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TMI Blog2019 (8) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... 's largest food and beverage company with annual consolidated revenue of CHF 90 Billion and profits of CHF 7 Billion. The Petitioner states that it had total retained earnings and reserves of CHF 88 Billion and 80 Billion for the years ending December 2010 and 2011 respectively. 3. The Petitioner has its subsidiary in India by the name of Nestle India Ltd. ('Nestle India') incorporated under the Companies Act, 1956. During the Assessment Year ('AY') 2011-12, the Petitioner's receipts of Rs. 158 crores approximately from India from its subsidiary Nestle India consisted of dividend and interest on which tax was duly deducted at source in accordance with the provisions of the Act. The Petitioner states that it has received approximately Rs. 419 crores from Nestle India as dividend and interest over the past three years. 4. During AY 2011-12, the Petitioner purchased an additional 8,85,125 shares of Nestle India for Rs. 282 crores approximately (CHF 60 million in value) at market price through a recognised stockbroker, registered with the Securities and Exchange Board of India (SEBI), and through the National Stock Exchange and Bombay Stock Exchange after payment of Securities Tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to be adopted in this regard. 8. The reasons stated were that the Petitioner had been identified as a foreign company in the NMS category and that during Financial Year (FY) 2010-11 relevant to AY 2011-12 it had entered into a share transaction amounting to Rs. 2,79,23,68,985/-. It was stated that 'in the absence of details for non-filing of return of income', the source of income of the above investment could not be substantiated. It was further stated that there was no material on record to examine such source of income and whether it was offered to tax and that from the said discussion it was clear that the Petitioner had not offered the details of 'income of Rs. 2,79,23,68,985/-.' Accordingly, the Respondent stated that he had reason to believe that income in the above sum, which was chargeable to tax, escaped assessment by reason of the failure on part of the Petitioner to fully introduce all material facts. 9. The Petitioner on 26th July, 2018 through its authorized representative submitted its objections to the above notice dated 26th March, 2018. As regards the non-filing of return of income, it was pointed out that the Petitioner's income from India consisted o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome derived by the assessee [exempted income and tax deducted income]. 3. Prime facie the Court is of the opinion that the petitioner's arguments are merited. The respondents are consequently restrained from passing the final orders in the re-assessment proceedings during the pendency of the present petition. 4. List on 20th February, 2019." 12. Pursuant to the above notice a counter-affidavit has been filed by the Respondent in which, inter alia, the stand taken is more or less the same as stated in the reasons for issuance of the notice under Section 147 of the Act. Apart from standard defences that the Petitioner has an efficacious alternative remedy and that the Respondent at this stage is to only form a prima facie view that income has escaped assessment, it is asserted that 'as long as there is a live link between the material which was placed before the Assessing Officer at the time when reasons for reopening were recorded, proceedings under Section 147 of the Act would be valid'. 13. Mr. Porus Kaka, learned Senior Counsel appearing for the Petitioner submitted that this is a case of non-application of mind by the Respondent to the undisputed facts that the Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted that it was obliged to do so in law. He also adverted to the possibility of the subsidiary of the Petitioner being a permanent establishment (PE) of the Petitioner and income being attributable on that basis which may have escaped assessment. He submitted that at this stage no interference was called for and all defences could be raised by the Petitioner in the assessment proceedings before the Respondent. 17. The above submissions have been considered. At the outset, it requires to be noticed that in the counter-affidavit filed by the Respondent there was no denial of the fact that the Petitioner is a company established under the laws of Switzerland and that it is a tax resident of Switzerland. It is undisputed that the Petitioner is entitled to protection under India's DTAA with Switzerland. The averments in para 6 of the petition where the Petitioner, enclosing its financials for the years ending 31st December, 2010 and 31st December, 2011 showing its consolidated revenue of CHF 109 Billion and 83 Billion respectively have not been disputed by the Respondent. The averments in para 7 of the petition that during the AY in question its receipts from its Indian subsidia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to in section 194LD; or (iiac) distributed income being interest referred to in sub-section (2) of section 194LBA; (iii) income received in respect of units, purchased in foreign currency, of a Mutual Fund specified under clause (23D) of section 10 or of the Unit Trust of India, the income-tax payable shall be aggregate of- (A) the amount of income-tax calculated on the amount of income by way of dividends other than dividends referred to in section 115-O, if any, included in the total income, at the rate of twenty per cent; (B) the amount of income-tax calculated on the amount of income by way of interest referred to in sub-clause (ii), if any, included in the total income, at the rate of twenty per cent; (BA) the amount of income-tax calculated on the amount of income by way of interest referred to in sub-clause (iia) or sub-clause (iiaa) or sub-clause (iiab) or sub-clause (iiac), if any, included in the total income, at the rate of five per cent; (C) the amount of income-tax calculated on the income in respect of units referred to in sub-clause (iii), if any, included in the total income, at the rate of twenty per cent; and (D) the amount of income-tax w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court has devised a procedure in GKN Driveshafts (India) Ltd. v. Income Tax Officer (supra). The procedure outlined by the Supreme Court reads thus: "We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking Order before proceeding with the assessment in respect of the abovesaid five assessment years." 23. The above procedure has to be mandatorily followed by the Respondent. It is the above procedure that required the Petitioner to file a return in order to be provided with the reason for issuing notice. Therefore, the filing of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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