income from India. Since the Co....
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....s to be computed as excess of (a) Full Value of consideration received or accrued as result of transfer; over (b) Cost of acquisition of shares and (c) Expenses incurred in connection with such transfer. As per section 2(42A) of the Act, in case, shares of unlisted company are held for more than 24 months from the date of transfer, they are categorized as Long term Capital Assets ("LTCA"), else Short term Capital Assets ("STCA"). Period of 24 months shall be substituted by 12 months where the subject shares are listed on recognized stock exchange. * Where shares being sold are - (a) equity shares; (b) listed on recognized stock exchange; and (c) chargeable to securities transaction tax ("STT"), then any income arising from the same shall be exempt under the provisions of section 10(38) of the Act. * The Company is a tax resident of Mauritius and is entitled to be governed by the beneficial provisions of Indian-Mauritius Tax Treaty ("Tax Treaty"). As per Article 13 of the Tax Treaty, any gains arising from the transfer of shares of Indian entity shall be taxable in Mauritius. It is submitted that the Company has chosen to opt for the beneficial provisions of the Ta....
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....reaty, the same has not been suo-moto carried forward by the Company. In absence of specific columns to represent such short term capital loss in the ITR Form, no disclosures for such loss transaction was provided. Note that the long term capital gain of INR40,056,781 has been shown in schedule CG of ITR out of abundant caution. * Income from dividend - INR22,300,518 During the year under consideration, the Company has received dividend from Senco Gold Limited and Manpasand Beverages amounting to INR22,300,518. Such dividend shall be exempt in the hands of the Company under section 10(34) read with section 115-0 of the Act. Notwithstanding the above, the Company reserves its right to make additional submissions/claims (including carry forward of losses) in case your office do not concur with the positions taken by the Company. Yours faithfully, Sd/- Shafiq-Ur-Rahmaan Soyfoo" 11. From the perusal of notes to computation of income [supra] it can be seen how the loss was computed with a specific mention that on transfer of such shares, though the company has incurred loss, but has opted not to carry forward the said loss. 12.....
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....any commercial substance in Mauritius and whether any tax avoidance arrangement was made where in the form of a conduit company with an objective to obtain tax benefits under the India- Mauritius DTAA. The AO should have verified the details of key personnel who manage the investments decisions of the fund. No details were called for in this regard. This is essential to ascertain whether the fund manager creates a PE for the assessee or in case assessee's activity is controlled and managed in India, then the assessee may be treated as a resident for tax purposes in India leading to different tax consequences in India. On the basis of above observation, it is clear that the aforesaid Assessment order passed under section 143(3) was passed without making necessary factual verification and application of correct legal provisions to ascertain the tax liability of the receipts in the hands of the assessee. Therefore, the order is erroneous and therefore prejudicial to the interest of the revenue. In view of the above, you are requested to show cause as to why necessary action should not be taken in your case under section 263 of the Income-tax Act. You are requested to....
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....o furnish the basis of cost of acquisition and sale price. In order to ascertain the correctness of the fair market value at the time of acquisition and also at the time of sale adopted by the assessee company. 11.6 For unlisted companies, Income-tax Rule under 11UA provides the methodology of computation of fair market value. Rule 11UA (1) prescribes the manner to find out the fair market value of the various properties. Fair market value of unquoted Equity shares is required to be computed as per the formulae given there in. However, for finding out fair market value of the unquoted equity shares in case of shares issued by the company at premium, there are two options provided under Rule 11 UA(2) at the choice of the assessee. One option is to calculate the fair market value of unquoted equity shares as per formula given. The other one is the fair market value of unquoted equity shares determined by Discounted Free Cash Flow (DCF) Method. However under Rule 11UA(2), if an assessee choose the valuation of unquoted equity shares as per the Discounted Free Cash Flow Method, then he has to obtain a report from Merchant Banker. Assessee has not furnished the valuation report....
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....of the Revenue. If one of them is absent--if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-- recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous ". 18. The Hon'ble Bombay High Court in the case of Gabriel India Ltd 203 ITR 108 has held as under: "The power of suo-motu revision under subsection (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this sub-section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous....
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....ner with the power of suo-motu revision because the first requirement, viz., that the order is erroneous, is absent. Similarly, if an order is erroneous but not prejudicial to the interests of the Revenue, then also the power of suo-motu revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. We, therefore, hold that in order to exercise power under sub-section (1) of section 263 of the Act there must be material before the Commissioner to consider that the order passed by the Income tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of t....
