TaxTMI 
TaxTMI 
TaxTMI 
2023 (11) TMI 231
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....1, in pursuance to the directions of learned Dispute Resolution Panel ("DRP"). 2. Dispute arising in the appeal relates to taxability of capital gain arising on sale of shares. Briefly the facts are, the assessee is a non-resident corporate entity incorporated under the laws of Mauritius and is a tax resident of Mauritius. As stated by the Assessing Officer, the assessee holds a Category 1 Global Business Licence issued by the Financial Services Commissioner under the Mauritius Financial Services Act, 2007. The Assessing Officer has further stated that the principal activity of the assessee is to act as an investment holding company. As an investment holding company, the assessee has invested in acquiring equity shares in certain Indian co....
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....ntrol and management decisions of the company were vested with a non-resident of Mauritius, rather than director resident in Mauritius. Further, he made various other allegations, such as, the company does not own any land/building and pays no rent. It has no electricity, water and telephone expenses. It has no employees as wages and salaries and other staff costs are nil etc. Thus, based on the aforesaid analysis of facts, the Assessing Officer observed that the assessee is merely a paper company set up for availing treaty benefits. Accordingly, he issued a show-cause notice to the assessee to explain, why the exemption claimed under the treaty provisions should not be denied and the capital gain should not be taxed as per the provisions o....
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....ing in shares. The control and management of the company also resides outside Mauritius. The assessee company has been interposed as a conduit company to avail the treaty benefit. As per the well laid principle purpose test under BEPS, a treaty benefit may be denied to the entity if its very existence and sum and substance to get the benefit from the treaty only, notwithstanding the fact that assessee has a valid TRC for the above period. The DRP is in agreement with the stand taken by the assessing officer. The assessee objections on the above is therefore, rejected." 7. Before us, learned counsel appearing for the assessee submitted that the decision of the Assessing Officer to tax the long term capital gain under the provisions of the d....
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....rther fortified from the fact that neither the Assessing Officer nor learned DRP have invoked the Limitation of Benefit (LOB) clause under Article 27A of the treaty. Thus, he submitted, without establishing the fact through cogent evidence that the assessee is a conduit company, exemption claimed by the assessee under Article 13(4) cannot be denied on flimsy grounds. Further, he submitted, the issue is otherwise fully covered by the decision of the Coordinate Bench in case of Leapfrog Financial Inclusion India (II) Ltd. Vs. ACIT, ITA No.365 & 366/Del/2023, dated 11.08.2023. 9. Learned Departmental Representative strongly relied upon the observations of the Assessing Officer and learned DRP. 10. We have considered rival submissions and per....
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....eason on which the Assessing Officer has declined the treaty benefits to the assessee is because, according to him, the assessee is a stepping stone conduit entity set up in Mauritius only for the purpose of availing treaty benefits, hence, it is an impermissible tax avoidance arrangement. Though, the Assessing Officer has made various allegations to conclude that the assessee is a conduit entity, however, such conclusion is not backed by any substantive and cogent material brought on record. In sum and substance, the Assessing Officer has made mere allegations and has failed to substantiate the fact that the assessee is a conduit company through clinching evidences. Unfortunately, learned DRP without going deep into the issue factually, ha....
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....r XA of the Act are applicable to the impugned assessment year. Though, the Assessing Officer has alleged that the assessee is a conduit company and has been set up as a part of impermissible tax avoidance arrangement, surprisingly, he has not invoked the provisions of GAAR as provided under Chapter XA of the Act. Even, the Departmental Authorities have not invoked the LOB clause as provided under Article 27A of India - Mauritius DTAA. Thus, facts on record clearly indicate that the departmental authorities were accepting the fact that the shares in the Indian companies having been acquired prior to 01.04.2017, hence, the capital gain derived from sale of such shares would be exempt from taxation in India in terms of Article 13(4) of the In....