TMI Blog2017 (8) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... tial we refrain from going into said aspect as we have decided this Petition on merits itself. On perusal of the Judgment of the AAR, it transpires that the AAR has considered all the relevant aspects of the matter and has arrived at the just conclusion. The Treaty has also been rightly considered. - Writ Petition No. 3070 of 2016 - - - Dated:- 28-7-2017 - S. V. Gangapurwala And A. M. Badar JJ. Ms.Minal Lad a/w. Ms.Namita Shirke i/b. Mr.Charanjeet, Advocate for the Petitioner Mr.Porus Kaka, Senior Counsel a/w. Mr.Divesh Chawla i/b. Mr.Atul K. Jasani, Advocate for the Respondent JUDGMENT ( Per S. V. Gangapurwala, J. ) 1 The present Respondent applied for an advance ruling to the Authority for Advance Rulings (Income-Tax), New Delhi (hereinafter referred to as AAR for the sake of brevity) to ascertain whether capital gains in respect of the transfer of shares of Tata Industries Limited (hereinafter referred to as TIL for the sake of brevity) to Tata Sons Limited (hereinafter referred to as TSL for the sake of brevity) are taxable in India in the hands of the Respondent/Applicant by virtue of the India Mauritius Tax Treaty. The Applicant sought ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on account of interest received or paid to or from the group entities besides profits of sale of share in question. It demonstrates that JSH (Mauritius) Limited was not having business/commercial substance of its own. (c) The JSH (Mauritius) Limited was created only for the purpose of taking advantage of Tax Treaty with Mauritius and not having any commercial or business substance. The AAR has observed that the Respondent is not a shell Company on the basis of balance sheet of the Company but has not discussed basis of arriving at said view. No such discussion and evidence has been considered by the AAR while arriving at such conclusion. (d) According to the learned counsel, in case where Revenue finds that any holding structure and entity which has no commercial/business substance has been interposed only to avoid tax, then in such case, applying the case of 'Fiscal Nullity', it would be open to the Revenue to discard such interposing of that entity. (e) The learned counsel further submits that this is a fit case of abuse of Tax Treaty and it amounts to Treaty Shopping. Such Treaty Shopping is undesirable since it frustrates the spirit of the Treaty. (f) Only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of his erudite arguments, put forth following propositions : (a) The statute does not provide any appeal against the order of the AAR. Finality is given to the Order passed by the AAR. This Court in exercise of its jurisdiction under Article 226 of the Constitution of India would not sit as an Appellate Authority over the decision of AAR, but would only be concerned with due adherence to the decision making process and the AAR has strictly followed the decision making process. No error has been committed in the decision making process by the AAR. (b) The Petition is filed after much delay i.e. after a period of eight months from the date of the Order. If such a Petition is entertained, it would frustrate the very object behind introduction of Scheme of AAR. No explanation has been given for belatedly filing Petition. (c) The Respondent Company is incorporated in Mauritius on 4th April 1996. The Respondent is resident as per Section 6 of the Act and does not have any business presence or permanent establishment in India. The Respondent is engaged in business of investment and financing activities. The Respondent is holding a Category 1 Global Business Company License iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s evidence and Income-Tax Authority in India will not go behind the TRC and question his residential status. Further Circular dated 13th April 2000 would continue to be in force, so also clarified that the Circular issued by CBDT would be binding on the Tax Authorities and cannot be ignored. The learned Senior Advocate refers to the Judgment of the Apex Court in a case of Union of India and Anr. v. Azadi Bachao Andolan Anr. reported in 2003 ITR Volume 263 page 706 and submits that in the said Judgment the Apex Court upheld the validity of the Circular dated 13th March 1994 and 13th April 2000 issued by the CBDT and held that once the Certificate of Residence is granted, that would be conclusive evidence for determining the status of residence under the Treaty. Relying upon the said Judgment, the learned Senior Advocate submits that the Treaty Shopping is not illegal. (h) The learned Senior Advocate submits that the objection with regard to maintainability of the application before the AAR qua Section 245(R)(2)(iii) of the Act is not tenable. The AAR on 14th September 2011 observed that the investment made by the Holding company of Bermuda are required to be looked into. It re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treaty shopping, in our view, is another. Despite the sound and fury of the respondents over the socalled abuse of treaty shopping , perhaps, it may have been intended at the time when the IndoMauritius DTAC was entered into. Whether it should continue, and, if so, for how long, is a matter which is best left to the discretion of the executive as it is dependent upon several economic and political considerations. This court cannot judge the legality of treaty shopping merely because one section of thought considers it improper. A holistic view has to be taken to adjudge which is perhaps regarded in contemporary thinking as a necessary evil in a developing economy. 9 The Apex Court in the said Judgment further observed that Section 90 is specifically intended to enable and empower the Central Government to issue a notification for implementation of the Double Tax Avoidance Agreement. When that happens, the provisions of such an agreement with respect to cases to which they apply would operate even if inconsistent with the provisions of Income Tax Act. The Apex Court further observed that the Circulars issued by the CBDT under Section 119 of the Act are binding on all office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication and the records called for, by order, either allow or reject the application: Provided that the Authority shall not allow the application where the question raised in the application,- (i) is already pending before any income tax authority or Appellate Tribunal [except in the case of a resident applicant falling in subclause (iii) of clause (b) of section 245N] or any court; (ii)involves determination of fair market value of any property; (iii) relates to a transaction or issue which is designed prima facie for the avoidance of Income-Tax [except in the case of a resident applicant falling in subclause (iii) of clause (b) of section 245N. Provided further that no application shall be rejected under this subsection unless an opportunity has been given to the applicant of being heard: Provided also that where the application is rejected, reasons for such rejection shall be given in the order. (3) A copy of every order made under subsection (2) shall be sent to the applicant and to the Commissioner. 11 The said provision would come into operation when the application by the party relates to a transaction or an issue which is de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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