TaxTMI 
TaxTMI 
2025 (11) TMI 566
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....nal grounds of appeal under Rule 11 of the Income Tax (Appellate Tribunal) Rules and it is purely legal issue and the same is reproduced below :- "1. That the Appellant being a foreign company having no Permanent Establishment (P.E.) in India for A.Y. 2015-16, the provisions of section 6(3) were consequently inapplicable, warranting that the Ld. Assessing Officer had no jurisdiction to assess income in India; consequently, there could not have been any escapement of income under section 148 of the Act. 2. That the Ld. Assessing Officer misdirected himself by alleging 'Place of Effective Management' (POEM) in India, whereas the unamended section 6(3)(ii) applied for A.Y. 2015-16, thereby rendering the action of the Ld. Assessing Officer ultra vires to the provisions of the Act. 3. That the Appellant company being a foreign company and a SEBI-registered Foreign Portfolio Investor (Category III) had no income chargeable to tax other than interest income on which tax under section 194LD had been duly withheld, thus warranting no requirement to file a return of income under section l115(S) of the Income Tax Act, 1961. 4. That the entire action....
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....he applicable law in Singapore. 9. The AO observed that the assessee is a company incorporated in Singapore and a tax resident of Singapore. During the year under consideration, the assessee made investment of Rs. 448 crores on account of purchase of Non-Convertible Debentures (NCD) in Sugam Vanijay Holdings Private Limited (SVHPL), an Indian company. As per the information available with the Assessing Officer, investment in SVHPL is primarily funded by way of issuance of equity shares, redeemable preference shares and shareholder loan amounting to USD 74.1 million from the sole shareholder of assessee, Ephesus Holding Pte Ltd., a Singapore incorporated company. Since there was no compliance from the assessee side to the various notices issued by the Assessing Officer, final notice was issued to the assessee on 22.08.2022. In response to the same, assessee filed its reply dated 24.08.2022 and it was submitted as under : "In this regard, it is humbly submitted that the Company has been wound up on June 05, 2021 as per the prevailing laws in Singapore. Hence, the company was already liquidated prior to the commencement of the said proceedings and hence, the proceedings ar....
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....the amount of INR 448,00,00,000 as undisclosed income of the Company and the interest income of INR 8,24,81,096 as undisclosed business income of the Company. 4.2. However, it may be noted that the Company was not engaged in any business or profession in India. 4.3. In this regard, your kind attention is drawn to the provisions of section 2(14)(b) of the Act which states as follows: "any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992), but does not include- ...." 4.4. As stated earlier, Argos was registered as an FPI with SEBI and accordingly, the NCDs held by the Company would qualify as 'capital assets'. 4.5. Given the above, the transaction relating to investment in capital assets and the income arising to the Company from such investment in the NCDs (which constitute capital assets) cannot be regarded as business income." 10. After considering the submissions of the assessee, the Assessing Officer rejected the same and proceeded to make the addition with the following obs....
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....ng company and AHPL does not have any employees or activities in Singapore. Apart from investment in NCDs in Sugam Vanijya, it has no other investment in any other Indian companies. Hence, the facts clearly show that there is no rationale for incorporation of the AHPL in Singapore. The funds are obtained from the holding company in Singapore, invested in India in NCDs, and the interest earned on these NCDs is repatriated back to Singapore. (v) It is also important to mentioned here that the during the course of assessment proceedings it is also noticed that the AHPL, SVHPL and Ephesus Holding Pte Ltd. are related parties as per the response to notice u/s 133(6) of the Income Tax Act, 1961, by SVHPL. Perusal of the bank statement of AHPL for the for the relevant F.Y. shows that throughout the year, the only transaction has been of a credit entry of 74,100,000 USD from Ephesus Pte Ltd and debit entry of same amount to SVHPL. This highlights the fact that AHPL was a shell entity with no genuine business activities of its own. 5.1 Hence, in the light of above facts and findings, it is very clear that the funds invested by assessee company in India in the guise of Fore....
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....s of the cases the Dispute Resolution Panel - 1, New Delhi ("DR P") erred in upholding the additions without proper consideration or the material on record and without applying an independent judicial mind, contrary to the mandate of section 144C(5) of the Act and the binding directions of the Hon'ble Delhi High Court. Ground No.3: The Ld. Assessing Officer erred in law and on facts by failing to consider the detailed documentary evidence and legal submissions filed by the Appellant including proof of FPI registration, fund flow details, and Form 26AS, the assessment was completed without granting an adequate and effective opportunity of hearing. Such omission constitutes a gross violation of the principles or natural justice and renders the impugned assessment order procedurally defective, arbitrary, and unsustainable in law. Ground No.4(a): That on the facts and circumstances of the case, the Ld. AO erroneously passed the impugned Order beyond the time limit as prescribed under the IT Act. hence the impugned order is bad in law and quashed. Ground No.4(b): On the fact and circumstance of the case and relying on Madras High Court in the case of Roca ....
