TaxTMI 
TaxTMI 
2023 (10) TMI 14
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....on from capital gain tax arising on sale of Compulsory Convertible Debentures (CCDs) by alleging that the Appellant is not eligible for the beneficial provisions of Double Taxation Avoidance Agreement (DTAA) entered between India and Singapore. 2.1 The Ld. AO and Ld. Panel basis own surmises and conjectures has grossly erred on facts and in law in denying the beneficial provisions of DTAA between India and Singapore without appreciating that the Appellant has duly furnished a Tax Residency Certificate ('TRC') obtained from the Singapore Revenue Authorities evidencing its residential status of Singapore and being entitled to avail the DTAA benefits. 2.2 The Ld. AO and the Ld. Panel has grossly erred on facts and in law by alleging that the Appellant lacks economic substance in Singapore as per the Limitation of Benefit (LOB) clause in India-Singapore DTAA and denying the DTAA benefit without appreciating that the Appellant fulfills all conditions of LOB clause as prescribed under the DTAA. 2.3 The Ld. AO has grossly erred in ignoring the facts that the Appellant has obtained all necessary approvals and complied with necessary filings in reference to impugn....
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.... which the sale consideration of INR 2444 per CCD's can be substantiated. 5.1 The Ld. AO has grossly erred in alleging the fair market value was lower of CCD without appreciating that the same is backed-up with the report of a reputed independent third valuer namely M/s Duff and Phelps. 5.2 The Ld. AO has not appreciated that the sale consideration on INR 2444 per CCD has itself been accepted by the Ld. AO while computing the capital gain on sale of CCD by the Appellant. 5.3 The Ld. AO failed to appreciate that the Ld. Panel has not provided any observation or direction to verify the fair market value of CCD. 6. The Ld. AO and the Ld. Panel grossly erred on facts and in law in treating the transaction of sale of CCD as sale of equity instruments, without appreciating that the Appellant has never claimed it as an equity instrument and has always claimed that CCDs are debt unless converted into equity. 6.1 The Ld. AO failed to appreciate that, in any case, both sale of equity as well as debt instruments were not taxable in India prior to 1st April 2017 as per Article 13(4) of DTAA between India & Singapore. 7. That the Ld. AO has ....
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....HIPL) now known as "THR Infrastructure Pte. Ltd." The assessee Company, incorporated in Singapore is primarily in the business of providing consultancy and management services and also act as an investment holding company for RHT Trust. In turn, FGHIPL (i.e., the COMPANY) wholly owns Fortis Healthcare Management Limited (FHML), an Indian incorporated company. Further, as per the laws in Singapore, all assets of the Trust has to be held by the trustee manager directly in its capacity as trustee-manager or indirectly through one or more holding subsidiaries. Accordingly, RHT Trust made all the investments via the Assessee, being its 100% subsidiary through money raised from IPO and debts/ loans obtained by the Assessee. 5. The Assessee had subscribed to, inter alia, 87,04,000 CCDs of face value of Rs. 1,000 each issued by Fortis Hospotel Limited ("FHTL") in October 2012 for an aggregate consideration of Rs. 870,40,00,000/-. The subscription to CCDs issued by FHTL was made by the Assessee with due intimation to Reserve Bank of India ("RBI") which was duly acknowledged and approved by the RBI vide letter dated 13^th August, 2013 (enclosed at pages 116 to 117 of the paper book Volume....
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....of ld. DRP, the Assessing Officer brought to tax the surplus on sale of CCDs as income under the head "capital gains" and levied tax thereon @10% under section 112 of the Act denying the benefit of the Tax Treaty but accepting the valuation adopted by the Assessee. 11. The grievance of the Assessee raised by grounds of appeal Nos. 2 to 6 is thus limited to the denial of the exemption under Article 13(4) of the Tax Treaty qua capital gains earned on sale of CCDs. 12. Facts relevant to the adjudication of the case are as under: The structure of the assessee group is below: * RHT was listed on the Singapore Stock Exchange on 19^th October, 2012 with a business proposition to invest in medical and healthcare assets and services. RHT Trustee Manager Pte. Ltd. (Trustee Manager) acts as the Trustee Manager of RHT whereas Fortis Healthcare International Limited (FHIL) is the Sponsor of RHT and holds 28% units in RHT. The list of other substantial unit holders of the Trust as of 26 June 2013 is as under- S. No. Name of the Unit holder No. of Units % 1 Fortis Healthcare International Limited 220,676,944 28.00 2 DBS Nominees Pte. Ltd. 100,777....
