TMI Blog2019 (10) TMI 1449X X X X Extracts X X X X X X X X Extracts X X X X ..... terial facts could lead to rejection of applications at the threshold. We are of the considered opinion that the above facts are very much relevant and necessary and the material facts to the present applications which were not disclosed by the applicants. The argument of learned senior advocate that it is an inadvertent error and does not cause any prejudice to the Revenue is not acceptable. The applicants were party to the transaction, pleaded earnestly to be included as intervenors in earlier proceedings, were vitally concerned with questions raised by AASL, participated in earlier proceedings, filed documents called for by the Revenue, collaborated, discussed, deliberated with Vortex group on sharing the tax deducted at source amount and very conveniently omitted these facts in form 34C. They falsely mentioned in verification segment that all relevant, correct and complete facts were stated to the best of their belief. This is not credible more so when the applicants are part of big business group of India and enjoy the services of best legal and financial brains. It is not relevant whether the Revenue is affected or not, what is pertinent is conduct of applicants. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier 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 that no liberty was granted to the present applicant to file fresh application on the same subject matter. Drawing support from the above decision in Microsoft Operations P. Ltd., In re [ 2009 (2) TMI 23 - AUTHORITY FOR ADVANCE RULINGS] we are of the considered view that applications are not maintainable on all the three counts. Whether there was a commercial arrangement between the transacting parties implying thereby the consent of the intervenors to withdrawal application by AASL ? - We are convinced that there was a commercial arrangement between the transacting parties vide agreement dated July 1, 2011 after giving effect to which, the withdrawal could be made possible. We are therefore, of the opinion that after entering into, executing and obtaining additional consideration on account of tax payable and consequently withdrawal of the Authority for Advance Rulings application, the applicants cannot now disregard the entire set of facts to take the plea that it was unilateral act of Vortex Group to withdra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case. Whether the applications are barred under clause (ii) of proviso to section 245R(2) ? - Authority for Advance Rulings in its admission order, dated July 20, 2015 had mentioned that the determination of fair market value was also a scheme to avoid payment of tax could be examined at the time of final hearing, it is seen that neither the Department nor the applicant presented any fresh arguments despite opportunities provided in the hearings under clause (ii) of the proviso to section 245R(2). In view thereof, it is presumed that the contention is not pertinent and is set to rest and is not discussed further. Even otherwise, prima facie it looks that the share sale transaction is between two independent entities and at mutually agreed price and thus the capital gain is clearly ascertainable. Hence, we are of the view that there is no bar under clause (ii) of the proviso to section 245R(2). Prima facie tax avoidance - Whether the applications are barred under clause (iii) to proviso to section 245R(2) ? - We are not in agreement with the plea of the applicant that for considering the issue of prima facie tax avoidance or exemption under treaty, we have to l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... man), Kishore Kumar Vyawahare Member Revenue And Inder Kumar Member Law For the Applicants : Arvind Datar, Senior Advocate, Sanjay Sanghvi, Advocate and Pranav Sayta and Nimesh Vora, Chartered Accountants For the Department : Girish Dave, Special Counsel, Ms. Kavita Pandey and Dr. Prabhakant, Commissioners of Income-tax, and Pankaj Jindal, Additional Commissioner of Income-tax RULING 1. Capex Com Ltd., (CCOM) and Capex Communications Ltd., (CCLM) filed applications before the Authority for Advance Rulings on September 13, 2012. The Capex Com Ltd.,(CCOM) Mauritius is a company incorporated in Mauritius on March 9, 2001 and Capex Communications Ltd., (CCLM) Mauritius is a company incorporated in Mauritius on October 13, 2005. Both companies have their registered offices at Capex House, Frere Felix de Valois Street, Port Louis, 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 shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er on the facts and circumstances of the case, the applicant is chargeable to tax in India on the capital gains arising from transfer of shares in Vortex Capex Ltd. (VCL), and the Revenue authorities should refund to CCOM the tax deducted at source by Aura Atlantic Sec. Ltd. from payment of the sale price made to the applicant ? (ii) Whether on the facts and circumstances of the case, the applicant could be subjected to tax under the provisions of section 115JB of the Act ? Case A. A. R. No. 1374 of 2012 (CCLM) (i) Whether on the facts and circumstances of the case, the applicant is chargeable to tax in India on the capital gains arising from transfer of shares in Vortex Capex Limited (VCL), and the Revenue authorities should refund to CCLM the tax deducted at source by Aura Atlantic Sec. Ltd. from payment of the sale price made to the applicant ? (ii) Whether on the facts and circumstances 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om a short-term facility (repaid within one month) from American Express Bank (now Standard Chartered Bank, UK). The ultimate source of fund was from USD 140 million facility raised by CCOM from unrelated overseas lenders Lehman Brothers Commercial Corporation Asia Ltd. and DKR Sound Shore Oasis Holdings Fund Limited. 