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....round No.7: That on the facts and circumstances of the cases the Ld. AO erred in law in treating the investment amounting to INR 4,48,00,00,000 made in SVHPL as undisclosed income without any cogent basis, ignoring the documentary evidence provided regarding the source, nature and purpose of the investment. a. The Ld. AO has erred in not considering the documentary evidences provided in relation to the source of the investment. Hence, the proposed adjustment is against the principal of natural justice. b. That under the facts and circumstances of the case Ld. AO has erred in making additions on issues other than subject matter of re-opening, rendering the re-opening and the consequent re-assessment void. Ground No.8: That on the facts and circumstances of the case, the AO erred in denying benefit of concessional rate of tax u/s 194D r.w.s. 115A of the Act. a. The AO has erred in not appreciating that Appellant was a SEBI registered Category HIFPI, eligible for concessional tax treatment u/s 194D. b. The AO has erred in not considering NCDs in SVHPL as a rupee denominated bond & hence, denied benefit of concessional rate of tax. ....
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....pore. Admitted fact in both writ petitions. - - 1 39-40 Tax Residency Certificate (TRC) issued by the competent authority of Singapore 30.10.2014 SEBI Registration as FPI 1 41 Granted Category III FPI registration under SEBI (FPI) Regulations, 2014 (Reg. No. INSGFP028814). This certificate was later placed before AO/DRP. Admitted fact. - Obtained PAN - - Obtained PAN as per Regulation 23(f) of SEBI (FPI) Regulation, 2014, Rule 114 of Income Tax Rules and in Form 49AA 10.11.2014 Opened Bank Account 1 208 Opened Bank Account in India as per Regulation 27 of SEBI (FPI) Regulation, 2014 and Master Circular No.15/2012-13 28.01.2015 Board Resolution 1 203 Board resolution for investment in redeemable and unsecured Non Convertible Debentures (hereinafter "NCDs") of an Indian Entity named Sugam Vanijya Holdings Pvt. Ltd. (now known as 'VR Dakshin Private Limited') 28.01.2015 Transfer of Funds from Singapore 1 207 Transfer of Fund of USD 7,40,00,000 from Deutsche Bank- A/C no.6561096 30.01.2015 Received funds in India 1 209 Received USD 7,40,00,000 in Indian....
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....h ACRA, Singapore 1 188-191 Intimation of dissolution filed with Accounting and Corporate Regulatory Authority (ACRA), Singapore. Triggered statutory 3month waiting period under Singapore Companies Act. Admitted fact. Proceedings under Income Tax Act 1961 11.02.2021 and 17.03.2021 Income-tax compliance query 1 73-76 AO issued letter requiring compliance for non-filing of return for AYs 2015-16 & 2017-18. Petitioner was already in liquidation stage; Notice addressing to the appellant in Singapore issued only in Income Tax Portal and not in email. 31.03.2021 Notice u/s 148 (AY 2015-16) 1 77 AO allegedly issued notice dated 31.03.2021. However, actual service was only via email on 25.06.2021, i.e., after dissolution. 27.03.2021 Notice u/s 148 (AY 2017-18) 3 30 AO allegedly issued notice dated 27.03.2021. Again, service only via email on 25.06.2021, i.e., after dissolution. 05.06.2021 Dissolution / Winding Up 1 186-191 Argos formally dissolved under Singapore Companies Act. From this date, it ceased to exist in law. Admitted fact. 25.06.2021 Service of 148 Notice by Email 1 78 Section 148 notices (da....
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....7-18. 13.03.2024 H.C. Order 5 1-5 The Hon'ble Delhi High Court, by its order dated 13.03.2024 in W.P.(C) 8640/2023 and W.P.(C) 8641/2023, has expressly recorded, inter alia, that the Appellant had raised jurisdictional objections before the DRP including that the reassessment was initiated against a non-existent, wound-up company. It further noted that the DRP's impugned directions dated 11.05.2023 were bereft of reasoning, constituted abdication of statutory functions, and merely passed the buck to the AO. On this admitted basis, the DRP's directions were set aside and the matter remanded. These findings, emanating from the High Court's order, amount to admitted facts which conclusively establish the absence of jurisdiction and procedural invalidity in the reassessment proceedings. 30.03.2025 DRP Directions (Second Round) 5 54-68 & 232-239 Despite the High Court's express mandate, the DRP once again failed to adjudicate the fundamental jurisdictional objections. The directions merely rubber-stamp the draft assessment orders, without examining (i) the fact of dissolution of the Appellant on 05.06.2021, (ii) invalid service of Sec.148 notices only....