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....is exercisable any time FHL is entitled to transfer its 51% shareholding interest after having obtained the necessary approvals, including approval from HUDA. In the event where the FHTL Call Option is not exercised within 5 years from the date of the shareholders agreement (i.e. 17 September 2012), FHML will be entitled to exercise a put option (FHTL Put Option) requiring FHL to acquire FHML's 49% shareholding in FHTL. Refer page 17 of the Paper Book Volume-1. • It was originally intended that RHT Group ultimately holds 100% equity interest in FHTL by acquiring remaining 51% equity interest in FHTL. For this purpose, FHL had submitted an application on 12 June 2013 to HUDA for approval to transfer the 51% equity interest in FHTL to FHML. Copy of said letter is enclosed as per pages 105- 108 to Paper book - Volume I. Despite repeated follow ups, approval has not been granted. As the requirement for FHL to hold at least 51% in FHTL was imposed from HUDA in its letter dated 3 January 2006, a waiver of this condition or approval from HUDA is required before FHL could sell its 51% interest in FHTL to FHML. The Assessee would like to categorically mention before your Ho....
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....the other rights available under Law, the Investor shall, for a period of 90 Business Days thereafter ("Put Option Period"), have the right to issue the put Option Notice (as defined hereinafter), requiring the Promoter and/or its nominee to purchase from the Investor, at the Investor's sole discretion, all, but not less than all the Investor CCDs then held by the Investor in the Company ("Put Securities") to the Promoter and/or its nominee, and the Promoter and/or its nominee shall be obliged to purchase such Investor CCDs for the Put Option Consideration (defined in Clause 7.1.2)." 13. In this background of investment, earning of interest on CCDs in India and subsequent sale of CCDs, it was argued that the capital gains earned on sale of CCDs by the assessee is not liable to tax in India by virtue of the exemption available under Article 13(4) of the Tax Treaty. 14. The ld. AR argued that the Assessee is having valid Tax Residency Certificate (TRC) and TRC is one of the prerequisites for the non-resident's entitlement to beneficial provisions of the DTAA. As per provisions of section 90(4) of the Act, a non- resident shall not be entitled to claim any relief under t....
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....rotocol which was made effective from 01.04.2017, meaning thereby that amended Article is applicable for assessment year 2018-19 and onwards. The Delhi bench of the Tribunal in the case of MIH India (Mauritius) Ltd. vs. ACIT has held that similar amendment made in the India Mauritius Tax Treaty w.e.f. 1.4.2017 would apply only from assessment year 2018-19 and onwards. Accordingly, it was argued that the amendment to the Tax Treaty vide the aforesaid Protocol is not applicable, at the threshold to the assessment year under consideration, viz., assessment year 2017-18. The ld. AR submitted that by no stretch of imagination, the assessee company can be regarded as a shell company/conduit entity. 17. It was submitted that the Assessee is wholly owned by RHT, a business Trust listed on Singapore stock exchange. In that view of the matter, it is the submission of the Assessee that it should be regarded as a listed company on a recognized stock exchange of Singapore. In this connection, the Assessee seeks to draw support from the provisions of section 2(18)(B)(c) of the Act, which provides that the wholly owned subsidiary of a listed company would be regarded as "a company in which pub....
