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2023 (2) TMI 1008 - AT - Income TaxIncome chargeable to tax in India - benefits of India-Singapore DTAA - Supremacy of law - GAAR Applicability - AO/ DRP denying the benefit of Article 13 (4A) of the DTAA to the Appellant qua capital gains earned by the Appellant on transfer of shares - Article 3 (1) of the 2005 protocol to the India- Singapore DTAA was invoked - As per AO/ DRP assessee had no economic substance or commercial substance and that it was a “shell” or a “conduit” company - whether the revenue can go behind the tax residency certificate issued by the other tax jurisdiction ? - HELD THAT:- Supremacy of law made by the Parliament is beyond any doubt. However, one of the recognised exceptions to the said rule is section 90 (2) of the Act which can be termed as treaty override provision as held by the Hon’ble Supreme Court in the case of Azadi Bachao Andolan [2003 (10) TMI 5 - SUPREME COURT] and, therefore, this provision allows the provisions of a DTAA to supersede the provisions of the income tax Act in case their application is more beneficial. There is no dispute that GAAR is applicable to the assessment year under consideration which empowered the revenue to declare the subject transaction to be an impressible arrangement. As per section 101 of the ITA, domestic GAAR cannot be pressed into operation for denial of a tax benefit, where the case of an assessee falls within one of the conditions prescribed under Rule 10U of the IT Rules 1962. Thus in the case in hand the short term capital gain the tax on which is below the threshold set out in Rule 10 U (1) (a) (supra) further the impugned shares were acquired by the assessee on 22.08.2016 which is prior to the cut off date set out in Rule 10 U (1)(d) Assuming domestic GAAR provision are applicable but for the aforestated facts the treaty benefit cannot be denied to the assessee. AO / DRP have also invoked the doctrine “substance over form” to deny the benefit of Article 13 (4A). In our considered opinion the said doctrine is prior to the codification of domestic GAAR and the legislators were conscious enough when they were providing exemptions under Chapter X-A of the Act. Even the treatment of the assessee company as “Shell” or “conduit” also do not hold any water in as much as the veracity of the expenditure incurred by the assessee in Singapore was a subject matter of tax scrutiny in Singapore and the same has been accepted to be genuine by the Singapore tax authorities as per tax assessment orders mentioned elsewhere. To conclude it is not in dispute that the assessee has furnished a valid tax residency certificate issued by Inland Authority of Singapore, audited financial statements and return of income filed alongwith tax assessment orders by Singapore Tax Authority, therefore, in the light of the binding decision of Black Stone Capital Partners [2023 (2) TMI 35 - DELHI HIGH COURT] we direct the AO to delete the impugned disallowance and allow the treaty benefit to the assessee as per the relevant provisions of the law/treaty. Decided in favour of assessee.
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