TMI Blog2020 (7) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... aj Sheth, A.R ORDER PER RAVISH SOOD, JM The present appeal filed by the revenue is directed against the order passed by the CIT(A)-56, Mumbai, dated 10.12.2018, which in turns arises from the order passed by the A.O under Sec. 144C(3) r.w.s 143(3) of the Income Tax Act, 1961 (for short Act‟), dated 05.02.2018. The assessee has assailed the impugned order on the following grounds of appeal before us: 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 Securities, ignoring the fact that, the assessee has not even furnished the financials e.g. Annual reports.etc. during the course of assessment proceedings and has failed to prove the beneficial ownership of funds which is one of the prerequisite to claim exemption under Article 11(3)(c) of India- Mauritius DTAA . 2. 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 Securitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate 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 . or all the above grounds of appeal, or add any further grounds, before or at the time of hearing. 2. Briefly stated, the assessee which is a limited liability company incorporated, registered and a tax resident in Mauritius is a Foreign Institutional Investor (for short FII ) duly registered as such by the Securities and Exchange Board of India (for short SEBI ). The assessee had e-filed its return of income for A.Y 2015-16 on 30.11.2015, declaring its total income at Rs. Nil. Subsequently, the case of the assessee was selected for scrutiny assessment u/s 143(2) of the Act. 3. In the course of the assessment proceedings the assessee placed on record the Tax Residency Certificate (for short TRC ) issued by the Mauritius Revenue Authority evidencing the assessee‟s tax residence in Mauritius. On a perusal of the computation of income, it was observed by the A.O that the assessee had during the year received the following interest income : S.No. Particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in order to claim interest income as exempt from tax in India viz. (i). the interest should be derived and beneficially owned by the assessee; and (ii). the entity should be a bank carrying on bona fide banking business in Mauritius, were cumulatively satisfied on its part. It was the claim of the assessee that as it was a licensed bank carrying on bona fide banking business in Mauritius, it had thus derived the interest income as contemplated in Article 11(3)(c) of the India-Mauritius tax treaty. In so far the requirement that the interest income arising in the Contracting State i.e India should be beneficially owned by the assessee was concerned, the assessee relied on CBDT Circular No. 789, dated 13.04.2000, which therein provided that wherever a Certificate of Residence is issued by the Mauritian Authorities, such certificate will constitute sufficient evidence for accepting the status of residence as well as beneficial ownership for applying the tax treaty. It was further submitted by the assessee that the validity of the aforesaid Circular was upheld by the Hon‟ble Supreme Court in the case of Azadi Bachao Andolan Vs. DCIT (2003) 263 ITR 706 (SC). Apart from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company acting as a fiduciary or administrator of the recipient of the interest income would not be the beneficial owner of such income, as it nether has the full right to use and enjoy the interest that it receives nor owns the said interest income. In so far the CBDT Circular No. 789, dated 13.04.2000, was concerned, the A.O held a conviction that the reliance placed by the assessee on the same was misplaced, for the reason, that the same was regarding taxation of income from dividends and capital gains under the India-Mauritius tax treaty. Also, the support drawn by the assessee on the judgment of the Hon‟ble High Court of Bombay in the case of Universal International Music B.V (supra), was held to be distinguishable on facts by the A.O. After referring to the fact pattern of the loans advanced, borrowings and interest revenue of the assessee in and outside Mauritius, the A.O observed that the banking activities carried out by the assessee in Mauritius locally were miniscule and were only for the name sake purpose. Further, the A.O in the backdrop of his observations recorded in the assessment order, therein observed that in the totality of the facts it could safely b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn case for A.Y 2014-15 in ITA No. 1319/Mum/2019. In order to drive home his said claim the ld. A.R took us through the aforesaid order of the Tribunal. Apart from that, it was submitted by the ld. A.R that adopting a similar view the Tribunal had consistently vacated identically placed additions of interest income that were made by the revenue in the assessee‟s own case for the preceding years. 