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....Ds have been offered to tax in India in the tax return filed in India @ 10% as provided under the Tax Treaty. The same was accepted by the assessing officer in the draft assessment order. The past assessments of the Assessee, too, have been completed taxing the said interest @ 10%, thereby accepting that the Assessee was entitled to the Treaty benefits. 21. With regard to the Place of effective management ("POEM") of the assessee is in Singapore, the ld. AR argued that Prior to the amendment of section 6(3) of the Act by the Finance Act, 2016 w.e.f. 1.04.2017, a foreign company was said to be a resident in India in any previous year, if during that year the control and management of its affairs is situated wholly in India. With the amendment by the Finance Act, 2016 w.e.f. 1.04.2017, amended section 6(3) of the Act reads as under: "a company is said to be a resident in India in any previous year, if (i) it is an Indian company; or (ii) its place of effective management, in that year, is in India." Explanation - For the purposes of this clause "place of effective management" means a place where key management and commercial decisions that are n....
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.... 2.1. During the year, the assessee received Rs. 1099,98,40,802/- from India on sale of 51% stake in CCDs (Compulsory Convertible Debentures) issued by Fortis Hospital Limited (FHTL). The assessee filed in its ITR for AY 2017-18 on 30.11.2017 and claimed Long Term Capital Gain (LT CG) of Rs. 656,08,00,802/- from the above transaction as fully exempt as per Article 13(5) of the India- Singapore DTAA. 2.2. The AO in its Final Order, taking into account the direction of the DRP, held that the assessee company is not entitled to the treaty benefits of India-Singapore DTAA as the business arrangement employed by the assessee is a scheme for tax avoidance through treaty shopping, and the assessee company is held not to be the real owner of the income so generated from the transaction, thus lacked beneficial ownership. The AO further held that the TRC is not sufficient to establish the tax residency as the substance of transaction established otherwise due to control and management of the assessee company is not present in Singapore, but rather in India. This AO held that the assessee company is not entitled to the treaty benefits of India- Singapore DTAA, and accordingly incom....
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....of Singapore. Further, assessee in support drew a reference of provisions of section 2(18)(B)(c) of the Act and placed reliance on decision of IT AT, Pune bench in the case of Daimler Chrysler India Pvt. Ltd. (ITA No. 968/PN/03). 3.3.4. Annual expenditure in Singapore on operations in that Contracting State is equal to or more than $200,000:- Assessee submitted the expenditure incurred by it in last 24 months from the date of transfer is in excess of the threshold of Singapore $ 200,000 per year and these expenses were incurred and booked at the year end. Therefore, appellant has to be regarded as resident of Singapore and entitled to Tax Treaty benefits, even taking into account the amendment to the said Treaty through the Third Protocol. 3.3.5 Commercial Substance:-Assessee submitted that it has commercial substance, as it has made investments in other than CCDs subscribed in FHTL and has done all business activities in Singapore under the law of Accounting and Corporate Regulatory Authority of Singapore Ministry. Therefore, it cannot be regarded as a shell company/conduit entity. 3.3.6 Rule of Consistency:-Assessee submitted that the interest earned on....
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....gare Health Trust, a business trust in Singapore, by first creating a wholly-owned subsidiary in Mauritius named Fortis Mauritius. 4.1.4 Assessee company is a wholly owned subsidiary of Religare Health Trust (RHT). As per public domain information, Religare Health Trust is a registered Business Trust constituted in Singapore in July 2011. 4.1.5 RHT Trust's principal activity is to invest in medical and healthcare assets and services, in Asia, Australasia and emerging markets in the rest of the world. All the investments of Religare Health trust namely 14 clinical establishments and 2 operating hospitals across India are all in the Fortis group of hospitals in India through the assessee company. One such investment of the assessee company is in Fortis Hospital ltd. (FHTL), an Indian company whose CCDs have been sold during the year under consideration. 4.1.6 There are 2 main groups of unit holders in Religare health Trust namely the Fortis Group entities and institutional lenders. As per its website, the main unit holders/investors of the RHT include Mauritius based company Fortis Healthcare International Ltd. (Fortis Mauritius) (27.6% shareholding), DB No....
