TMI Blog2020 (3) TMI 1242X X X X Extracts X X X X X X X X Extracts X X X X ..... ome in assessment year under appeal is no different preceding assessment years. Ergo, we do not concur with the argument of ld. Departmental Representative that the Tribunal has not considered the fact in the past that the interest is not beneficially owned by the assessee. In the light of decision of the Co-ordinate Bench on the issue raised in the appeal by Revenue we find no infirmity in the impugned order. - Decided against revenue. - ITA NO.1319/MUM/2019 - - - Dated:- 20-3-2020 - SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI N.K.PRADHAN, ACCOUNTANT MEMBER For the Appellant : Shri Sanjay Singh For the Respondent : Shri Niraj Sheth ORDER PER VIKAS AWASTHY, JM: This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-56, Mumbai (in short the CIT(A) ) dated 10/12/2018 for the assessment year 2014-15. The Revenue in appeal has assailed the order of CIT(A) by raising following grounds:- 1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in directing the Assessing Officer to follow the decision of Hon'ble ITAT on Interest income from foreign currency loan and Securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l International Music B.V. [2013] 31 taxmann.com 223 (Bombay) to adjudicate that, the assessee is beneficial owner of interest income, without appreciating the fact that in the relied upon case the concerned foreign Tax Authority issued a specific certificate certifying that the respondent assessee was a beneficial owner of the royalty received in respect of musical track given to M/s. Universal Music Pvt. Ltd., whereas, in the instant case the assessee solely relied upon the Tax Residency Certificate to prove its beneficially ownership? 6. The Appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer restored . 2. Shri Niraj Sheth, appearing on behalf of the assessee submitted at the outset that the issues raised in present appeal by the Revenue have already been considered by the Tribunal in assessee s own case in assessment year 2011-12 in ITA No.1708/Mum/2016 decided on 02/07/2018. The ld. Authorized Representative for the assessee further submitted that the addition for similar reasons were made by the Assessing Officer in assessment year 2009-10, 2010-11, 2012-13 and 2013-14. In all the aforesaid assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterpretation of beneficial ownership is meant in the context of restricting the treaty benefit to intended persons. 7. Further facts to be noted are that HSBC Bank Ltd. the parent company, already has several branches in India. It incorporated a new entity HSBC Bank (Mauritius) Ltd. The AO called for details of-borrowings and lending by assessee which was not provided. Even agreements with borrowers in India which would indicate the entity negotiating and providing the loan is not available. For instance if Indian borrower/entity negotiated with HSBC Switzerland or UK and transaction was merely assigned or routed through Mauritius, treaty benefit will not be available. While complete details of depositors / borrowings and lending were not provided, the summary financials provided by the assessee is tabulated and analysed in Para 14.3 of the assessment order. The banking activity in Mauritius is miniscule and funds used and income earned are from other than Mauritius and is a clear case of Treaty Shopping (para 14.5 of the assessment order). 8. The claim of the assessee for exemption is incorrectly allowed by the Ld. CIT(A) since (i)assessee is a FII and does not carry o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 bona 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 ld. DR appearing for the Revenue did not dispute the assertions of the assessee and, in fact, our atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ITR 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 aspect which is brought out by the learned representative is based on the decision of Chennai Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pre-requisites 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 on this aspect. The only controversy is whether such Tax Residency Certificate enables an inference that the interest incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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 that 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. From the perusal of the above order of the Tribunal, it is evident that the Tribunal has considered the issue of assessee being beneficial ownership of the interest income. The Co-ordinate Bench in an unequivocal manner has held that the assessee is a beneficial owner of the interest income. Undisputedly, the nature of interest income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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