TMI Blog2019 (1) TMI 1688X X X X Extracts X X X X X X X X Extracts X X X X ..... er alia, examined the provisions of Article 11 of the India Mauritius Tax Treaty and concluded that the assessee was indeed the 'beneficial owner' of such interest income. We noticed that the claim of the assessee has also been allowed by Hon ble ITAT in the assessee s own case for the A.Y. 2010-11.In view of the decision of the Hon ble ITAT in the assessee s own case (supra) we set aside the finding of the CIT(A)on this issue and allowed the claim of the assessee. Levy of interest u/s 234B - assessee has argued that the payer is under obligation to deduct the tax at source and on account of failure of payer to deduct the tax at source, the penalty interest u/s 234B cannot be imposed on the payee - HELD THAT:- In the instant case the assessee received the payment without deduction of TDS. No doubt, the payer was liable to be deduct the TDS who failed to do so, therefore, the penalty is not leviable to be payee in view of the law settled in Director of Income Tax (International Taxation) Vs. Ngc Network Asia LLC [ 2009 (1) TMI 174 - BOMBAY HIGH COURT] . Therefore, in the said circumstances, it is quite clear that the interest and penalty cannot be imposed upon the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the AY 201112. Ground 3 - Levy of interest wider section 234B of the Act of ₹ 79.49,35,017 On the facts and circumstances of the case. the CIT(A) erred in uphold in levy of interest under section 234B of the Act of ₹ 79,49,35.0 17. The Appellant prays that the levy of interest under section 234B of the Act by the Assessing Officer he deleted Ground 4- Initiation of 'penalty proceedings under section 271(1 )(c) of the Act On the fact and in the circumstances of the case, the Assessing Officer erred in initialing penalty proceeding under section 271(1)(c) of the Act. The Appellant prays that to instruct (lies Assessing Officer to drop the initiation of penalty proceedings. 3. The brief facts of the case are that the draft order u/s 143(3) r.w.s. 144C(1) of the I.T. Act, 1961 was passed on 31.12.2016 which was served upon the assessee. The assessee also filed the reply by virtue of letter dated 02.02.2017. Thereafter, the assessment order was passed assessing the interest income on security taxable u/s 115AD @ 20% to the tune of ₹ 4,120,521,236/- and also assessing the interest on T Bills s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. All the aforesaid issues were taken up by the assessee in appeal before the Tribunal, which vide order dated 16.12.2016 (supra) accepted the pleas of the assessee so far as the first two aforestated conditions were concerned. In other words, the Tribunal held that the interest income in question was derived by the assessee and that it was carrying on bone fide banking business. So however, with regard to the third condition of 'beneficial ownership', the Tribunal remanded the issue to the file of the Assessing Officer with certain directions. This aspect was agitated by the assessee by way of a Miscellaneous Application u/s 254(2) of the Act and vide its order dated 10.01.2018 (supra), the Tribunal recalled its decision so far as it pertained to the issue of 'beneficial ownership'. In this background, the learned representative for the assessee pointed out that the captioned proceeding is to adjudicate the issue of 'beneficial ownership' while evaluating assessee's claim of non-taxability of the aforestated interest income in terms of Article 11(3)(c) of the India-Mauritius Tax Treaty. Insofar as the scope of the present proceeding is concerned, the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Mauritian Revenue authorities, a copy of which was also filed before the DRP. On the aforesaid basis, assessee sought to explain the fulfilment of the condition of 'beneficial ownership'. The DRP, however, rejected the plea of the assessee as according to it, no documents were placed by the assessee to suggest that the interest income in question was beneficially owned by the assessee. As per the DRP, assessee had failed to show the immediate source of funds for making the impugned investment and also the immediate application of the impugned interest income earned by it. Against such observations of the DRP, assessee is in appeal before us. 5. Before us, the learned representative for the assessee reiterated the reliance on the CBDT Circular no. 789 dated 13.04.2000 (supra) whose validity, according to the learned representative, has also been upheld by the Hon'ble Supreme Court in the case of UOI vs Azadi Bachao Andolan, [2003] 263 1TR 706 (SC). Furthermore, it is pointed out that the Ministry of Finance vide Press Clarification dated 01.03.2013 clarified that the CBDT Circular no. 789 dated 13.04.2000 (supra) continues to be in force. Another aspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the earlier paras and is not being repeated for the sake of brevity 8. Article 11(3)(c) of the India-Mauritius Tax Treaty, inter-alia prescribes that interest income arising in a contracting state shall be exempt from tax in that state provided it is derived and beneficially owned by any bank carrying on a bona fide banking business which is resident of the other contracting state. The limited point before us is as to whether assessee, who is a tax resident of Mauritius, beneficially owns the interest income of ₹ 94,57,45,856/- in question. The other prerequisites of Article 11(3)(c) of the India Mauritius Tax Treaty are not for consideration before us as they have already been dealt with by our predecessor Bench in its order dated 16.12.2016 (supra). Be that as it may, in support of the proposition that the impugned interest income is beneficially owned by the it, the appellant has primarily relied on the Tax Residency Certificate issued by the Mauritian Revenue authorities certifying the fact that assessee is a tax resident of Mauritius. Copies of such Certificates have been placed in the Paper Book at pages 268 to 270. Factually speaking, there is no dispute o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India-Mauritius Tax Treaty. On this aspect itself we uphold the plea of the assessee that assessee is the 'beneficial owner' of the impugned interest income on the strength of the Tax Residency Certificate issued by the Mauritian authorities. 10. Moreover, in the context of element of interest income earned by the assessee from Hyundai Motor India Ltd., the Chennai Bench of the Tribunal in its decision in the case of Hyundai Motor India Ltd. (supra) has already observed th6t the recipient therein (i.e. the assessee before us), was the 'beneficial owner' of the interest income qua the provisions of Article 11 of the India-Mauritius Tax Treaty. Be that as it may, in view of our aforesaid discussion, we uphold the stand of the assessee that it is the beneficial owner of the interest income of ₹ 94,57,45,856/- qua the provisions of Article 11(3)(c) of the India-Mauritius Tax Treaty and thus, such income is not taxable in India. 5. On appraisal of the above mentioned finding, we noticed that the claim of the assessee has also been allowed by Hon ble ITAT in the assessee s own case for the A.Y. 2010-11 in ITA. No.1086 1087/M/2018 dated 30.08.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