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....s of issuance. 4.1.14 In July 2016, the assessee company entered into an agreement with Fortis India to sell 51% of the CCDs of FHTL (i.e. 44,39,040 CCDs) held by it for a consideration of Rs. 1099,98,40,802/- (SGD 2271 million). 4.1.15 Immediately thereafter, the assessee company declared a dividend of SGD 193 million to its parent RHT Trust and also extended a loan to it. The RHT Trust in turn declared a special distribution to all its unit holders at 24.8 Singapore cents per unit on 28.10.2016 as against the usual distribution rate of 3.5 Singapore cents per unit. 4.1.16 RHT Trust continue to remain functional till February 2019, which coincided with the time when Fortis India publicly declared that it had taken full control of all its assets in India thereby indicating that the Trust was no longer an investor in the group's assets. 4.1.17 Accordingly, the Trust website indicates another special distribution to its unit holders on 04.02.2019 coinciding with the time when it had finally divested all its stakes in Fortis group assets. 4.1.18 As on date, the T rust website states that it has ceased to have any operational business and it....
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.... The reason given regarding HUDA land conversion rule is an alibi to perpetuate this pre-conceived modus operandi to avoid taxation in Indian territory. vi. No basis of adopting fair market value at the time of issue of CCD to the Company in 2012 was furnished by the Company during the course of assessment proceedings. Fair market value of CCD's and sharp rise in the value of adopted at the time of disposal of CCD's also remains unsubstantiated by the Company. No commercial basis for undertaking the transfer of CCD's by the Company in Fortis Hospital Limited (FHTL). vii. The appellant is a conduit entity/economic sham considering that (i) the appellant has only one employee; (ii) majority of the operational expenses are in the form of Trustee Manager fee (who also render services to other related entities) which is to a related party. Further, in the in the protocol on LOB clause, the term use is "annual expenses on operation", meaning thereby the annual expenses for the assessee solely be in the nature of operating expenses. No other expenses passive nature like realised and unrealised foreign exchange loss as well as the notional losses like unrealised fair valu....
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.... director of Fortis India. Board meetings not held in Singapore as Board Resolutions do not show place of meeting. xii. Tax Residency Certificate is not sufficient to establish tax residency if there is no economic substance in entity. TRC not conclusive in view of the ruling of Hon'ble Supreme Court in the case of Vodafone (para 98). 5. Point-wise rebuttal for assessee Legal Objections on Tax Avoidance Scheme. 5.1 TRC is not Sufficient to Claim Treaty Benefits: 5.1.1 The assessee has stated that CBDT Circular 789 dated 13/04/2000 should be applicable on it which states that "it is hereby clarified that wherever a Certificate of Residence is issued by the Mauritian Authorities, such Certificate will constitute sufficient evidence for accepting the status of residence as well as beneficial ownership for applying the DTAC accordingly." This circular provides a general provision that TRC would constitute sufficient evidence for accepting the status of residence and beneficial ownership. However, in the present case, there is overwhelming evidence (discussed under para 4 above and in AO/DRP orders,) that the assessee company is failing in the princip....
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....2 ITR 311 and observations made by the Bombay High Court in Indo star Capital v. CIT also held on similar view based on 'substance over the form' principle. 5.1.4 The place of incorporation argument is based on the premise that form is required to be recognized for deciding taxation issues. The Azadi Bachao Andolan of the Hon'ble Supreme Court is also based on this argument. However, the primacy of form of the taxpayer in deciding tax liability has not been approved under a tax treaty framework. For instance, under a dual residency situation always the economic substance overrides the form. Under the tie breaker rule for tax residency of companies, the country where the "control and management" of the company is situated gets the right to tax and not where the company is incorporated. The "control and management" test for tax residency of companies is basically based on the principle of "substance over form". 5.1.5 The assessee has tried to justify the rationale of establishing a company in Singapore. However, none of the causes mentioned by the assessee justify establishing a paper company with paper directors. It is an undoubtable conclusion derived ....
