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2023 (6) TMI 567 - AT - Income TaxRevision u/s 263 - Income taxable in India - evidence of residence - TRC produced by a resident of a contracting state - benefits under India- Mauritius DTAA being not a resident for tax purposes because of non-fulfillment of condition of “liable to tax” criteria - An order erroneous or prejudicial to the interest of the Revenue or not - Two view are possible - whether the income earned by the assessee who is a tax resident of Mauritius, out of the gains on currency derivates and the interest income on bonds is taxable in India or not? - HELD THAT:- The revenue cannot deny the benefit of India-Mauritius Tax Treaty to the assessee which is the assessee is legally entitled to on the strength of TRC issued by the Mauritian Tax Authorities. The Finance Ministry, through a clarification dated 2 March 2013, also clarified that the TRC produced by a resident of a contracting state would be accepted as evidence of residency in that contracting state and the Income-tax Authorities in India would not go behind the TRC and question the TRC holder’s resident status. We are also not in agreement with the observation of the ld. CIT that the assessee has about 21 investors who are non-tax resident of Mauritius and hence the assessee is a conduit. What is relevant is whether the assessee company is a taxable entity in Mauritius or not? Observation of the ld. CIT that the assessee has entered in only two transactions in the whole years in G-sec Bonds and few transactions in cash is only a partial truth. In addition to the investments in bonds and exchange traded cash equities, the assessee has large number of exchange traded derivatives transactions. The same can be proved by examination of the contracts notes which have been already provided to CIT. These contract notes reflect transactions of the assessee on MCX, BSE & NSE. In addition to the investments in India, the assessee has also invested in LME, CMX, SSE & DGCX. Hence, the contention of the ld. CIT that the income earned by the assessee from derivatives is not a business income also cannot be accepted. Thus, receipt is not taxable in India, hence there is no prejudice caused to the revenue and as the result, the order passed of ld. CIT u/s 263 is liable to be obliterated. Decided in favour of assessee.
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