TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 1052
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....essee company claimed to be holding valid tax residency certificate ('TRC') and Global Business License-I ('GBL- I License') issued by the Financial Services Commission, Mauritius. During the year under consideration, the Appellant transferred shares of Indian Companies and thereby earned long term capital gains amounting to INR 1,52,61,71,940 on such transfers. In view of the provisions of section 90(2) of the Act, the Appellant claimed the aforementioned capital gains as exempt as per Article 13(4) of the India- Mauritius Tax. Treaty ('IM Treaty' or Treaty'). Accordingly, the return of income ('ROI'), was filed on 30 October 2018, declaring NIL income and thereby refund of taxes deducted amounting to INR 40,01,520 was claimed in the ROI. Subsequently, the case was selected for scrutiny and in pursuance to the directions of the Hon'ble DRP, the Learned Assessing Officer ('Ld.AO'), denied the Treaty benefits and passed the final assessment order dated 10/02/2023, assessing the total income at INR 1,52,61,71,940 and raising a tax demand of INR 25,76,86,310 (including interest under section 234A and 234B of the Act). 3. Further, it will be convenient to understand the case of th....
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....irectors of JP MORGAN Asset Management and the board meetings was being . attended by Ms, Adria. Savarese by teleconference who herself also was an executive director at JP MORGAN asset management corporation. In the DAO at page 31 it is mentioned that "3,23 Vide questionnaire dated 14.02.2022, the assessee was asked to provide the details of investment manager of the company and copy of agreement with the investment manager. 3.24 In reply, the assessee submitted that it does not maintain any investment manager. The reply of the assessee in this regard is reproduced hereunder:- "We wish to submit that IPM- II has not engaged any investment manager with respect to it investment activities in India. The investment divestment decisions activities are taken by the board of directors of IPM- II ." 3.25 However, Audited financials received from Mauritius Authorities as per Exchange of Information provisions of the bilateral treaty revealed that that US 'based entity fP Morgan Investment Management Inc is Investment advisor for the fund and also JP Morgan India Pvt Limited is the Sub adviser to the adviser. The relevant extract of the audited financials wherein the role of advis....
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....ecial agreements, contracts or arrangements made or effected by Indian resident or the role of the OCB in the entire transaction." The above principles have been reiterated in various case laws, judicial precedents and rulings like TIGER GLOBAL INTERNATIONAL HOLDINGS AB MAURITIUS (2018) 402 ITR 311 (AAR). Further in the Apex Court decision in the GVK Industries case (332) ITR 13 it was held that the income of recipient is chargeable in the country where the source of payment is located. Therefore, the DRP doesn't find any infirmity in the DAO and the assessee objection on the above is rejected. The other objections mentioned in 1.2 above is general in nature and doesn't call for any specific direction from the DRP." 4. The assessee is in appeal raising following grounds: "On the facts and circumstances of the case and in law, India Property Mauritius Company II (hereinafter referred to as the "Appellant") craves leave to prefer an appeal against the order passed by the Assistant Commissioner of Income-tax (International Taxation)-2(1)(1) Delhi ('Learned AO'), under section 143(3) read with section 144C(13) of the Act dated 10 February 2023, pursuant to the directions of the ....
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....ty. 6.1 As with regard to the allegation of AO that appellant company has no commercial rationale for set up in Mauritius other than to take advantage of IM Treaty and that the appellant is a mere conduit entity without any economic substance, learned Sr. Counsel submitted that assessee company was incorporated in the year 2006 and is an Investment Fund, held 100% by India Property Mauritius Company I, (IPM-I) which was formerly known as JP Morgan Indian Property Mauritius Company I. He pointed out that IPM-I pools capital from investors based in multiple jurisdictions through series of fund investor vehicles/ feeder funds and invests in appellant company by way of equity infusion. The Appellant Company, in accordance with its investment objectives, made the impugned investments in Indian entities, being Grandeur Homes Private Limited (Demerged entity: Citadel Homes Private Limited) and ASF Insignia SEZ Pvt Ltd (formerly known as Canton Buildwell Private Limited; on demerger additional shares of Kings Canyon SEZ Private Limited and Grand Canyon SEZ Private Limited received), during the period FY 2007-08 to FY 2011-12, on various dates. These investments were made through proper ba....
