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TMI Blog2019 (10) TMI 1449X X X X Extracts X X X X X X X X Extracts X X X X ..... Mauritius and are engaged in investment holding activities. 2. Capex Communication (Mauritius) Ltd. (CC(M)L) holds 100 per cent. stake in Capex Communications Ltd. (CCLM). CCLM holds 100 per cent. stake in CCOM. All the three companies are companies incorporated and resident in Mauritius. 3. CCOM held 25,651,389 equity shares in Vortex Capex Limited (herein-after referred as VCL), an Indian company, constituting 6.19 per cent. of the ordinary share capital and CCLM held 65,634,887 equity shares in VCL constituting 15.85 per cent. of the ordinary share capital of VCL. 4. CCOM and CCLM are non-residents and do not have any tax presence or permanent establishment in India. CCOM and CCLM holds category 1 global business licence issued by the Financial Services Commission of Mauritius. Further CCOM and CCLM have been consistently holding tax residency certificates issued by the Mauritius Revenue Authority and continue to hold valid tax residency certificates. 5. On July 1, 2011 the CCOM sold 25,651,389 equity shares in VCL to Aura Atlantic Sec. Ltd. hereinafter referred as AAS (a company nominated by Vortex which is a non-resident company for the purpose of the Act) for a total cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case, the applicant could be subjected to tax under the provisions of section 115JB of the Act ? Background of case 12. The Capex group was participating in the telecom business in India along with the Marsh group of Hong Kong through various regional telecom companies. Subsequently, under the Unified Licensing Schemes of Government of India, (1999-2003) there was consolidation of holdings among various shareholders managing the telecom business. In 2004 in a letter addressed by Marsh Max Telecom Pvt. Ltd., to the Foreign Investment Promotion Board requesting consolidation of Marsh Capex Telecom Ltd., Marsh Telecom East Ltd., Pascal Ltd., and Marsh Capex South Ltd., etc., it is observed that through this consolidation there has been acquisition of the entire shareholding of the operating companies by Marsh Max Telecom Pvt. Ltd. (MMTL), as a consideration of which MMTL has issued its own equity shares to the shareholders of the erstwhile operating companies based on their respective shareholdings in the operating companies. As a consequence of this consolidation, shareholding of Capex Group in MMTL was mostly in the hands of Capex Teleholdings Limited (CTHL) and CTHL alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e application money received from CC(M)L. CC(M)L had obtained a loan of USD 1.1 billion from Standard Chartered Bank (London), which was subsequently refinanced and upsized to USD 3.59 billion in August 2007 from a consortium of overseas banks. 16. In the loan agreement for USD 3.59 billion, there was a stipulation by the lenders wherein, it was required that "CCLM must" appoint a liquidator to liquidate CTIL forthwith and complete the liquidation latest within 18 months of the execution of the agreement. Therefore, it became necessary for CCLM to liquidate CTIL and for CCLM to become the direct owner of 15.85 per cent. shares of VCL and thus, CTIL went into voluntary liquidation in July 2008. Accordingly, CCLM being 100 per cent. share-holder of CTIL, received 65.63 million shares (representing 15.85 per cent. stake) in VCL. 17. CCLM had infused USD 400.61 million in CTIL as per below details : -USD 330.15 million was received by CCLM as share application money from CC(M)L, which was in turn sourced out of a loan taken by CC(M)L from Standard Chartered Bank, U. K. ; -USD 50 million was received as short-term loan from CIHL, Mauritius ; and -USD 20.46 million was received a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable to tax in India, having regard to the Double Taxation Avoidance Agreement between India and Mauritius ? (ii) If the answer to question (i) is in the negative (i. e., not chargeable to tax in India), whether the applicant is required to with hold tax under section 195 of the Income-tax Act ('Act') from such payment ? (iii) If it is held that the applicant is required to withhold tax on payments proposed to be made to CCLM and CCOM, whether the applicant is required to withhold tax at source at the rate prescribed in clause 2(b)(vii) of Part II of Schedule I to the Finance Act, 2010 only on the net capital gains arising in the hands of CCLM and CCOM, computed by deducting the declared cost of acquisition of the shares transferred from the full value of the sale consideration ? Issue notice to the parties for hearing on April 5, 2011." 21. Vide letter and application dated May 17, 2011, CCLM, CCOM and CC(M)L applied to this Authority to join the proceedings as intervenors. This intervention application was admitted vide order dated May 24, 2011. The order for reference is reproduced below : "This is an application on behalf of Capex Com Ltd. (CC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervenors are also heard before a ruling is rendered. 3. In view of this, the application for intervention is allowed." 22. There were hearings on the merits on May 24, 2011 and May 26, 2011 wherein the above mentioned three companies were present and duly represented. 23. On May 27, 2011, AASL the applicant in that case moved an application for adjournment for one month and accordingly the hearing was adjourned to July 1, 011. 24. On July 1, 2011, the AASL filed an application dated July 1, 2011 for withdrawal. The companies, namely, CCLM, CCOM and CC(M)L were present for proceedings also made submissions as represented by their authorised representatives. 25. The application was accordingly "dismissed as withdrawn" vide order to this effect on the same date. After hearing all the sides in the withdrawal application, i. e., the applicant, the intervenors and the special counsel for the Department this Authority passed the order dated July 1, 2011 which reads as follows : "When the matter came up today for arguments, learned senior counsel for the applicant moved an application for permission to withdraw the application made under section 245Q of the Income-tax Act. Having h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res to Vortex VCL an Indian company by Capex Com Limited, Mauritius and Capex Communication Limited, Mauritius is chargeable to tax in India having regard to the Double Taxation Avoidance Agreement (DTAA). The case of AASL was that it was not required to withhold any tax under section 195 of the Act, since it was covered by the provisions of India-Mauritius Double Taxation Avoidance Agreement. 4. Very strangely, the present two companies, i. e., Capex Com Ltd. and Capex Communication Ltd. filed applications in those proceedings for interventions. This intervention application dated May 17, 2011 was allowed by this authority on May 24, 2011. 5. These intervention applications were not opposed by the Revenue. The tenor of the intervention application suggests that the applicants have claimed that they would be vitally interested in the issue raised by AASL in the application. 6. Eventually, the said Authority for Advance Rulings application by AASL which was registered as A. A. R. No. 982 of 2010 was sought to be withdrawn by the applicant therein. This was permitted by this Authority by an Order dated July 1, 2011. 