7. Per contra, the ld. Departmental Representative (for short D.R ) relied on the assessment order. It was submitted by the ld. D.R that it was incorrect on the part of the counsel for the assessee to claim that the present appeal was squarely covered by order passed the Tribunal in its own case for A.Y 2014-15 in ITA No. 1319/Mum/2019. Elaborating on his said contention, it was averred by the ld. D.R that the Tribunal while disposing off the said appeal had not dealt with the claim of the revenue that as the assessee had failed to substantiate that it was the beneficial owner of the interest income and not a conduit company, therefore, Article 11(3)(c) of the India-Mauritius tax treaty could not have been applied. The ld. D.R submitted that in the backdrop of the aforesaid factua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly been held that as per Article 11(3)(c) of the India-Mauritius tax treaty the interest income would not be exigible to tax in India. On a perusal of the order passed by the Tribunal while disposing off the appeal of the revenue in the assessee‟s own case for A.Y 2014-15, in ITA No. 1319/Mum/2019, dated 20.03.2020 for A.Y 2014-15, we find that it was observed as under : 4. We have heard the submissions made by rival sides and have examined the orders of authorities below. We have considered the decisions of the Tribunal in assessee s own case in the preceding assessment years. We observe that in the case of present assessee taxability of interest income of foreign currency loans and securities is a perennial issue. This issue had come up for consideration before the Tribunal for the first time in assessee s case in assessment year 2011-12. The Tribunal after considering the facts of the case, CBDT Circular No.789 dated 13/04/2000 , Indo-Mauritius Tax Treaty and decision rendered by Hon'ble Bombay High Court in the case of Director of Income Tax vs. Universal International Music BV, 31 taxmann.com 223 held as under:- 3. The appellant before us is a limited liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not dispute the assertions of the assessee and, in fact, our attention was also invited to two Affidavits filed by the Assessing Officer dated 21.03.2018 and 15.03.2018 before the Hon'ble Bombay High Court wherein the Revenue took the stand that the order passed by the Tribunal dated 16.12.2016 (supra) was recalled u/s 254(2) of the Act vide order dated 10.01.2018 (supra) only to the extent of the issue of beneficial ownership . 4. In this background, we have heard both the parties on the issue of beneficial ownership under Article 11(3)(c) of the India-Mauritius Tax Treaty qua the interest income of ₹ 94,57,45,856/- earned by the assessee. On this aspect, we find that the DRP required the assessee to explain as to how it fulfils one of the requirements of Article 11(3)(c) of the India Mauritius Tax Treaty which prescribes that such interest must be beneficially owned by the assessee. As per the DRP, the aforesaid was one of the pre-requisites before Article 11(3)(c) of the India-Mauritius Tax Treaty could be applied to say that the interest income in question was not taxable in India. The DRP has reproduced the submissions put forth by the assessee wherein asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned representative is based on the decision of Chennai Bench of the Tribunal in the case of Hyundai Motor India Ltd. vs DCIT, [2017] 81 taxmann.com 5. In this case, the interest paid by Hyundai Motor India Ltd. to the assessee was disallowed u/s 40(a)(i) of the Act on the ground that the payer therein, i.e. Hyundai Motor India Ltd. had not deducted the requisite tax at source. The Tribunal in the aforesaid decision, inter-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. The relevant extract of the decision referred to reads as under :- The doubts expressed by the DRP with regard to beneficial owner of the interest income are devoid of any legally sustainable basis. No case has been made out by the revenue for the beneficial owner of the interest income being entities other than Mauritian entities in question. In terms of article 11(3), interest arising in a Contracting State (i.e. India, in this case) shall be exempt from tax in that State (i.e. India) provided it is derived and beneficially owned by, inter alia, by any bank carrying on a bona fide banking b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Residency Certificate enables an inference that the interest income in question is beneficially owned by the assessee. In this context, the CBDT Circular no. 789 dated 13.04.2000 (supra) of the CBDT is quite eloquent, whose relevant content reads as under :- 2. ..................It is hereby clarified that wherever a Certificate of Residence is issued by the Mauritian Authorities, such Certificate will constitute sufficient evidence for accepting the status of residence as well as beneficial ownership for applying the DTAC accordingly. *underlined for emphasis by us] Ostensibly, as per the clarification issued by the CBDT, wherever a Certificate of Residency is issued by the Mauritian authority, such Certificate will constitute sufficient evidence for accepting the status of residence as well as the beneficial ownership for applying the provisions of the India-Mauritius Tax Treaty. Thus, in our considered opinion, the aforesaid clarification by the CBDT supports the assertion of the assessee that based on the Certificate of Tax Residency issued by the Mauritian authority there is sufficient evidence to accept the position that the beneficial ownership of the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the interest income. Undisputedly, the nature of interest income 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. The CIT(A) has granted relief to the assessee by following the order of Tribunal in ITA No.1708/Mum/2016 (supra). The impugned order is upheld and the appeal by the Revenue is dismissed sans merit. 6. In the result, the appeal by the Revenue is dismissed. In our considered view, the issue involved in the present appeal i.e as to whether Article 11(3)(c) would be applicable in the fact pattern of the case of the assessee before us, as rightly pointed out by the ld. A.R is squarely covered by the orders passed by the Tribunal in the assessee‟s own case for the preceding years, wherein dealing with identical facts for the said respective years the Tribunal had consistently concluded that pursuant to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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