15. Capex Telecom Investments Limited ( CTIL ), an Indian company held 65.63 million shares (representing 15.85 per cent. stake) in VCL. CTIL had made an application to the Foreign Investment Promotion Board ( FIPB ) on July 18, 2006 for issue of shares to CCLM (due to indirect/downstream investment in VCL being in the telecom sector). CTIL received the approval on December 11, 2006 for issue of shares to CCLM. Pursuant to the said approval by Foreign Investment Promotion Board, CCLM infused USD 400.61 million in CTIL in various tranches. Majority of the funding for the investment by CCLM in CTIL was from share 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcise of put option by Capex Communications (Mauritius) Ltd ( CC(M)L ). AASL Mauritius filed an application before the Authority for Advance Rulings vide Application Number 982 dated August 23, 2010. The application was admitted vide admission order under section 245R(2) dated February 18, 2011 which reads as under : We are of the view that there is no bar on admission under section 245R(2) of the Act on the questions (i), (ii) and (iv) raised in the application on which the rulings of this Authority has been sought. This application, therefore, deserves to be heard on merits. Accordingly, we allow the application under section 245R(2) of the Act to give a ruling on the following questions : (i) Whether on the stated facts and law, the transfer of shares of Vortex Capex Limited ('VCL'), an Indian company, by Capex Com Limited ('CCOM') and Capex Commutations Limited ('CCLM'), both tax residents of Mauritius, to the applicant, is 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication is one and only to be made by the applicant for advance ruling. He further referred to rule 28 and pointed out that it was in wide terms, that it did contemplate the hearing of representations which obviously would mean a representation by one was not a party to the application. It is clear that there is nothing in the provisions of the Act or the Rules which stand in the way of this Authority hearing the intervenors in case he established that he would be affected by a ruling to be rendered by this authority. In this case, we may also notice that pursuant to the permission granted by us, the Revenue has sought information from the intervenors before us and such information as are available with them have been furnished by the intervenors. Clearly, if any explanation regarding such information furnished by the intervenors is needed, it could only be supplied by the intervenors. In that situation, the principles of natural justice make it imperative that the intervenors 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 ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the similar facts was dismissed without giving any liberty to file fresh applications on the same subject matter, these applications are only termed as second application and the applications are not maintainable according to law. On the side of the applicant it is submitted that the applications are filed by CCLM and CCOM who are different persons, the applicants are only intervenors in the earlier application A. A. R. No. 982 of 2010 and the present applications are perfectly valid and maintainable in law. The Principal Bench has admitted the present applications vide order dated July 20, 2015. The relevant observations in the order are incorporated here under : 3. It so happened that the purchaser company Aura Atlantic Sec. Ltd. (AASL for short) had earlier filed an application whether as a purchaser it was liable to make the deduction on the sale consideration to the applicant-company. This application was filed on August 24, 2010, seeking advance ruling on the question whether the transfer of shares 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 Taxat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these applications are perfectly within the framework of law and subsequent filing of the Income-tax returns would be inconsequential. 9. There, Mr. Pardiwala is undoubtedly right. It is clear from the records that these applications have been filed prior to the return. The question, however, is as to why the applicants had to wait for full one year for filing these applications when they had realized that their intervention applications had been disposed of. Thanks to the withdrawal of the main application 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 the material facts 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 245R(2), provisos (ii) and (iii) and further regarding suppression of material facts and whether these applications are barred because of the dismissal of earlier application A. A. R. No. 982 of 2010. 