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....C, FPI registration records, and related supporting documents duly annexed to the Paper Book/Writ Petition, and are not in dispute. Regulation 23(f) of SEBI (FPI) Rule Regulation, 2014: a foreign portfolio investor shall obtain a Permanent Account Number from the Income Tax Department Rule 114 of the Income Tax Rules, 1962 provides for provision for application of PAN by Companies incorporated outside India (Foreign Company) in Form 49AA wherein the foreign companies are required to provide the copy of registration certificate (i.e. KYC details especially to be filled by FPIs) issued in India vide Item No 16 of Form 49AA for PAN application. Regulation 27 of SEBI (FPI) Regulation, 2014: A foreign portfolio investor shall appoint a branch of a bank authorized by the Reserve Bank of India for opening of foreign currency denominated account. and special non-resident rupee account before making any investments in India. The appellant authorised ICICI Bank as per the above and opened bank account with it. The Bank account was opened as per Master Circular on Foreign Investment in India dated July 02, 2012 as amended upto April 01, 2013 i.e. RBI/2012-13/15 [Master Circular No....
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....idence, i.e. Singapore. Cessation of Indian Investments and Dissolution of the Appellant In F.Y. 2019-2020, the Singapore-based Board of Directors of Argos sanctioned voluntary winding up. Intimation dated 5th March 2021 was thereafter placed before the Accounting and Corporate Regulatory Authority, Singapore (hereinafter "ACRA") qua the dissolution of the Appellant. As per the provisions of the Singapore Companies Act, the Appellant was wound up on 5th  June 2021. The chronology of winding-up and dissolution stands evidenced in the records forming part of the Paper Book. Reopening Proceedings under Section 148 of the Income-tax Act, 1961 Notices purporting to have been issued under Section 148 of the Income-tax Act are reflected on the Department's portal as dated 31.03.2021 (in respect of AY 2015- 16) and 27.03.2021 (in respect of AY 2017- 18). However, the Notice under section 148 was served on the Appellant via email dated 25th June 2021. And in response to the same, the Appellant intimated the Department (via its former director) that the company was no longer in existence. In the present case, the admitted record shows ....
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....e (NCD subscription) and Rs. 8,24,81,096 (interest income) as the Appellant's "undisclosed income" by denying treaty and withholding tax benefits, to thereafter raise a demand of Rs. 5,259,040,290. Similarly, vide Order dated 31st March 2025, the A.O. for A.Y. 2017-18 passed the impugned order by disallowing the amount received from Nonconvertible Debenture Redemption (of ICC Realty):amounting to Rs. 245,47,78,600/- and repatriated abroad, plus the interest received on the original debenture subscription of Rs. 53,76,00,000/- - by treating both as "undisclosed business income," to raise a demand of Rs. 5,651,347,830. The impugned order for both A.Y. 2015-2016 and A.Y. 2017-2018 contains no engagement, or application of mind by the A.O. citing that he/she had any reason to believe that the Appellant, a foreign entity, was subject to tax in India under Sec.6(3) of the Act, despite the TRCs or FPI and other myriad evidences that establish its effective management and residence to vest outside of India. The impugned orders therefore replicate the DRP's observations lock, stock and barrel, bereft of proper and due application of mind, therefore leadin....
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....luntary winding up, establishing situs of control and management in Singapore. o PB Reference: AY15-16 PB-1 p.186-191. 5. ACRA Dissolution Filings: o Intimation of dissolution (05.03.2021) and final dissolution effective (05.06.2021). o PB Reference: AY15-16 PB-1 p.186-191; AY17-18 PB-4 p.72-75. 6. High Court Record: o The above documents (TRCs, FPI certificate, ACRA filings) were part of the paper book before the Hon'ble Delhi High Court in the writ proceedings. The High Court order (13.03.2024, Annexure A) expressly noted these submissions, and the Department did not dispute them. o PB Reference: PB-5 (Consolidated), p.1-5 These materials, when placed before the jurisdictional Hon'ble High Court, have never been challenged or impeached at any stage of proceedings. Thus, by settled judicial authority, a valid TRC issued by the competent authority of the contracting State is sufficient evidence of residence for DTAA purposes. The Hon'ble Supreme Court in Union of India v. Azadi Bachao Andolan [(2003) 263 ITR 706 (SC)] held that once a TRC is produced, treaty entitlement follows as a matter of law. I. J....