7. Thereafter, the present applicants waited till September ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and as such it could not be said that there was a prejudice caused to the Revenue. After considering the overall contentions, we feel that at this stage it will not be proper to refuse the admission. 10. In order to test the other contentions raised by the Revenue regarding the determination of fair market value which is also a scheme to avoid payment of tax. It would be better to admit the mat ter. However, with a rider that the question regarding the failure on the part of the applicant to state in the present applications about the intervention applications and its effect would be kept open at the time of final hearing. We also find that the other question regarding the applicability of section 115JB is pending before the hon'ble Supreme Court and has to come for arguments shortly that would also be one of the reasons for admitting these applications. The applications are admitted." 29. The applications in the case of both the applicants were admitted under section 245R(2) vide common order dated July 20, 2015. Subsequent to the admission, several hearings took place on the merits of the case. Both the parties have expressed that the matter was "heard and reserved for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave any tax presence or permanent establishment in India. All the members of the board of directors of the applicants during the financial year ("FY") 2011-12 were Mauritius tax residents or other non-residents except a few. The applicant are controlled and managed by its board of directors. All the meetings of the board of directors of the applicant during the financial year 2011-12 were held in Mauritius. All decisions concerning the affairs of the applicants including those relating to the present transaction, have been taken by the board of directors through board meetings convened, chaired and conducted in Mauritius. The board of the applicant comprised of people with significant qualification and experience. All the decisions concerning the affairs of the applicant have been taken by the board of directors outside India. All statutory books of account and records of board meetings etc. are maintained and kept at the applicant's registered office in Mauritius. The applicants have leased office premises in Mauritius at its disposal from which they operate. The applicants are regular in filing its tax returns in Mauritius. 34. Learned senior advocate submits that the applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to be in force. It further stated that a tax residency certificate produced by a resident of a treaty country will be accepted as evidence that he is a resident of that country and the Department will not go behind the tax residency certificate and question his residential status. Learned senior advocate fairly submits that while the India-Mauritius tax treaty has subsequently been amended to withdraw the capital gains exemption for the assessment year 2018-19 onwards (not applicable to the year under consideration) on shares acquired on or after April 1, 2017, shares acquired prior to April 1, 2017 (which covers the case of the applicants) have clearly been grandfathered. 41. Learned senior advocate emphasizes that the above developments (issuance of clarification as well as grandfathering of shares acquired prior to April 1, 2017) unambiguously reflect the intention of the Union of India. Mauritius is one of the highest contributors to the flow of foreign direct investment in India. Bearing this is mind, the Ministry of Finance has always intended to maintain a stable and unambiguous tax environment especially for tax residents of Mauritius. 42. Thereafter the learned senior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hypothetical assessment of the 'real motive' of the assessee. In our view, the court must deal with what is tangible in an objective manner and cannot afford to chase a will-o'-the-wisp . . . We are unable to agree with the submission that an act which is otherwise valid in law can be treated as non est merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudice to the national interests, as perceived by the respondents." 43. Thereafter learned senior advocate referred selectively to Supreme Court in the case of Vodafone International Holdings B. V. v. Union of India [2012] 341 ITR 1 (SC) where it is held (page 36 of 341 ITR) : "When it comes to taxation of a holding structure, at the threshold, the burden is on the Revenue to allege and establish abuse, in the sense of tax avoidance in the creation and/or use of such structure(s). In the application of a judicial anti-avoidance rule, the Revenue may invoke the 'substance over form' principle or 'piercing the corporate veil' test only after it is able to establish on the basis of the facts and circumstances surrounding the transaction that the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the sale of shares and not with the sale of assets, item-wise. The facts of this case show sale of the entire investment made by HTIL, through a top company, viz., CGP, in the Hutchison Structure. In this case we need to apply the 'look at' test. In the impugned judgment, the High Court has rightly observed that the arguments advanced on behalf of the Department vacillated. The reason for such vacillation was adoption of 'dissecting approach' by the Department in the course of its arguments. Ramsay (supra) enunciated the look at test. According to that test, the task of the Revenue is to ascertain the legal nature of the transaction and, while doing so, it has to look at the entire transaction holistically and not to adopt a dissecting approach. One more aspect needs to be reiterated. There is a conceptual difference between preordained transaction which is created for tax avoidance purposes, on the one hand, and a transaction which evidence investment to participate in India. In order to find out whether a given transaction evidence a preordained transaction in the sense indicated above or investment to participate, one has to take into account the factors enum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed was driven entirely by commercial/business considerations. Accordingly, it needs to be appreciated that the transaction of sale of VCL shares was undertaken purely for commercial purposes inter alia to repay the loans to the third party overseas lenders. It is repeatedly stressed that despite more than 3,500 pages of factual documents having been filed by the applicants in numerous hearings since 2011, no colourable device has been found and hence the consistent view of the authority granting treaty benefits should be followed. 