32. Hence, as per earlier order the issues regarding section 245R(2), provisos (ii) and (iii) are left open and whether the application is not maintainable for the reason of suppression of material facts and whether these applications are barred in view of dismissal of earlier application A. A. R. No. 982 of 2010. Both sides are permitted to argue on the factual and legal position on the above issues. Arguments of applicants 33. The learned senior advocate Mr. Arvind Datar, opened the arguments stating that this is a plain and straightforward case of tax exemption under Indo-Mauritius treaty. The applicants hold valid tax residency certificates ( TRC ) issued by the Mauritius Revenue Authority ( MRA ) and category 1 global business licence issued by the Financial Services Commission, Mauritius. They are non-residents and do not have any tax presence or permanent establishment in India. All the members of the board of directors of the applicants during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed base. 37. Based on the above, it is submitted that capital gains derived by the applicant, being a resident of Mauritius, from the sale of shares in VCL an Indian company, are liable to tax only in Mauritius 38. Learned senior advocate avers that section 119 of the Act provides that the Income-tax authorities and all other persons employed in the execution of the Act shall observe and follow the orders, instructions and directions issued by the Central Board of Direct Taxes. It is a fairly well settled proposition that a circular which is issued by the Central Board of Direct Taxes should be considered to be binding on the tax authorities. 39. Learned senior advocate concludes by saying that in view of the above applicants, being investment holding companies are entitled to the benefits of article 13(4) of the India-Mauritius tax treaty and the impugned capital gains are not chargeable to tax in India. 40. Learned senior advocate impresses that the Government of India has itself issued a press release on March 1, 2013, reiterating that Circular No. 789 continues to be in force. It further stated that a tax residency certificate produced by a resident of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this court should interdict such arrangements and, as if by waving a magic wand, bring about a situation where the incorporation becomes non est. For this they heavily rely on the judgment of the Constitution Bench of this court in McDowell and Co. Ltd. v. Commercial Tax Officer [1985] 154 ITR 148. Placing strong reliance on McDowell's case [1985] 154 ITR 148 (SC) it is argued that McDowell's case [1985] 154 ITR 148 (SC) has changed the concept of fiscal jurisprudence in this country and any tax planning which is intended to and results in avoidance of tax must be struck down by the court. Considering the seminal nature of the contention, it is necessary to consider in some detail as to why McDowell's case [1985] 154 ITR 148 (SC), what it says, and what it does not say . . . If the court finds that notwithstanding a series of legal steps taken by an assessee, the intended legal result has not been achieved, the court might be justified in overlooking the intermediate steps, but it would not be permissible for the court to treat the intervening legal steps as nonest based upon some hypothetical assessment of the 'real motive' of the assessee. In our vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 83 ITR 216 (HL) which further observed that genuine strategic tax planning has not been abandoned by any decision of the English courts till date). Applying the above tests, we are of the view that every strategic foreign direct investment coming to India, as an investment destination, should be seen in a holistic manner. While doing so, the Revenue/courts should keep in mind the following factors : the concept of participation in investment, the duration of time during which the holding structure exists ; the period of business operations in India ; the generation of taxable revenues in India ; the timing of the exit ; the continuity of business on such exit. In short, the onus will be on the Revenue to identify the scheme and its dominant purpose. The corporate business purpose of a transaction is evidence of the fact that the impugned transaction is not undertaken as a colourable or artificial device. The stronger the evidence of a device, the stronger the corporate business purpose must exist to overcome the evidence of a device . . . At the outset, we need to reiterate that in this case we are concerned with the sale of shares and not with the sale of assets, item-wise. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 44. In view of the above, it is submitted that the approach to be adopted is to look at and not look through an arrangement/transaction to determine whether or not a colourable device exists. Adopting this approach, in the present case, there is no question of a colourable device as the applicants are genuine Mauritian corporations holding valid tax residency certificates and were formed for genuine investment business. 