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....aw. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the decision of Hon'ble High Court of Bombay in the case of CIT vs. Nirav Modi, [2016] 71 Taxmann.com 272 (Bombay). 20. The Hon'ble High Court of Gujarat in the case of CIT vs. Nirma Chemical Works Ltd. 309 ITR 67 has observed as under: "if assessment order were to incorporate the reasons for upholding the claim made by an assessee, the result would be an epitome and not an assessment order. In this case, during the assessment proceedings for both the Assessment Years, the Assessing . A.Y. 2009-10 Officer issued a query memo to the asses....
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.... the facts of the case in totality from all possible angles, we failed to persuade ourselves to accept the contention of the ld. DR who had strongly supported the findings of the PCIT. We are of the considered view that the order framed u/s 263 of the Act deserves to be set aside and that of the Assessing Officer deserves to be restored. We order accordingly." 22. The Hon'ble Delhi High Court in the case of Delhi Airport metro Express [P] Ltd 398 ITR 8 had the occasion to consider a similar issue and the Hon'ble High Court held as under: "9. It is seen, in the order dated March 30, 2016, the Principal Commissioner of Income-tax has proceeded by setting out the contents of the show-cause notice and the contents of the reply given by the assessee. It appears that no inquiry, as such, was undertaken by the Principal Commissioner of Income- tax to come to the conclusion that the original assessment order was erroneous and prejudicial to the interests of the Revenue. 10. For the purposes of exercising jurisdiction under section 263 of the Act, the conclusion that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue ....
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.... Jurisdictional High Court on the facts of the case in hand, we find that in the appeal under consideration, the ld. CIT called for valuation report in revisionary proceedings. However, when the valuation reports were filed by the assessee, the ld. CIT chose to set aside the entire matter back to the file of the Assessing Officer without appreciating that it was incumbent upon the ld. CIT to himself examine the valuation reports and verify as to how the case of the assessee was erroneous and prejudicial to the interest of the Revenue following the ration laid down by the Hon'ble Jurisdiction High Court in the case of the Delhi Airport Metro Express [P] Ltd [supra]. 24. Similar view was taken by the Hon'ble Delhi High Court in the case of Jyoti Foundation 357 ITR 388 wherein the Hon'ble High Court has observed as under: "In the present case, inquiries were certainly conducted but the Assessing Officer. It is not a case of no inquiry. The order under Section 263 itself records that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called. However, in such cases, as observed in the case of DG Housing Proj....
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....y in India from whom payment is received during the year. 11. Details of invoices raised to the Indian customers/Income received. 12. Copy of all orders u/s. 195(2) which assessee might have received from payers relevant to the assessment year in consideration. 13. 14. 15. 16. 17. 18. Whether the assessee company received any payment from any non-resident in connection with business of non-resident in India. If yes, please, file the relevant details. Explain in detail whether you have permanent establishment in India. सतà¥à¤¯à¤®à¥‡à¤µ जयते Whether technical services were provided to the Indian customer during the year? If yes, please submit the names of employees and other persons who visited India this regard stating their period of stay, purpose and for which project these services were provided and whether An these projects the assessee has supplied any products. The information should be provided invoice wise. Furnish the details of all expatiates whose remuneration is charged to the expenses in India during the relevant period. 10 Furnish the details of sa....
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....sons specified section 40(A) (2) (b). 31. Furnish details along with proofs of payments made before the date of filing the return for payments referred to in section 43B and 40(a) (ia), if any. 32. Furnish list of sundry creditors/sundry debtors with complete names and addresses and amount payable/ receivable from each of them. 33. Produce bills/documentary evidence of new assets purchased during the relevant previous year on which depreciation is claimed Adduce evidence to prove when the asset was put to use for business. 34. Complete details about the parties to whom payment in excess of Rs. 50,000/- is made with nature of such payments, mode of payments, TDS deducted, if any. INCOMETAX DEPARTMENT 35. Copy of last assessment 36. Produce books f accounts with supporting bills and vouchers and bank statement. 37. Detailed reply on the reason of scrutiny selection 1. "Foreign remittances made to person(s)located in low tax jurisdiction countries (Assessee being the remitter) 2. Value of foreign remittance sent by the assessee is higher than the gross total income (Assessee being remitter) 3. Large outward remittances ....