TMI Blog2023 (11) TMI 697X X X X Extracts X X X X X X X X Extracts X X X X ..... while upholding the validity of the aforesaid Circular, the Hon ble Supreme Court in case of Azadi Bachao Andolan [ 2003 (10) TMI 5 - SUPREME COURT ] has also held that the person/entity holding a valid TRC would be entitled to the treaty benefits. Subsequently, the aforesaid legal position has been followed in many decisions, including the recent decision of Blackstone Capital Partners (Singapore) VI FDI Three Pte. Ltd. Vs. ACIT [ 2023 (2) TMI 35 - DELHI HIGH COURT ] Whether assessee is a conduit entity set up in Mauritius only for the purpose of availing treaty benefits? - AO 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accept assessee s claim of exemption under Article 13(4) of India Mauritius DTAA, qua the capital gain derived from sale of subject shares. Decided in favour of assessee. - Shri Saktijit Dey, Vice-President And Dr. B.R.R. Kumar, Accountant Member For the Assessee : Sh. Sunny Mittal, CA, Sh. Gaurav Singhal, CA For the Department : Sh. Vizay B. Vasanta, CIT(DR) ORDER Captioned appeal by the assessee arises out of final assessment order dated 20.06.2022 passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (in short the Act ) pertaining to assessment year 2018-19, in pursuance to the directions of learned Dispute Resolution Panel (DRP). 2. At the outset, Registry has reported delay of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) of the tax treaty, the Assessing Officer observed that 75% of assessee s shares are held by a company in United Kingdod (UK) and the remaining 25% shares are held by an individual, who is a Canadian resident. On examining the audited financial statements and books of account, the Assessing Officer observed that the assessee has invested in only two Indian companies and has not booked any operating and passive revenue from its principal activity in 2017 and 2018. Neither it has booked any operating expenses during these two years. Thus, he observed that the assessee has no economic substance and no commercial rationale can be attributed to its creation. He observed that, though, the assessee claimed to have employed well qualified indivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Out of the total consideration of Rs. 2,81,94,834/-, the Assessing Officer reduced the cost of acquisition of Rs. 35,01,740/- and the net long term capital gains of Rs. 2,46,93,094/- was brought to tax. Accordingly, he framed the draft assessment order. Against the draft assessment order, the assessee raised objections before learned DRP. However, learned DRP rejected the objections of the assessee. 7. We have heard Sh. Sunny Mittal, learned counsel appearing for the assessee and Sh. Vizay B. Vasanta, learned Departmental Representative. Undisputed facts are, the assessee is a company incorporated in Mauritius and is holding a valid TRC for the assessment year under dispute. Therefore, ordinarily, the assessee has to be treated as a tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed in many decisions, including the recent decision of Hon ble Jurisdictional High Court in case of Blackstone Capital Partners (Singapore) VI FDI Three Pte. Ltd. Vs. ACIT [2023] 452 ITR 111 (Delhi HC). 11. The only reason on which the Assessing Officer has declined the treaty benefits to the assessee is because, according to him, the assessee is a conduit entity set up in Mauritius only for the purpose of availing treaty benefits, hence, it is a colourable device to avoid tax. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has been empowered under the statue w.e.f. 01.04.2016 to deny treaty benefits to the assessee in a case where GAAR is applicable. 14. Undisputedly, the provisions of section 90(2A) read with Chapter 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 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 that the shares in the Indian com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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