45. It is explained that there is no round tripping of funds in the present case and that the entire sale proceeds were utilized for repayment of borrowings to the consortium of international lenders -which indeed was driven entirely by commercial/busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two applicants, namely, M/s. Capex Com Ltd. (CCOM, in short) and Capex Communications Ltd. (CCLM, in short) can be allowed admission at the threshold stage : (a) in the context of previous joinder as intervenors by their applications made on May 24, 2011 in terms of rule 5 read with rule 28 of the Authority for Advance Rulings (Procedure) Rules, 1996 (The Authority Rules, in short) in the application filed by Aura Atlantic Sec. Ltd. (In short, AASL ) being Application No. 982 of 2010 and (b) Further, for the reason that the two applicants did not disclose or rather suppressed in their respective applications the fact of joining in that application as intervenors which was a relevant and a material fact. AASL withdrew its application on July 1, 2011 in their presence. This fact is evident from the order dated July 1, 2011 of the hon'ble authority dismissing the application of AASL as withdrawn. 49. The Revenue pleaded for ouster of the two applicants in the present applications at the threshold itself, for the reason that they had already been considered and participated as Co-applicants in Application No. 982 of 2010, by virtue of the admission of their inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich such a third party is allowed to become a party to the litigation 3.Int'l law. One nation's interference by force, or threat of force, in another nation's internal affairs or in questions arising between other nations-intervene vb. 51. The Revenue thus emphasized that by sheer legal meaning of the term intervenors, the present applicants have entered into the proceedings in 982 of 2010 voluntarily and thus they cannot now turn back to say that they did not participate in the proceedings in so far as the applicability of withdrawal order is concerned. 52. The Revenue then 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 (pages 4-5 Revenue PB volume 3) 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 New Delhi, the 27th May, 2014 G. S. R 367(E) 1. (1) These rules may be cited as the Supreme Court Rules, 2013. 2.(1) In thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on account of tax to be kept in the escrow account. The dispute was resolved only after the buyer agreed to pay additional USD 400 million as a consideration for transfer of shares held by Mauritius based companies of the Capex Group. 56. This additional payment was 50 per cent. of the tax payable, as computed by both the groups. Only after such enhanced consideration payment, the Capex Group came in agreement with Vortex for withdrawal of the earlier application vide number 982 of 2010. 57. Thus, the withdrawal could be made possible only after both the parties entered into a commercial arrangement for this purpose. 58. It is added that one cannot now disregard the entire set of facts and withdrawal of Authority for Advance Rulings application as part of commercial arrangement. 59. The Revenue thereafter, mentions that these authority rules are unique and exceptional in the sense that in no other Chapter of the entire Income-tax Act, 1961, such provisions exist and that an analogy of these provisions can be found in rule 8A, rule 10(2) and rule 1 of Order 1 of the Civil Procedure Code of 1908 ( the CPC , in short). It is averred that even the withdrawal of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation filed was dismissed as withdrawn and the said order of withdrawal shall have an equal effect on the petitions of the intervenors. 62. It is harped that this position would be clear from the provisions of rule 28 of the Authority for Advance Rulings (Procedure) Rules, 1996, which reads as under : 28. Procedure in case of other application.-The provisions contained in these rules for the hearing and disposal of application under section 245Q(1) shall apply, mutatis mutandis, to the hearing and disposal of all other applications, petitions and representations before the authority. 63. It is delineated that joining of the two present applicants in Application No. 982 of 2010 filed by AASL requires to be read, appreciated and interpreted keeping in view the relevant provisions contained in Order 1, rule 1, rule 8A, rule 10(2), and Order XXXIII, rule 1, rule 3 and rule 5 of the Civil Procedure Code, 1908 (CPC, in short). As regards the joinder of parties and withdrawal thereof in terms of rules 3 and 5 of Order XXIII of Civil Procedure Code case law interpreting analogous provisions of Civil Procedure Code were relied upon and referred to, in the order to canvass t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laintiff or defendant, be struck out, and that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the suit, be added. Order 23, rule 3 -Where the Court is satisfied- (a) That a suit must fail by reason of some formal defect, or (b) That there are sufficient grounds for allowing the plaintiff to institute a fresh suit for the subject-matter of a suit or other part of a claim, it may, on such terms as it thinks fit, grant the plaintiff permission to withdraw from such suit or part of the claim with liberty to institute a fresh suit in respect of the subject-matter of such suit or such part of the claim. Order 23, rule 5 -Nothing in this rule shall be deemed to authorise the Court to permit one of several plaintiffs to abandon a suit or part of a claim under sub-rule (1), or to withdraw, under sub-rule (3), any suit or part of a claim, without the consent of the other plaintiffs. 