46. According to learned senior advocate this issue is no longer res integra and cites some of the important decisions in this regard, which are listed as under : -Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 (SC) ; -Serco BPO Private Limited v. Dy. CIT [2012] 253 CTR (P&H) 410; -DIT (International Tax) v. Copal Research Ltd. [2015] 371 ITR 114 (Delhi) ; (270 CTR 223) (Delhi) affirming Moody's Analytics Inc., USA, In re [2012] 348 ITR 205 (AAR) ; -Mahindra-BT Investment Co. (Mauritius) Ltd., In re [2016] 389 ITR 19 (AAR) ; -Dow Agrosciences Agricultural Products Ltd., In re [2016] 380 ITR 668 (AAR) ; -Ardex Investments Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. It was expressed that the two intervenors joined the then applicant, AASL in Application No. 982 of 2010 on an admitted plea that they were vitally concerned, interested and affected in the principal issue on which ruling was being sought for by AASL and on being asked during the course of admission proceedings for the intervention application, they unequivocally stated that rule 5 and rule 28 of the Authority for Advance Rulings (Procedure) Rules, 1996 enables the two intervenors to join the application filed by AASL. Mr. Girish Dave, learned special counsel for the Revenue, took this Bench through the provisions of Chapter XIX-B of the Income-tax Act, the Authority for Advance Rulings (Procedure) Rules, 1996, the relevant provisions of the Civil Procedure Code, 1908 (hereinafter referred to as CPC) and the judicial insight on the issue. The Revenue expressed that by virtue of being admitted as intervenors as per the provisions of rule 5 to the Authority for Advance Rulings (Procedure) Rules, it is bound to be an applicant as per the definition provided under rule 2(d) and 2(k) of the Authority for Advance Rulings (Procedure) Rules which is reproduced hereunder : "2(d) ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent' includes Intervenors." 53. The Revenue further drew our attention to the contents of the withdrawal order dated July 1, 2011, which stated that the application was "dismissed as withdrawn". The Revenue emphatically canvassed that as per the provisions of section 245S read with section 245R, the Advance Ruling pronounced by the authority is binding on the applicants and as, the applicants of the present application CCLM and CCOM stepped into the shoes of the "applicant" by joining the proceedings through intervention application, the dismissal order will be binding on CCLM and CCOM. The Revenue further highlighted the provisions of clause (b) of sub section (1) to section 245S of the Income-tax Act to advocate that the decision of dismissal was binding on the "transaction" which was the same in the present case as well as in the case of AASL. 54. The Revenue expressed that the consent of the intervenors was implied on account of the commercial arrangements entered into between the transacting parties, i. e., Vortex and the Capex Group. This commercial arrangement, the Revenue emphasized was an agreement to share the tax burden on account of the withholding tax. The event ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under section 245Q(1) of the Act would require to be dealt with in the manner provided under rules 3 and 5 of Order 23 of the Civil Procedure Code. It is commented that the uniqueness of the provisions of the aforesaid Rules could not come up for consideration by hon'ble authority except in the case of General Electric Pension Trust, In re reported in [2007] 289 ITR 335 (AAR) ; [2007] 159 Taxman 213 (AAR) where it was held (page 339 of 289 ITR) : "A perusal of rule 5 discloses that the power conferred on the Authority is couched in very wide terms. It speaks of determination of the application filed under section 245Q(1) of the Income-tax Act, 1961 (for short 'the Act') and such other applications, petitions and representations of an interlocutory, incidental or ancillary nature after giving due opportunity of being heard to the parties. The ultimate object of determination of the interlocutory application, petition or representation is for a complete and effective disposal of the section 245Q(1) application. It follows that the power thereunder is meant to be exercised before the disposal of the application filed under section 245Q(1) of the Act and not thereafter. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent applicants cannot re-enter as applicants in fresh applications once the application by AASL is dismissed as withdrawn and liberty is granted only in "other" proceedings ; and (iii) the withdrawal by AASL cannot be unilateral for AASL alone once the two present applicants joined the application of AASL as intervenors and were heard at the time of withdrawal by AASL and the two present applicants acquiesced in the withdrawal, particularly when analogous provisions of rule 3 and rule 5 of Order XXIII of Civil Procedure Code are read with the relevant rules of the Authority for Advance Rulings (Procedure) Rules referred to above for a complete and effective disposal of the application which shall include application of the intervenors as well, in terms of rule 5 of the Authority for Advance Rulings (Procedure) Rules. 64. The Revenue, then quotes these provisions : "Rule 1, Order 1, Civil Procedure Code : Who may be joined as plaintiffs,-All persons may be joined in one suit as plaintiffs where- (a) Any right to relief in respect of, or arising out of, the same act or transaction or series of acts or transactions is alleged to exist in such persons, whether jointly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue has further argued that the following demonstrates that CCLM/CCOM is to be treated as a co-applicant- -For filing of the intervention application, CCLM/CCOM had paid fees of INR 2,500, which was the prescribed fee to be paid by an applicant for obtaining a ruling from the hon'ble Authority. -The affidavit attached to the intervention application contained a declaration made by CCLM's/CCOM's director that "I also understand that the question on which the advance ruling is required is not pending in my case before any Income-tax authority, the Appellate Tribunal or any court". -As per rule 24, no person other than the applicant, the Com missioner or their representatives could remain present during hearings. The fact that CCLM's/CCOM's representatives were present and heard in AASL's AAR application (No. 982 of 2010) shows that they were co-applicants as no other person would be permitted. 66. Attention was drawn to the provisions for withdrawal of application by the applicant contained in sub-section (3) of section 245Q of the Act which lays down that an applicant may withdraw an application within thirty days from the date of the application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of its claim of "ouster" of the present applicants from the Authority for Advance Rulings in view of the intervention applications : (i) Judgment of the hon'ble apex court in the case of Sarguja Trans port Service v. State Transport Appellate Tribunal, AIR 1987 SC 88. (ii) Judgment in Jonnala Syra Reddy v. Tityayahura Srinivasa Reddy [2003] SCC Online AP 631. (iii) Judgment in Satish Khosla v. Eli Lilly Ranbaxy Ltd. [1998] 44 DRJ 109 (DB) High Court of Delhi. (iv) Judgment in Haldhar Prasad Singh v. Giridih Municipality, AIR 1989 Patna 321. (v) Judgment in S. M. A. M. S. Meyyappa Chettiar v. Seethachi Achi [1936] SCC Online Mad 366. (vi) Judgement in Vanjiappa Goundan v. N. P. V. L. R. Annamalai Chettiar, AIR 1940 Mad 69. (vii) Judgment in Amon v. Raphael Tuck and Sons Ltd. [1956] 1 QB 357 ; [1956] 1 All ER 273. (viii) Judgment in Ramesh Hirachand Kundanmal v. Municipal Corporation of Greater Bombay [1992] 2 SCC 524. (ix) Judgment in S. P. Chengalvaraya Naidu v. Jagannath [1994] 1 SCC 1. (x) Judgment in Krishnamachari v. Dhanalakshmi Ammal (C. R. P No. 43 of 1965 dated April 16, 1965). (xi) Judgment in Padma Sundara Rao (Decd) v. State of Tamil Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a case of tax avoidance and the facts show that the VCL shares were acquired, disposed, controlled and managed by Seth Group with the aid of Senior Capex Group personnel based in India and abroad and as such, the transfers of these shares are definitely required to be taxed in India. The facts relied upon by the Revenue for its conclusion, inter alia are : 1. That VCL shares were acquired, disposed, controlled and managed by Capex Group with the aid of Senior Capex Group personnel based in India and as such the transfers of these shares are definitely required to be taxed in India. 