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....nce and supervision. c) There is very little discretion with the management of intermediary concern and all the major decisions are taken by the controlling company and passed on to the entity. d) Funds received are immediately transferred to the holding company and funds only to the extent of requirement are remitted by the holding company. e) There is very little infrastructure or, employees or business activities with the intermediary concern. f) There is no or very low taxation in the Country of Residence of the intermediary concern. 5.2.3 In this regard, it is useful to refer the observations of Hon'ble Apex Court in Vodafone Case at para-67 is very relevant, which is reproduced as under:- "67. "It is generally accepted that the group parent company is involved in giving principal guidance to group companies by providing general policy guidelines to group subsidiaries. However, the fact that a parent company exercises shareholder's influence on its subsidiaries does not generally imply that the subsidiaries are to be deemed Residents of the State in which the parent company resides. Further, if a company is a parent com....
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....ing process is transferred to the holding company. ii. In Management of intermediary entity is acting as puppet. iii. There is no reasonable business purpose in running the intermediary entity. In view of the above, the legal position and based on the facts and circumstances analysis in para-4 above, it is intended to use the legal doctrine of substance. 5.3 Substance Over Form squarely the Doctrine Applicable to assessee: 5.3.1 The doctrine of substance over the form means to brush aside and disregard the deeds, legal structure, the legal rights and liabilities arising under a contract between the parties, and decide the question of taxability and non-taxability independent of rights and the liabilities of the parties what they are in law. Even though significance of legal form of a transaction has been given due importance in several English cases but later a balanced approach was adopted by English Courts where it was held that one has to look at the whole transaction to ascertain the true character of the payment. In Indian cases also importance was earlier given to legal form. However, subsequently the Courts have not hesitated to e....
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....assessee company in question is taken into account, the intermediary should be denied treaty benefits according to the policy of double tax treaties because it does not satisfy the requirement of being the beneficial owner of the income at issue. 5.4 Beneficial Ownership: (a) However, in the light of the traditional legalistic view of companies, and of the meaning of "ownership", it seems that foreign courts decided that they were unable to apply the beneficial ownership test literally. As a result, in order to prevent residents of non-contracting states from obtaining treaty benefits by means of the interposition of conduit companies, foreign courts adopted surrogate tests in place of the literal beneficial ownership test. These surrogate tests focus not on ownership of income by the company in question but on some other factual matter such as "dominion". (b) The test of dominion is a surrogate form of reasoning that foreign courts have used to apply the beneficial ownership test in conduit company cases. The word "dominion" is not a term of art. This article uses the word "dominion" to represent an incident that exhibits ownership. Salmond desc....
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....x Authority sufficed the condition to enjoy DTAA benefits by assessee as per sec 90(2) of IT Act read with DTAA. 6.2. However, contrary to insistence of assessee, the LOB clause would squarely apply to the assessee's transaction executed in 2016. Even though the latest amending Protocol of Indo-Singapore DTAA came into effect from 01.04.2017 for applicability of Art 12 (4A) on capital gain income for LOB Clause as stated by the AR of the assessee, but the fact remains that the LOB Clause as introduced in the year 2005, (which was reproduced in new amending Protocol of 2017), being applicable w.e.f. 01.04.2005 continues to operate in respect of income under Article 12, 13, 11 of DTAA. 6.3. The LOB Clause as applicable from 01.04.2005 and as appeared in the Protocol to DTAA is reproduced below for ready reference: "AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION AND PREVENTION OF FISCAL EVASION WITH FOREIGN COUNTRIES - SINGAPORE Whereas the annexed Agreement between the Government of the Republic of India and the Government of the Republic of Singapore for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income ha....
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.... in Article 1 of this Protocol. 2. A shell/conduit company that claims it is a resident of a Contracting State shall not be entitled to the benefits of Article 1 of this Protocol. A shell/conduit company is any legal entity falling within the definition of resident with negligible or nil business operations or with no real and continuous business activities carried out in that Contracting State. 3. A resident of a Contracting State is deemed to be a shell/conduit company if its total annual expenditure on operations in that Contracting State is less than S$200,000 or Indian Rs. 50,00,000 in the respective Contracting State as the case may be, in the immediately preceding period of 24 months from the date the gains arise. 4. A resident of a Contracting State is deemed not to be a shell/conduit company if- (a) it is listed on a recognized stock exchange3 of the Contracting State; or (b) its total annual expenditure on operations in that Contracting State is equal to or more than S$200,000 or Indian Rs. 50,00,000 in the respective Contracting State as the case may be, in the immediately preceding period of 24 months from the date the gains ....