65. It is asserted by the Revenue that in view of the above, the two applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the hon'ble Authority. The question pertaining to the transaction under consideration, involving the issue of taxability of capital gains on the sale of shares of Vortex Capex Ltd., (in short, 'VCL') which was deliberated, argued and canvassed by Aura Atlantic Sec. Ltd., the present two applicants and the Revenue before the hon'ble Authority in Application No. 982 of 2010 filed by AASL and subsequently 'dismissed as withdrawn' by the hon'ble Authority debars the two applicants from raising identical question on the same transaction for the same issue. 68. Mr. Dave, learned special counsel also urged that the hon'ble Authority has no power to allow withdrawal beyond a period of 30 days from the date of the application and in the absence of any provisions that deal with such withdrawal, the provisions of Code of Civil Procedure, 1908 ( CPC ) are applicable and the withdrawal order dated July 1, 2011 having been passed by the hon'ble Authority in the case of AASL after admission of Application No. 982 of 2010, it was a ruling under section 245R(4) of the Act and is binding upon AASL by virtue of the provisions of section 245S(1)(b) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd was placed upon Microsoft Operations P. Ltd., In re [2009] 310 ITR 408 (AAR) ; 178 Taxman 328 and Ghanshyam Das Rungta, In re (A. A. R. No. 1730 of 2015) and also paragraphs 22 to 24 and 34 of the ruling in the case of DIT (International Taxation) v AAR [2013] 352 ITR 185 (AP) ; [2013] 34 taxmann.com 6 (AP). 71. Then, Ms. Kavita Pandey, the Commissioner of Income-tax took over the reins for the Revenue and at the outset expressed that it has no dispute with the application of tax residency certificate and application of Circular No. 789 issued by the Central Board of Direct Taxes under normal circumstances. However in the instant cases the applications have been admitted by their Authority, leaving the question of tax avoidance in terms of clause (iii) of the proviso to section 245R(2) open for being decided at the time of hearing of the issue on the merits of the case. 72. Then in a very elaborate and exhaustive exposition, Ms. Kavita Pandey, the Commissioner of Income-tax took us through the facts of the case right from incorporation of applicant companies, their acquisition and transfer of shares through maze of transactions, raising of loans, meetings of boards, di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M)L show that no activity has been carried out in these companies since the inception. 11. All the benefits on account of the loan facility and also on account of sale of VCL shares have immediately gone for the repayment of loan taken for the benefit of Capex group companies. Sale proceeds have not been retained by the applicants. 12. The Mauritian entities had no involvement, informed of the decisions already taken, acquiesced or ratified the decisions already taken by Capex group in India or the executives of the Capex group. 13. The scheme and dominant purpose of the assessee is tax avoidance and this scheme is supported by frequent changes in holding structure and layering of beneficial ownership through maze of companies in Mauritius, Cayman Island, BVI and India. 14. There are several defects in the minutes books and they cannot be relied upon. 74. It is stated that even the hon'ble Supreme Court in the Vodafone case envisaged the possibility of a situation of genuine tax avoidance and gave a rider to its general conclusion, at page 55 of the judgment (page 42 of 341 ITR) : The question is what is the nature of the 'control' that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stance test No specific business, No business income, No independent functions. There is no commercial/business substance in the assessee-company with no income generating activity, no infrastructure. As per financials of both the companies, they have no significant assets no income has been offered to tax during the entire period of holding. Income earned upon the transfer of shares has gone immediately to CC(M)L for repayment of loan taken for Group benefit. Shareholding in VCL not used for the purpose of own business No significant employees Look at Structures created to defeat the purpose of law. Substantial fund already used as income principle by Capex Group companies (USD 2.2 Bn. as dividend income by goes to CGL Cayman) by design of structure out of loan taken on the pledge of impugned shares and subsequently loan returned out of the sale consideration of impugned transactions. USD 532 Mn. goes as income to CIHL (in the form of sale consideration) out of the loan taken on the pledge of impugned shares and subsequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When and how the timing of exit of the entity under examination has been decided. The timing of exit decided in India and not by the applicants. Continuity of business on exit Whether the entity under examination has continued its