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...."NMS non-filer" cannot give rise to "reason to believe" that income has escaped assessment without identifying any facts to suggest that Argos's control and management (for AY 2015-16) or its POEM (for AY 2017-18) lay in India. There is no reference to treaty override, no factual articulation of decision-making locus, and no pointer to any undisclosed credits or escapement trigger. As per settled law, the AO must hold a bona fide reason to believe that it is based on a live causal nexus between tangible material in possession and the alleged escapement of income (ITO v. Lakhmani Mewal Das (1976) 103 ITR 437 (SC)). In the present case, such a nexus is wholly absent. The absence of any recorded satisfaction as to residence under Section 6(3) renders the issuance of notice under Section 148 jurisdictionally defective and void ab initio. To elaborate, the sanction recorded u/s 151 of the Act cannot be done without any file-note or separate order documenting the sanctioning authority's satisfaction under Section 147 read with Section 6(3). Thus, the A.O.'s finding that Argos is a "shell entity" stems from a reproduction of the DRP's directions, demonstrating abdication....
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....n sourced income comprised interest on listed debt instruments, on which tax was withheld at source under Section 194LD of the Income-tax Act, 1961. Under Section 115A(5), where tax is deductible at source on the specified income of a non-resident (including a foreign company), and such tax has in fact been deducted, the non-resident is expressly exempt from any return-filing obligation under Section 139(1) in respect of such income. Accordingly, the Appellant's non-filing of returns for the relevant years was in strict conformity with the statute and cannot, in law, be treated as a default. This is in addition, the recorded reasons for reopening do not disclose any tangible material evidencing escapement of income under a chargeable head, nor do they record any satisfaction as to residence under Section 6(3) for either AY 2015-16 or AY 2017-18. This failure to record jurisdictional satisfaction is itself a fatal defect. IV. Invalid Service of Notices under Section 282 of the Income Tax Act for Extra-Territorial Service, and service on a Non-Existent Company render the proceedings to be Void. Under Section 282(1) of the Income Tax Act, r/w Rule 127 of the Income-t....
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.... 613 (SC)] categorically held that framing of an assessment in the name of a non-existent amalgamating company is void ab initio and not a mere procedural irregularity. The Delhi High Court in Spice Enfotainment Ltd. v. CIT [(2012) 247 CTR 500 (Del); (2012) 280 ITR 43 (Del)], SLP dismissed [(2017) 398 ITR (St.) 4 (SC)], reiterated the same principle, holding that participation by the assessee or its successor cannot cure the inherent lack of jurisdiction, and that an assessment framed on a dissolved entity is fundamentally void. The Delhi High Court has consistently applied this principle in subsequent cases, including CIT v. Dimension Apparels (P) Ltd. [(2015) 370 ITR 288 (Del)] and Sky Light Hospitality LLP v. ACIT [(2018) 405 ITR 296 (Del)], underscoring that Section 292B cannot be invoked to legitimise assessments against non-existent entities. Applying the ratio of these binding precedents, the impugned reassessments and demand notices, having been issued in the name of the Appellant after its dissolution on 05.06.2021, are wholly without jurisdiction and liable to be struck down. Thus, the impugned orders suffer from myriad jurisdictional defects th....
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....tisfaction based on the information available on record without there being any proper verification. He was also aware of the fact that the assessee is a non-resident and also earned only the interest income during the year. In our view, he should have verified the fact, on what basis the interest was remitted after tax deduction at source. He should have also recorded the proper reasons on what basis, he concluded that the income escaped, particularly the assessee under consideration is a non-resident. One cannot ignore the fact that the tax authorities aware of the fact that in the case of foreign residents, the treaty provisions are applicable. 20. Apart from the above, the AO cannot overlook the statutory provisions. As per the provisions of section 115A(5) read with section 115A(1)(iiab), for the sake of brevity, it is reproduced below: Section 115A(1)(iiab) "115A. (1) Where the total income of- (a) a non-resident (not being a company) or of a foreign company, includes any income by way of- ......... (iiab) interest of the nature and extent referred to in section 194LD; or" Section 115A(5) (pre amended) (5) It s....