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....r the Financial Services Act, 2007 (Mauritius), corporations holding a GBL-I License are required to be administered at all the times by a management company holding Global Business License-II ('GBL-II License'). Accordingly, the Appellant had appointed an administrator for various administrative services, for which professional fees was paid by the Appellant. Further, considering that the Appellant is an investment holding company, where decisions with respect to investment/ divestment are taken by the board of directors and the day-to-day administration activities are outsourced to external service provider(s), the Appellant was not required to have any employees or incur fixed expenditure such as rental expenses, electricity expenses, property tax etc.. 6.5 Next with regard to observation of AO that appellant did not provide the required KYC forms/documents to verify the actual operator/manager of the funds of the company and as such the appellant concealed the actual operator/manager of its bank account maintained in Mauritius, the learned AR submitted that the accounts were opened around 15 years ago and those documents as submitted to bank were not readily available. 6.6 Le....
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.... on the judgment of Hon'ble Supreme Court in the case of Director of Income Tax Vs. Mitsubishi Corporation [2021] 130 taxmann.com 276 (SC); and the Tribunal's decision in the case of Hitachi High Technologies Singapore Pte Ltd. v. DCIT [2020] 113 taxmann.com 327 (Delhi-Trib), to support aforsaid submissions. 9. Learned AR also submitted that, without prejudice and in addition to the above, the appellant has a case that the embargo created vide proviso to section 209(1)(d) is not applicable in the present case. The said proviso is applicable if the person responsible for deducting tax has paid or credited such income without deducting the said tax. In the present case, since the taxes were deducted under section 195 of the Act read with section 197 of the Act, therefore the proviso is not applicable in the present case. Judgment of Delhi Bench of Tribunal in BG International Limited v. DCIT, DDIT/ADIT (International Taxation) (ITA No. 31/DDN/2020) (31.12.2020) (Delhi-Trib.) was relied and it submitted that same was further followed in the case of Amadeus IT Group SA v. DCIT (ITA No.2007/Del./2017) (29.01.2021) (Delhi-Trib.) 10. Lastly he added that the impugned final assessment or....
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....diac Developers Private Limited 24-Sep-10 47,77,798 Total 10,06,56,952 11.1 The learned AO seems to have proceeded to question the TRC of the assessee on the basis of Hon'ble Bombay High Court judgment in the case of Vodafone BV, as he has relied on para 99 of the said judgment on page 48 and para 8.2 of his order and the same is reproduced herein below for further convenient reference in the discussion. "99. It is to be noted that LOB and look through provisions cannot be read into a tax treaty but the question may arise as to whether the TRC is so conclusive that the Tax Department cannot pierce the veil and look at the substance of the transaction. DTAA and Circular No 789 dated 13.04.2000, in our view, it would not preclude the Income Tax Department from denying the tax treaty benefits, if it is established, on facts, that the Mauritian Company has been interposed as the owner of the shares in India, at the time of disposal of shares to a third party, solely with a view to avoid tax without any commercial substance. Tax Department, in such a situation, notwithstanding the fact that the Mauritian company is required to be treated as a beneficial owner of t....
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.... purposes. 11.3 To question the genuineness of the activities of assessee on the basis of the fact that Directors were not residents of Mauritius or absence of operational expenditures and Directors' remunerations, when analyzed in the light of aforesaid facts as to how the assessee company had come into existence as a subsidiary company of IPM-I, the assessee company has validly discharged its burden by establishing that the external service provider has been outsourced, the day to day administrative activities of assessee company as per the law of land and payments were being made for those services. It is the wisdom and discretion of company as to how the day to day activities are managed and without establishing that on sham basis administrative activities are being shown, Revenue cannot question genuineness of the business operations of an assessee. 11.4 Learned AO has attributed conduit status to the assessee alleging that the investment funds and the consideration received from liquidation were immediately transferred to the assessee before investment and the assessee immediately transferred the consideration in the form of share buyback and dividend. When assessee is inco....