2. The sources of acquisition of the impugned shares are either out of past ownership of shares of Capex Group in Telecom Operating Companies in India or out of the loans taken on the strength of control of Capex Group. 3. The arrangement with Vortex Group clearly shows that the entire control over the shares vest with Capex/Seth Group and applicants are mere puppet entities. 4. The arrangement with Vortex Group shows that the share holders have responsibilities towards discharging the Telecom Operations in India. This function has never been carried out by the applicants and in fact, has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases, the legal position of any company incorporated abroad is that its powers, functions and responsibilities are governed by the law of its incorporation. . . . In none of the authorities, have the assets of the subsidiary been held to be those of the parent unless it is acting as an agent.. . . Though, it may be advantageous for parent and subsidiary companies to work as a group, each subsidiary will look to see whether there are separate commercial interests which should be guarded . . . . But in case of multinationals, it is important to realize that their subsidiaries have a great deal of autonomy in the country concerned except where subsidiaries are created or used as a sham." 75. The Revenue subjected the factual spreadsheet to various tests laid down by the hon'ble Supreme Court in the case of Vodafone, like : Fiscal nullity test, Commercial/business substance test, "Look at" principle test, investment participation test, time duration test, business operations period in india test, generation of taxable revenues in India test, timing of the exit test, continuity of business on exit test, scheme and dominant purpose test, colourable or artificial device test which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment by CCOM was made out of loan executed by Capex Group on the strength of Seth Family, (ii) In the case of CCLM the situs of shares already owned by CTHL India has been shifted to Mauritius by voluntary liquidation of CTIL India Time duration Test Formation and existence of the subsidiary in question. * Acquisition in the hands of CCOM Mauritius made after Supreme Court decision in the case of Azadi Bachao Andolan * CTHL India shareholding in VCL transferred to Mauritius after FDI Policy relaxed to 74 per cent. from 49 per cent. The Holding structure of the applicant-companies keeps changing for USD 1 in most of the cases * CCLM has acquired VCL shares upon voluntary liquidation of CTIL in July 2008. Thus, the transfer of impugned shares made within 3 years. Business operations period in India test Business operations undertaken by the entity under examination * The applicants have not participated in shareholders functions of VCL operating in India. * The shareholders function of VCL is being participated by Indian key management personnel-Shri Ravi Seth and other Capex Group executives Generation of taxable revenues in India test Whether the entity unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction under consideration is a sham transaction affected through a colourable device. Reliance is also placed by the Revenue on decisions in AB Mauritius, In re [2018] 402 ITR 311 (AAR), Aditya Birla Nuvo Ltd. v. DDIT (International Taxation) [2012] 342 ITR 308 (Bom) and Indostar Capital v. Asst. CIT (International Taxation) [2019] 415 ITR 513 (Bom) ; [2019] 105 taxmann.com 96 (Bom) wherein India Mauritius treaty benefits are denied. Rebuttal by applicants 79. As regards suppression of facts, it is prayed that the applicants are of a bona fide belief that the facts in relation to intervention and withdrawal were irrelevant in the present application. In any case, the fact that an Authority for Advance Rulings application was filed by AASL was mentioned in the deed of amendment dated July 1, 2011 filed as a part of the present application. 80. It is added that the Authority for Advance Rulings and the Revenue were already privy to these facts as they pertained to earlier proceedings before the same forum. At best, it was an inadvertent mistake by the applicants. The applicants would neither gain anything nor it would prejudice the Revenue. The taxes had duly been deducted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, we have decided in the assessee's favour. The intervenors may take advantage of that order." 85. It is stated that in the present case, there has been no order on merits passed in the case of AASL Authority for Advance Rulings application. Even if a ruling under section 245R(4) was pronounced by the hon'ble Authority for Advance Rulings for AASL's application (A.A.R 982 of 2010), the intervenors in A.A.R 982, i. e., the applicants in the present case, would not have been entitled to the same ruling. Thus, the Revenue's allegation that the present applications are nothing but a second attempt to get the issue resolved, is contrary to law. 86. Further to the above, the applicants submit that the provisions of the Civil Procedure Code (except those specifically stated at various provisions under the Act) do not apply to Income-tax matters. Reliance in this regard can be placed on various judicial precedents inter alia including the following : -Addl. CIT v. S. Surjit Singh [1975] 101 ITR 433 (Patna). -CIT v. Gourishankar Lal Singha [1967] 63 ITR 711 (Cal). -CIT v. Smt. V. Rukmini [2011] 331 ITR 102 (Karn). 87. In the case of General Electric Pension Trust, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 245R binding. In any case, what should be the effect of the withdrawal order being binding on CCLM/CCOM as there is no ruling that has been pronounced by the Authority for Advance Rulings on the questions raised before it in AAR No. 982 of 2010. 90. It is emphasized that clause (b) of section 245S(1) of the Act results in the binding effect only on the transaction of the applicant that was ruled upon by the Authority for Advance Rulings and not any other transaction of the applicant himself. Such a view may be supported by the argument that a party's action of approaching the Authority for Advance Rulings cannot close the door upon one of the available courses of action available to the other party (of securing an advance ruling in his own case). As each party has its own individual remedy available, the AAR ruling cannot be treated as binding on the other party to the transaction. 