business after the exit. Since the Capex Group has completely exited VCL after the impugned transfer and subsequent trigger of call option, transfer of balance of 10.97 per cent. shares made by Indian company, this test does not apply Scheme and dominant purpose test The rationale of the transaction entered into involving the entity under examination. The scheme and dominant purpose of the assessee is tax avoidance by claiming benefit of Mauritius DTAA this scheme is supported by frequent changes in holding structure and layering of beneficial ownership through maze of companies in Mauritius, Cayman Island, BVI and India. Colourable or artificial device test Whether entity under examination is just a colourable device. Based on all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agination on the part of the applicants and this cannot be treated as concealment that has a bearing on the present applications. 81. Without prejudice, it is submitted that the omission is not of a fact which is relevant to decide the question under consideration and hence, ought to be treated merely as an objection and therefore should be condoned. Supreme Court rulings have also held that the suppressed fact must be a material one, i. e., had it not been suppressed it would have had an effect on the merits of the case-S. J. S. Business Enterprises P. Ltd. v. State of Bihar [2004] 121 Comp Cas 99 (SC) ; [2004] 7 SCC 166, Arunima Baruah v. Union of India [2007] 6 SCC 120. 82. The learned senior advocate has pointed out that since the applicants in the present case were only intervenors in A. A. R. 982 of 2010, the non-disclosure of being intervenors in the earlier application would not amount to suppression of a material fact for the present application (more so in view of the fact that there was no advance ruling pronounced in AASL's case, there was nothing to hide at all). 83. It is reasoned that in any case, non-disclosure of information which is not required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; [2007] 159 Taxman 213 (AAR), the Authority for Advance Rulings has itself held that the provisions of the Civil Procedure Code do not apply to Authority for Advance Rulings proceedings. The relevant extract is reproduced below (page 340 of 289 ITR) : In fact, what the applicant is seeking is to have additional evidence admitted and the ruling reviewed on the strength of such additional material. The power to grant such reliefs is analogous to the power of the appellate court under order 41 of rule 27 of the Code of Civil Procedure. Obviously, the authority does not have power either to admit additional material or to review the ruling on the basis of such additional material. 88. It is submitted that the order dated July 1, 2011 is an order passed rejecting AASL's Authority for Advance Rulings application and it is not an advance ruling pronounced under section 245R(4) of the Act as evident from the following : -The definition of the term ' advance ruling as provided in section 245N(a) of the Act which (in so far as relevant) means a determination by the Authority for Advance Rulings in relation to a transaction . -Section 245R(4) speaks of an ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AASL's application (AAR No. 982 of 2010). 92. It is further, submitted that there is no form or fee prescribed by law for filing of a miscellaneous application before the hon'ble Authority. The applicants had paid the said fees and provided the declaration due to absence of any guidance available in this regard. This was out of abundant caution and cannot change the status of an intervener to a co-applicant. It is submitted that the Authority for Advance Rulings (Procedure) Rules are procedural rules and do not alter the status of parties before the hon'ble Authority. 93. It is argued that the applicants had filed the application dated May 17, 2011 with the hon'ble Authority to be an intervener to AASL's application (AAR No. 982 of 2010) as the applicants wanted to protect its interest in view of the numerous details that had been sought by the Revenue from CCOM, CCLM and CC(M)L. A plain reading of the provisions of section 245Q(1) of the Act suggests that there has to be a question stated in the application on which the advance ruling is sought. The intervention application was not filed under section 245Q(1) of the Act by the applicants and it did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application. The only purpose of granting an intervention application is to entitle the intervenors 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. 96. Lastly, it is elucidated that even the hon'ble Authority, in its withdrawal order dated July 1, 2011, has itself neither considered the intervenors to be applicants. The hon'ble Authority has itself in the order treated the applicants and intervenors as being different at various instances by using the terms applicant and intervenors distinctly and naming them under separate headings on the first page of the aforesaid order. 97. It is contended that the terms intervention and impleadment have been distinguished by the High Court of Jammu and Kashmir in the judgment of Land Holders of Village Safanagri v. State of J K which states that there is a difference between the concept of impleadment and intervention. While impleadment results in addition of the applicant as a party, intervention merely allows the applicant to address the court. 