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....of this case following features of LOB clauses are triggered: * affairs were arranged with the primary purpose to take advantage of the benefits * Explanation.-The cases of legal entities not having bona fide business activities shall be covered by Article 3.1 of this Protocol: * A shell/conduit company is any legal entity falling within the definition of resident with negligible or nil business operations or with no real and continuous business * Annual expenditure on operations in that Contracting State is less than S$200,000 * Thus it shall not be entitled to the benefits of Article 1 of this Protocol * DTAA Preamble on the prevention of fiscal evasion is also violated, and therefore as per Vienna Convention, it breaches the object and purpose of the Treaty. Thus, the assessee by not adhering to the objects of the DTAA in good faith, has thus forfeited to proceed further to avail any benefits of DT AA. Since the DTAA is no more applicable to the assessee, the benefits of DTAA automatically do not flow to the assessee. Thus, existence of TRC has no meaning and applicability, as the assessee failed in threshold test of the prea....
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....tlement. Treaty shopping is well known for international tax planning whereby an entity is interposed in a country with favourable tax laws. Lately, the world over it is reckoned that improper nature of treaty shopping structure is created if the following factors are satisfied i.e., the beneficial owner of the treaty shopping entity does not reside in the country where entity is created; the interposed entity has minimal or no economic activity in the jurisdiction where it is located and lastly its income is subject to minimal tax in the country of location. [Para 62]" AAR Mumbai further stated that "The doctrine of substance over form mandates taxing transaction pursuant to its economic effect rather than its form and that a valid transaction must have both a substantial purpose apart from reduction of tax liability." Consequently, AAR Mumbai denied the benefits of India-Singapore DTAA to the assessee in this case." 7.4 Hon'ble Madras High Court in the case of Redington India [122 taxmann.com 136] has ruled that tax benefits can be withdrawn if the investment is merely done to circumvent domestic tax laws. Hence the intent or the principal purpose behind suc....
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....-196/04 Cadbury Schweppes Pic. Cadbury Schweppes Overseas Ltd. V. Commissioners of Inland Revenue was adjudicated before UK courts and it was finally referred to (European Court of Justice) wherein the ECJ pronounced the landmark decision and laid down the judicial ratio based on the concept of wholly artificial arrangements with reference to CFC legislation in UK . However, the judicial ratio could be applied here to examine whether assessee company is wholly artificial arrangements. A wholly artificial arrangement does not exist where an assessee company carried on genuine economic activities in the Contracting State. T he taxpayer must be given an opportunity to prove such genuine economic activity on the basis of objective factors (e.g. premises, staff and equipment of the assessee company in Contracting State) 8.3 Applying the above judicial ratio it is noted that there is only one employee, no effective resident director or neither any assets apart from meager operation of bank account in Singapore. Further all assets held are in the form of shares primarily located in India without any real intimate connection to Singapore. Further the dominion over such shares or a....
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....ss operations. These unique characteristics of BTs call for a new regulatory framework that is set out in the BT Bill." In accordance with Business Trust Laws in Singapore, the investments of the Assessee Company in health care sector were managed by the Trustee Manager and a substantial fee is paid to trustee manager in this respect. Further, for day to day operations, Assessee has one employee on its payroll. The management consultancy activities were rendered by hiring external consultants directly by the Assessee. It is submitted that merely because the Assessee has one employee only cannot be a ground to hold that the Assessee has no commercial substance when the Assessee has appointed separate Trustee Manager to make and manage investments, to whom substantial fees is paid. Further, the issue whether the Assessee is a shell/conduit entity has to be seen in the light of the cumulative circumstances, discussed at pages 9 to 12 of this written submission. There is no mention in the law that the trustee manager fee paid to the related party cannot be considered as operational expenses. Apart from trustee manager fee also, there are sufficient expenses l....