91. The learned senior advocate challenges the argument of the Revenue that CCLM/CCOM were "co-applicants" in AASL's application (No. 982 of 2010). It is submitted that the Revenue has misconstrued the facts and legal position in making this allegation. The applicants cannot be considered as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and rep-resentations cannot be applications under section 245Q(1) of the Act. The same is equally evident from the language in rule 5 which mentions applications under section 245Q(1) of the Act and such other applications, petitions etc. Further, rule 5 read with rule 28 of the Authority for Advance Rulings (Procedure) Rules themselves provide for procedure of hearing and disposal of other applications. They do not provide that any other application will be treated to be an application filed under section 245Q(1) of the Act. 95. It is spelt out that the rights available to an applicant (such as AASL) under Chapter XIX-B of the Act were not available to intervenors (such as CCOM, CCLM and CC(M)L). The only purpose of granting an intervention application is to entitle the intervenors to address arguments in support of one or the other side. Reliance can be placed on Saraswati Industrial Syndicate Ltd. v. CIT [1999] 237 ITR 1 (SC) ; [1999] 103 Taxman 395 (SC). The relevant extract is reproduced below (page 5 of 237 ITR) : "The learned counsel for the intervenors submits that he is entitled to the same order as we have just passed. We cannot pass such an order in an intervention ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such amendment) ; and -the aggregate consideration for sale of shares in the present application filed by CCOM and CCLM was USD 4.201 billion, while the con sideration for sale of shares in AASL's application was USD 3.8 billion. 100. The learned senior advocate has mentioned that it is factually incorrect that Vortex was of the view that tax was required to be deducted. Vortex was all along of the view the transaction was not taxable. Further, Recital 4 of the amendment deed on July 1, 2011 clearly sets out that both parties were of the view that the transfer was not subject to tax in India and no withholding was required and the covering letter by AASL to the Revenue in relation to deposit of deducted tax also mentions that it had no doubt that no tax was required to be withheld as the transaction was not taxable and that it withheld and deposited tax under protest. 101. In response to the contention of the Revenue that the withdrawal of application No. 982 of 2010 was part of a commercial arrangement between the deductor and deductees and it was a bilateral arrangement for withdrawal in the form of the deed of amendment dated July 1, 2011 to the put option agreement and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filing a fresh suit, reliance can be placed on the following rulings- Smt. Gowramma v. Nanjappa, AIR 2002 Karn 76. Ramakrishnan v. Thanka [2000] 2 KLJ 818 (Ker). 103. In regard to term "other proceedings" used in the withdrawal order dated July 1, 2011, it is submitted that the hon'ble Authority is not required to grant permission in respect of proceedings at forums other than the Authority for Advance Rulings. The fact that specific permission was granted implies that the Authority for Advance Rulings as a forum was intended to be included in the scope of "other proceedings". 104. The applicants further submits that the term "other proceedings" referred to therein would include proceedings before the Authority for Advance Rulings in the case of the applicants ; such proceedings would be in accordance with law, and would not be barred in any way, including by way of res judicata, as there has been no determination of the rights of these parties by the said order dated July 1, 2011. 105. Contending that while the Civil Procedure Code is not applicable to Income-tax matters, even if it is assumed that the Civil Procedure Code is applicable, the fact that the hon'ble A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in AASL's case). The withdrawal application by AASL was an application of an incidental/ancillary nature for complete and effective disposal of the application filed by AASL under section 245Q(1) of the Act. 109. It is articulated by the learned senior advocate that the Revenue urged for the first time that issue of notices under section 133(6) of the Act to the applicants during AASL's proceedings is hit by clause (i) of the proviso to section 245R(2) of the Act. The applicant expounds that this contention was not even raised in the two rounds of merit hearings before the Principal Bench of the Authority for Advance Rulings. Further, section 133(6) of the Act empowers certain Income-tax authorities to require any person to furnish information which could be useful or relevant to any enquiry or proceeding under the Act. Details called for under section 133(6) of the Act and provided without prejudice cannot be a question as made in an application for advance ruling. Further, the issue of notice to the applicants during AASL proceedings was ancillary to the Authority for Advance Rulings proceeding of AASL and the main purpose was to obtain details from the applicants in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fact presumed to be true unless, disproved by some evidence to the contrary." 114. It is underscored that in the light of the meaning of the term as explained above, there is no question of the present case being considered for prima facie tax avoidance in view of the Revenue not having established its claim despite multiple merit hearings having been held before various Benches of the Authority for Advance Rulings and over 3,700 pages of factual documents having been filed by the applicants. 115. The learned senior advocate argues that in fact, in the present case, there is no avoidance of tax by the applicants at all, prima facie or otherwise. There is a conceptual difference between "series of preordained transactions" which is created for tax avoidance purposes, on one hand, and a transaction which evidence investment to participate in India. In order to find out whether a given transaction evidence a series of preordained transactions or investment to participate, reference can be made to para 73 of the Supreme Court judgment in the case of Vodafone International Holdings B. V. v. Union of India [2012] 341 ITR 1 (SC) wherein certain parameters have been laid down. The rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t' operator/short time investor. If one applies the look at test discussed here in above, without invoking the dissecting approach, then, in our view, extinguishment took place because of the transfer of the CGP share and not by virtue of various clauses of the SPA. In a case like the pre sent one, where the structure has existed for a considerable length of time generating taxable revenues right from 1994 and where the court is satisfied that the transaction satisfies all the parameters of 'participation in investment' then in such a case the court need not go into the questions such as de facto control vs. legal control, legal rights vs. practical rights, etc." 116. Learned senior advocate, Mr. Datar comments that as the transaction in the applicants' case satisfies all the parameters of investment to participate laid down by the Supreme Court, the transaction cannot be said to be for the purpose of tax avoidance. 