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2022 (3) TMI 139 - AT - Income TaxAddition u/s 94A - transactions with persons located in notified jurisdictional area - scope and ambit of section 94A of the Act inserted by the Finance Act 2011 w.e.f. 01.06.2011 - addition on account of removal of “Cyprus” as a notified jurisdictional area u/s 94A - As per AO not only the assessee had failed to prove creditworthiness of the “cypriot” entity but also he noticed that the said tax jurisdiction was covered as a “notified jurisdictional area” under the provisions of section 94A of the Act vide notification dt.01.11.2013 - HELD THAT:- The legislature has incorporated non-obstante clause(s) in section 94A both sub-sections (2) and (4) thereof to be applicable in case(s) of the specified transactions in former and receipt or credit of any sum from any person; respectfully. Hon’ble apex court’s landmark decision in Central Board of India Vs. State of Kerala [2009 (2) TMI 451 - SUPREME COURT] holds that “a non-obstante clause is generally incorporated in a statute to give overriding effect to a particular section of the statute as a whole.” Meaning thereby that section 68 of the Act requiring an assessee to discharge its onus of identity, genuineness and creditworthiness, could no more be invoked when the specified transactions in question pertain to a person (defined in sub-section 6 (i)) located in the notified jurisdictional area. We wish to make it clear that Cyprus had been included in the notified list w.e.f. 01.11.2014 but removed on 21.04.2017 with retrospective effect from the former date which is nowhere an issue at all. Whether the assessee’s compulsorily convertible debentures fall under non-obstante clauses in sub-sections (2) to (4) of section 94A? - We notice with the able assistance of both the parties that such transactions are in the nature of “borrowals” only which have been duly covered under section 94A(2) wherein provisions of Chapter X are applicable than subs-section (4) exigible in case of receipt or credit of any sum from any person located in the notified jurisdictional area. We wish to observe here that even if the Revenue’s stand is accepted that the assessee had failed to prove creditworthiness, it could at best invoke Chapter X of the Act wherein such a transaction is treated to have been executed between associated enterprise within the meaning of section 92A only and not under sub-section (4) of 94A in foregoing terms. We thus uphold the learned CIT(A)’s directions deleting the impugned addition on account of removal of “Cyprus” as a notified jurisdictional area u/s 94A Now comes the equally important aspect in the Revenue’s arguments that we ought to direct the assessee to prove the creditworthiness of the “cypriot” entity qua the impugned compulsorily convertible debentures sums in tune with the assessment findings. We note with the able assistance of both the parties that the CIT(A) has nowhere dealt with the Assessing Officer’s detailed discussion holding the impugned “CCDs” to be a sham transaction whilst deleting the additions in issue made u/s 94A of the Act. The assessee’s plea before us is that this entire “sham transactions” issue has become redundant once the CIT(A) holds section 94A itself as not applicable. Be that as it may, we deem it appropriate that the CIT(A) needs to examine and adjudicate the above stated “sham transactions” issue in light of all the relevant facts on record on account of his foregoing failure in the impugned first round.It is made clear that the assessee shall be very much at liberty to file additional evidence and raise all factual / legal plea(s) including exigibility of section 68, in consequential proceedings.
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