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2016 (9) TMI 162

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..... to the Department's contentions and the essence of the reply is that Sinshei Bank Ltd. in its capacity as sponsor of the mutual fund is party to SPA and has borne certain responsibility to the regulations, investors of the individual sponsor. The matters regarding place of arbitration, sharing of responsibility to obtain the tax withholding order etc are not relevant particularly in view of the fact that shares have been subscribed by the applicant in its own name and the bank statements filed show that the applicant has paid for such subscription of shares. In these circumstances the applicant cannot be termed as a 'permitted transferee' as was the case in Aditya Birla Nuvo [2011 (7) TMI 60 - BOMBAY HIGH COURT ]. The facts in Aditya Birla Nuvo were entirely different where AT&T had paid for and subscribed to the shares of JV Company in India and obtained the shares in the name of AT&T Mauritius as a 'permitted transferee'. Here the facts are very clear that the applicant had paid for shares. Once it is established that the applicant has made investment on its own and Sinshei Bank Ltd. was party to SPA only in its capacity as sponsor and in order to comply with mutual funds regulat .....

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..... sell their entire shareholding in Shinsei Asset and Shinsei Trustee to Daiwa and its affiliates. 2. The applicant has raised the following questions:- 1. Based on the facts and circumstances of the case and in law, whether the applicant is liable to tax in India in respect of the transfer of 7,227,000 equity shares of AMC and 399,996 equity shares of Trustee Company under the India-Mauritius tax treaty? 2. Based on the facts and circumstances of the case and in law, whether Daiwa and its affiliates would be required to withhold tax as per section 195 of the ITA from payments made to the Applicant? 3. Based on the facts and circumstances of the case and in law, if the applicant's capital gains are not taxable in India, then whether the applicant would be required to file an income-tax return in India as per section 139 of the ITA? 4. Based on the facts and circumstances of the case and in Jaw, whether the applicant would be liable to tax under the provisions of section 115JB of the ITA? 3. According to the applicant Article 13 (4) of DTAA confers the power of taxation of the gains derived by a resident of a contracting state from the alienation of the specified .....

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..... . (iv) The place of arbitration has primarily and implicitly been limited to Japan and/or India only and not the place of incorporation of the Applicant, i.e. Mauritius. (v) Section 3.2 of the SPA provides that the revision of composition of Board of the AMC and Trustee Company are to be notified by the Purchaser to the parent Shinsei Bank Ltd., Japan and not to the applicant. (vi) Tax indemnification and claims are to be notified by the purchasers to Shinsei Bank Ltd., Japan only and the name of the applicant, Shinsei Investment I Limited, Mauritius, appears nowhere. Hence, prima facie, the applicant is merely nominal holder of the transferred shares and not the actual owner. (vii) Section 9.2 (f) requires the provision of all reasonable information to Shinsei Bank Ltd., Japan, for investigation of tax claim in timely manner. Further, Section 9(3) stipulates that Shinsei Bank Ltd., Japan is required to take over conduct of all proceedings and negotiations in connection with tax claim upon receipt of notice from the purchaser. (viii) Shinsei Bank Ltd., Japan is the sole party as regards to tax claim liability and the applicant i.e. Shinsei Investment I Ltd., does not .....

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..... nt company. d. In the case of Aditya Birla, the JVA had a clause that the arrangement between the parties and the JV would remain only until the telecom licenses remain. This shows that the investments were routed through the AT T Mauritius to avail the benefit of the tax treaty. 7. We have considered the submissions of the applicant and the Revenue and have carefully gone through the case laws relied upon by them. The main allegation of the Department is that the applicant has been introduced in this case as a 'permitted transferee'. This is a matter of fact and can be examined from share purchase agreement and other documents filed by the applicant. Sinshei Bank is a party to, the share purchase agreement because it is the sponsor and settler of the mutual fund in India and as required under the mutual funds regulations, Sinshei Bank Ltd. executed a trust deed dated 16. 7.2008 with the trustee company whereby Sinshei Bank Ltd. had established .the mutual fund and contributed to the initial corpus. As Sinshej Bank was the existing sponsor it was required to be part of the SPA for transfer of the sponsorship to the new sponsor i.e. Daiwa Asset Management Company Ltd. .....

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