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....tantial funds from reputed and large institutional investors, which was invested through the Assessee in various operating entities in the healthcare sector. The Revenue cannot question the commercial rationale for setting up the trust structure in Singapore, considering the substantial funds mobilized by RHT through the IPO, the investments made by the Assessee out of the funds raised through the IPO by RHT as also the funds borrowed by the Assessee directly, the income earned by the Assessee by way of interest on the CCDs, the surplus generated on disposal of investments and distribution thereof to the unit holders of RHT . DR's Contention - The Trust as pass through entity not entitled to Treaty benefit Assessee's Rebuttal - The setting up of the trust structure as a pooling vehicle for making investments through special purpose vehicles ("SPV") is an accepted trade practice. T he trust is only intended to pool resources from various investors, which are invested through the SPV and distributes the surplus through the unit holders from time to time and on liquidation of the trust. It is internationally accepted that taxes levi....
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....de hors the context/the facts in which the judgment was rendered (Refer CIT vs. Sun Engineering Works P. Ltd.: 198 ITR 297 (SC) @pg 320) The Assessee is seeking to refer to the dictum of the Supreme Court judgment in the case of Vodafone International Holdings B.V. v. Union of India (supra) in the separate, concurring judgments by the Hon'ble Judges in support of its case of availability of Treaty benefit to the Assessee. The Ld. CIT DR has relied upon the following case laws mentioned by the assessing officer in the assessment order: * Tiger Global International Holdings (AAR/04/05/07/2019) * Bid Services Division (Mauritius) Limited (275 Taxman. 244) * AB Mauritius (AAR-402 ITR 311) At the outset, it may be pointed out that the decision of the AAR is binding qua the Applicant (before the AAR) and the Revenue, insofar as that Applicant is concerned. The same cannot be regarded as a binding precedent, much less, binding on the Hon'ble Tribunal. Furthermore, the said decisions are distinguishable on facts. In each of the above cases, the Treaty benefit was denied on the ground that the Applicant was a conduit entity inter....
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.... TRC is an annual exercise done by the revenue authorities across the globe, of the Assessee Company. TRC is issued on an annual basis, considering the past records also and has never been denied to the Assessee. It is, therefore, incorrect to allege that TRC is issued basis only the confirm action from the Assessee. Further, TRC issued to the Assessee has been duly accepted while concluding the assessment proceedings for the previous assessment years; no doubts were raised on the validity of the TRC while concluding such assessment proceedings in the case of the Assessee. The arguments raised by the Ld. CIT DR are contrary to the admitted facts of the case and the settled position in law. The same do not merit acceptance. Accordingly, Ground Nos. 2 to 6 raised by the Assessee deserve to be allowed and the Assessee held entitled to the benefit of the Tax Treaty with respect to capital gains earned on sale of CCDs. RE: GROUND OF APPEAL NO. 7 TO 7.2 The Assessee filed return of income disclosing income by way of interest on CCDs in an amount of Rs. 341,50,87,837/- and fees for technical services in an amount of Rs. 90,00,000/-. Tax on the aforesaid amounts ....
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....scheme of tax avoidance as more than 30% of units in the RHT Trust are held through related parties. While it is a fact that 35.5% of shares were primarily held by FHIL, the remaining 64% was raised from public and institutional investors. The place of effective managements of the assessee is situated in Singapore owing to the conducting of Board meetings and placing of the Directors at Singapore. With regard to the contention of the revenue that there was no commercial rationale for FHL to incorporate wholly on subsidiary in Mauritius is of no relevance and commercial justification to establish the business trust in Singapore has been duly explained by the assessee. The applicant could demonstrate incurring the expenditure of more than $ 2,00,000 so as to come out of the allegation of being a shell entity. The circular of CBDT No. 789 dated 13.04.2000 and also the press release of 2013 mentioned above leaves no scope for the revenue to tax the amounts and deny the treaty benefits. It is also point for consideration that the interest on the CCDs has been rightly taxed by the revenue as per the treaty in the earlier years and now revenue cannot turn around and deny the benefits of t....