117. Learned senior advocate says referring to case of Vodafone International Holdings B. V. v. Union of India [2012] 341 ITR 1 (SC) ruling that tax avoidance has to be established by the Revenue (page 36 of 341 ITR) : "68 . . . When it comes to taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch lead to McDowell's decision leave us in no doubt that the principle enunciated in the above case has not affected the freedom of the citizen to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection, within the framework of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity.' This accords with our own view of the matter . . . Though the words 'sham', and 'device' were loosely used in connection with the incorporation under the Mauritius law, we deem it fit to enter a caveat here. These words are not intended to be used as magic mantras or catch-all phrases to defeat or nullify the effect of a legal situation. As Lord Atkin pointed out in Duke of Westminster's case [1936] AC 1 (HL) ; [1935] 19 TC 490, 511) : 'I do not use the word device in any sinister sense : for it has to be recognised that the subject, whether poor and humble or wealthy and noble, has the legal right so to dispose of his capital and income as to attract upon himself the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formed for genuine investment business. It has been demonstrated beyond doubt that there is no round tripping of funds in the present case. As regards the allegation of the Revenue regarding utilization of the sale proceeds and that the same have not been retained by the applicants, once again it has been amply demonstrated that the entire sale proceeds were utilized for repayment of borrowings to the consortium of international lenders -which indeed was driven entirely by commercial/ business considerations. Accordingly, it will be appreciated that the transaction of sale of VCL shares was undertaken purely for commercial purposes inter alia to repay the loans to the third party overseas lenders. Despite more than 3,500 pages of factual documents having been filed by the applicants, no colourable device has been found and hence the consistent view of the authority granting treaty benefits should be followed. 123. It is also pointed out that the Revenue has been presenting details right from 2001 to 2007 in regard to activities of the applicants, whereas the capital gains has arisen in the financial year 2011-12 and we have to restrict ourselves to the relevant assessment year an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nunciated. Based on such judicial and Organisation for Eco nomic Co-operation and Development principles, the Revenue expressed that the terms central management control with reference to "control and management wholly" should be construed as "cerebral management and control". The Revenue also relied on several other decisions to support its case-De Beers Consolidated Mines Ltd. v. Howe (Surveyor of Taxes) [1906] AC 455 ; [1903-1911] 5 TC 198 ; Supreme Court in V. VR. N. M. Subbayya Chettiar v. CIT [1950] SCR 961, AIR 1951 SC 101 ; [1951] 19 ITR 168 (SC) ; Development Securities Plc. v. Commissioner HMRC [2019] UKUT 0169 50 (TCC) ; Laerstate BV v. HMRC [2009] UKFTT 209 (TC) the First-Tier Tribunal ; Calcutta Jute Mills v. Nicholson [1876] 1 TC 83 and The Cessna Sulphur Company v. Nicholson ; Supreme Court in Erin Estate, Galah, Ceylon v. CIT [1958] 34 ITR 1 (SC) ; the Supreme Court in CIT v. Nandlal Gandalal [1960] 40 ITR 1 (SC) ; CIT v. Chitra Palayakat Co. [1985] 156 ITR 730 (Mad) ; CIT v. Bank of China [1985] 154 ITR 617 (Cal) ; Universal Cargo Carriers Inc. v. CIT [1994] 205 ITR 215 (Cal) dated, November 20, 1990. 124.3. For the purpose of demonstrating that the applicants are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chair of the businessman or in the position of the board of directors. -That the Revenue has pointed out some instances where companies have been transferred for USD 1 within the group to allege a non-commercial scenario without having regard to the fact that the transfers are undertaken outside India between group companies for the sake of reorganisation, which is not unusual at all and that initial acquisition of special purpose vehicles from service providers who had merely formed the companies (e. g., acquisition of CCLM, CCOM and CC(M)L from Tiger nominees) -That irrelevant points have been raised only to create prejudice and have nothing to do with the applicants case and are not even pertaining to the financial year 2011-12. -That loans were obtained based on pledge of underlying VCL shares and the pledge was done in a transparent manner with the approval of the Reserve Bank of India ("RBI"). -That there are numerous Indian companies which have made investment in India through Mauritius based companies. By way of example, they have placed the details of some companies like holding, subsidiary company/JV Tata Chemicals, ONGC, NDMC etc. have been provided, where there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reframe the issues and adjudicate on them. Accordingly, we have distilled out the following issues which cover the entire gamut of controversies and require determination : Issues (1) Whether the applicants suppressed the material facts in the applications ? If so whether the applications are liable to be dismissed on the above grounds ? (2) Whether the issues and questions raised in the two applications, in substances are the same to the previous application AAR No. 982 of 2010 ? (3) Can applications be dismissed on any other ground other than section 245R(2), provisos (i) to (iii) ? (4) Whether there was a commercial arrangement between the trans acting parties implying thereby the consent of the intervenors to withdrawal application by AASL ? (5) Whether "other proceedings" mentioned in the withdrawal order dated July 1, 2011 implies proceedings other than the Authority for Advance Rulings proceedings or not ? (6) Whether the applications are barred under section 245R(2), proviso (i) ? (7) Whether the applications are barred under section 245R(2), proviso (ii) ? (8) Whether the applications are barred under section 245R(2), proviso (iii), i. e., is it a case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was any suppression on the part of the applicants or any mala fide intention on the part of the applicants to defraud Revenue and where facts are known to both the parties, the omission by one does not render it suppression. Hence, such an inadvertent omission if any, should have no impact on the maintainability of the applications and determination of the questions raised in the present applications under section 245R(4) of the Act. 132. We have deeply pondered over the arguments from both sides and taken note of past events leading to this dispute. It is an admitted fact that the applicants did not mention the details with regard to the application made by AASL as also with regard to the intervention by the applicants and subsequent "dismissal as withdrawn" of earlier application. It is so recorded in the admission order of Principal Bench dated July 20, 2015. The relevant observations in the order are incorporated hereunder : "4. Very strangely, the present two companies, i. e., Capex Com Ltd. and Capex Communication Ltd. filed applications in those proceedings for interventions. This intervention application dated May 17, 2011 was allowed by this authority on May 24, 2011. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication No. 982 of 2010. There also can be no dispute of the fact and Mr. Pardiwala very fairly admits that the facts regarding the intervention application and the orders thereon have not been stated. When a specific question was put to him as to whether it amounts to suppression of material fact so as to cause any prejudice to the Department. The learned counsel is at pains to point out that merely because the facts of intervention applications have not been stated that did not put the Revenue in any disadvantageous position and as such it could not be said that there was a prejudice caused to the Revenue. After considering the overall contentions, we feel that at this stage it will not be proper to refuse the admission" (emphasis supplied) 133. Further during the course of hearing in Application A. A. R. No. 982 of 2010 in the case of AASL, the present applicants filed application before the Authority for Advance Rulings that they are vitally concerned, interested and affected by any ruling which would be pronounced. Furthermore, its involvement is further highlighted by the several questions and voluminous information sought from the applicant by the Revenue in connection to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation and verify it. I also understand that the question on which the advance ruling is required is not pending in my case before any Income-tax Authority, the Appellate Tribunal or any court. Verified today the 17th day of May, 2011 Mauritius Sunil Kumar Dash Signature." (emphasis supplied) 136. In the above circumstances it is useful for us to refer form 34C, the application form to be filed before Authority for Advance Rulings. Notes.- "(1) . . . (8) The question(s) should be based on actual or proposed trans actions. Hypothetical questions will not be entertained. (9) The applicant must state in detail the relevant facts and also disclose the nature of his business or profession and the likely date and purpose of the proposed transaction(s). Relevant facts reflected in documents submitted along with the application must be included in the statement of facts and not merely incorporated by reference. (10) The applicant must clearly state his interpretation of law or facts in respect of the question(s) on which the advance ruling has been sought." 137. The Act provides necessary form 34C to be filed before the Authority for seeking ruling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought on record, the applications may be rejected at the initial stage itself. The facts thus are distinguishable from the case cited in the context. 140. The courts cannot enter the mind of applicant but have to discern the intention from the facts and circumstances of the case. Looking into all the facts and circumstances of the case, we are of the view that in the instant case there is non-disclosure of material facts and the applications are thus not maintainable. 140. Issue-(2) Whether the issues and questions raised in the two applications, in substance are the same to the previous application AAR No. 982 of 2010 ? 141. We have perused the questions raised in Application No. 982 of 2010 and in the present applications and from a comparison of the two sets of questions, one can infer that the essence of the transaction is purchase by one and sale of shares by the other. The issue for determination by the authority is relating to said transaction and taxability thereof in the hands of the sellers that is Capex Com Limited and Capex Communications Limited and the obligation in a fiduciary capacity to deduct tax by the purchaser, that is, AASL. The issue is the allowability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information by May 13, 2011. Copies of the above letters and notice are enclosed as annexure 1, 2 and 3. 2. That the applicant has been given to understand that in the course of hearing before the hon'ble authority on April 5, 2011, the hon'ble authority have allowed the Income-tax authorities to collect the requisite information by invoking the provisions of section 133(6) of the Act. 3. That the aforementioned application seeks a ruling on the principle issue as to whether the sale of shares of VCL by the applicant herein and CCOM to AASL or sale of CCLM shares by CC(M)L to AASL would result in income chargeable to tax under the provisions of the Act so as to invoke the provisions of section 195(1) of the Act. 4. That the applicant is thus vitally concerned, interested and affected by any ruling which would be pronounced. Its involvement is further highlighted by the several questions and voluminous information sought from the applicant as noted and will be submitted by May 18, 2011. A copy of the applicant's letter dated May 2, 2011 is enclosed as annexure 4. 5. That in these circumstances it would be in compliance with the principles of natural justice, equi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 (AAR) ; [2011] 16 taxmann.com 344 (AAR -New Delhi) it is held that pendency of question in payee's hands debars payer's application. 149. Nuclear Power Corporation of India Ltd, a PSU, entered into an offshore services contract with a Russian company for setting up a power plant. The applicant claimed that the income arising to the Russian company from offshore supply of equipment was not chargeable to tax in India and that it was not liable to deduct/bear tax deducted at source thereon under section 195. However, as in the assessment of the Russian company, the Assessing Officer had already taken the view that the income from offshore supply was chargeable to tax under section 44BBB and the issue was pending before the Authority for Advance Rulings the question arose whether the application was maintainable in view of clause (1) of the proviso to section 245R(2) which provides that an application is not maintainable if the question raised in it "is already pending before any Income-tax Authority or Appellate Tribunal, or any court". The applicant claimed that the pendency in the case of the recipient did not affect the maintainability in the context of the payer's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45R(2) 154. The senior advocate for the applicant contended that the authority can reject the application only for non-compliance of section 245R(2)(i) to (iii). But on no other grounds the application can be rejected. 155. The learned counsel for the Department contended that the authority has the power to reject the application as it deems fit and proper for any genuine reasons for i. e., compliance with procedure etc. Learned counsel for the Department relies upon the following ruling : In the ruling of Microsoft Operations P. Ltd., In re [2009] 310 ITR 408 (AAR) in AAR No. 781 of 2008 dated February 27, 2009-(page 417 of 310 ITR) : "12.2 Thus the eligibility criteria for being an applicant and the scope and parameters of an advance ruling are set out in the definition clause. Unless the advance ruling sought conforms to the said provisions in the definition clause, the authority cannot proceed to consider the application. Then comes sub-section (2) of section 245R. That provision is couched in a permissive language - 'may allow or reject'. The language clearly admits of an element of discretion to this statutory body while passing an order under section 245R(2). G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tall further proceedings, it may then be a fit case to reject the application at the stage of consideration under section 245R(2). Another instance that can be visualized is in a case where the applicant raises frivolous or hypothetical legal issues without factual foundation. 12.3 It is apt to quote the following passage from Craies on Statute Law (7th Edn.) at page 284 : "Statutes passed for the purpose of enabling something to be done are usually expressed in permissive language, that is to say, it is enacted that 'it shall be lawful' etc. or that "such-and-such a thing" may be done. Prima facie, these words import a discretion, and they must be construed as discretionary unless there be anything in the subject-matter to which they are applied, or in any other part of the statute, to show that they are meant to be imperative." 156. On a careful reading of the above, it is clear that the authority has every power to reject the application inter alia on genuine and reasonable grounds. We have held in earlier paras that the applicants have suppressed material facts in the applications and that present applications deal with same matter as was in 982 of 2010 and also th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of withdrawal by the plaintiff, as held in the following cases : -Smt. Gowramma v. Nanjappa AIR 2002 Karn 76. -Ramakrishnan v. Thanka [2000] 2 KLJ 818 (Ker). 161. The Revenue has relied upon the Supreme Court of India Rules, Notification GSR 367(E) and GSR 368(E), dated May 27, 2014 of the Supreme Court of India wherein it has specifically been mentioned that the term "respondent" includes "intervenors" and by virtue of the same, the Revenue emphasized that there is no doubt that the intervenors enjoyed the same status as that of the applicants. "Supreme Court of India Notification G.S.R 367(E), dated New Delhi, the 27th May, 2014 "1. (1) These rules may be cited as the Supreme Court Rules, 2013 2.(1) In these rules, unless the context otherwise requires,- (o) 'respondent' includes intervenors." 162. The applicants are thus bound by the dismissal order. The reliance by applicant on the decisions in Smt. Gowramma v. Nanjappa, AIR 2002 Karn 76 and Ramakrishnan v. Thanka [2000] 2 KLJ 818 (Ker) holding that the defendant can file a fresh suit in case of withdrawal by plaintiff, has been effectively displaced by the Revenue's reliance on Supreme Court of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order as we have just passed. We cannot pass such an order in an intervention application. The only purpose of granting an intervention application is to entitle the intervener to address arguments in support of one or the other side. Having heard the arguments, we have decided in the assessee's favour. The intervenors may take advantage of that order." 165. The hon'ble apex court could not have granted the request of the intervener in that case as complete facts of the case of the intervener were not before it as the intervenors were not before the lower fact finding authorities and in the absence thereof it would have been travesty of justice to allow the same benefit to the intervener as was granted to the applicant . 166. Opposed to this, the present applicants entered the proceedings with a plea that they were vitally concerned, interested and affected in the principal issue on which ruling was being sought for by AASL. They further participated in all the hearings having taken place under section 245R and the withdrawal proceedings, as evident from the proceedings sheet and also from the withdrawal order, wherein it has been recorded that the intervenors have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant has also relied on strongly on the decision of the hon'ble Supreme Court in the case Saraswati Industrial Syndicate Ltd. v. CIT [1999] 237 ITR 1 (SC) ; [1999] 103 Taxman 395 (SC) in which case according to the applicants, it was held that intervention was only for the purpose of addressing arguments. It has also relied upon four decisions of the Special Bench to take support on the issue. 171. The learned special counsel for the Revenue relied upon the dictionary meaning for the words other, same etc. "Oxford English Reference Dictionary the word 'other' -not the same as one or some already mentioned or implied ; separate in identity or distinct in kind ; Black's Law Dictionary of Seventh Edition -Other -Different or distinct from that already mentioned ; additional, or further. Following an enumeration of particular classes 'other' must be read as 'other such like' and includes only others of like kind and character. The Law Lexicon of British India -the word other means -Different from that which has been specified, not the same, different 'other' always implies something additional ; Oxford English Reference Dictionary the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents of the Revenue that "other proceedings" would not mean proceedings before the Authority for Advance Rulings in respect of the same transaction. The word "other proceedings" mentioned in the earlier order means different or distinct or not similar proceedings which clearly shows that not similar or same proceedings before the Authority for Advance Rulings but different proceedings or before the other parties, i. e., Income-tax authorities, etc. Hence, arguments of the learned counsel for the applicant that as per the order dated July 1, 2011 the present applicants' rights are safeguarded by the previous order, is not an acceptable one. The applicant's rights are safeguarded only to put forward their right before other authorities which means not before the Authority for Advance Rulings on the same ground but before other authorities, i. e., Income-tax authorities, i. e., Assessing Officer, Commissioner (Appeals), Income-tax Appellate Tribunal etc. 178. Hence, the present applications filed by CCOM and CCLM are barred and these applications are not maintainable before this authority. Issue-(6) Whether the applications are barred under clause (i) of proviso to section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority for Advance Rulings relate to capital gains arising from transfer of shares in a Indian company and under section 48 of the Income-tax Act determination of capital gains depends upon ascertaining the full value of consideration in respect of capital asset that was transferred. It was stated that the consideration received was not according to the fair market value on the date of transaction but was based on price that was determined four years earlier through a put option. Under section 50D of the Act unless the fair market value is ascertained the capital gain cannot be determined. Thus the applicant falls under proviso (ii) to section 245R(2) and is liable to be rejected. 184. Vide letter dated July 3, 2015, the applicant had argued that non-taxability of capital gain on account of failure of computation provision does not arise in the facts of the case and that the issue before the Authority for Advance Rulings is non-chargeability of capital gains in India due to IndoMauritius tax treaty and that the hon'ble Authority on various occasions admitted the question of chargeability of tax on gains arising out of sale of shares, for example in the case of E-Trade Mauri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... influence by parent company in affairs of subsidiary and abdication of responsibility by subsidiary company in favour of parent. But for prima facie tax avoidance what is to be ascertained is whether there is a scheme which is apparent from the documents on hand or ascertainable from the chain of events. Prima facie means what appears as true even though it may be proved false later. 187. We are in agreement with the Revenue that in the instant case certain events inter alia do serve as pointer towards prima facie tax avoidance. These are : -Investment for acquisition of VCL shares not made by applicants but funds were routed through them and on top of that they bound them selves in restrictive covenants of loan agreements ; -Further loans were raised by pledging these shares for the benefit of Capex group ; -When shares were sold, consideration immediately moved out from accounts of applicants to lenders on the directions of executives of Capex group ; -Shares were bought, pledged, sold by Capex group and the entities merely lent their name to seek treaty benefits ; -The shares in MCL/VCL have been acquired by CCLM by voluntary liquidation of CTIL. The sole purpose, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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