98. It is outlined that, CCLM/CCO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, 2011 to the put option agreement and that the agreement ought to have been filed at the time of withdrawal, it was submitted by the authorised representative that : -the applicants decided to sell VCL shares, inter alia, to meet repayment obligations of a loan that was taken by CC(M)L. As per the amended terms of the USD 3.59 bn. facility, CC(M)L had to repay half of the loan taken by May 31, 2011 and the balance half by November 30, 2011. How ever, once the put option was triggered on the last day, i. e., March 30, 2011, half of the sale consideration was due from AASL by May 27, and the loan amount to that extent became immediately due to the lenders. The lenders gave a short extension from May 27, 2011 to June 1, 2011 (when half the loan was repaid from the proceeds received from AASL), as the Authority for Advance Rulings application of AASL was pending. -As the put option was already exercised and the consideration and loan repayment was due, the relevant parties from both sides (i. e., Vortex and Capex) entered into a deed of amendment on July 1, 2011, wherein it was recorded that both sides were of the view that the transfer of VCL shares was not chargeable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Civil Procedure Code is applicable, the fact that the hon'ble Authority for Advance Rulings granted permission to the intervenors to put forward whatever contentions they have at appropriate stage in other proceedings is similar to the permission granted by a court to institute a fresh suit under Order XXIII, R.1, sub-rule (3) of the Civil Procedure Code. Thus, the provisions of Order XXIII, R.1, sub-rule (4) which precludes a plaintiff from instituting a fresh suit shall not be applicable due to the exception provided therein. 106. Also, the previous proceeding would not operate as a bar on applicants to file fresh proceedings as the previous proceeding did not operate as res judicata. The principle of res judicata is provided under section 11 of the Civil Procedure Code. It is stated that as per a Constitution Bench of the Supreme Court in State of Tamil Nadu v. State of Kerala [2014] 12 SCC 696 the essential for the operation of res judicata is that the matter was directly and substantially in issue in the previous proceeding and a decision has been given by the court on that issue. As in AASL's case, there was no decision by the court on the issue, and hence t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding of AASL and the main purpose was to obtain details from the applicants in order to make arguments/place evidence before the Authority for Advance Rulings in AASL's case. Such proceedings under section 133(6) of the Act by itself would not make the question pending before any authority. Further, once the taxes were deducted by AASL and the Authority for Advance Rulings passed an order and permitted withdrawal of AASL's application on July 1, 2011, there cannot be any independent proceeding/question that can be said to be continuing under section 133(6) of the Act. Without prejudice, it is posited that noting of the Authority for Advance Rulings at para 10 of the admission order dated July 20, 2015, there was no mention therein of proviso (i) to section 245R(2) of the Act and in fact, raising the aforesaid new argument of question being pending at this stage would tantamount to seeking a review of the admission order. 110. In view of the above, the Revenue's fresh contention on proviso (i) cannot be entertained at the present stage. 111. On the issue of bar under proviso (ii) to section 245R(2), the applicant contends that while paragraph 10 of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternational Holdings B. V. v. Union of India [2012] 341 ITR 1 (SC) wherein certain parameters have been laid down. The relevant extract is as under (page 41 of 341 ITR) : At the outset, we need to reiterate that in this case we are concerned with the sale of shares and not with the sale of assets, itemwise. 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 tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 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 impugned transaction is a sham or tax avoidant. 118. Reliance is also placed on the following observations of the decision of the Supreme Court in Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 (SC) on tax avoidance (page 758 of 263 ITR) : We may in this connection usefully refer to the judgment of the Madras High Court in M. V. Valliappan v. ITO [1988] 170 ITR 238 (Mad), which has rightly concluded that the decision in McDowell [1985] 154 ITR 148 (SC) cannot be read as laying down that every attempt at tax planning is illegitimate and must be ignore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 least amount of tax. The only function of a court of law is to determine the legal result of his dispositions so far as they affect tax.'. . . 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. In the result, we are of the view that Delhi High Court erred on all counts in quashing the impugned circular. The judgment under appeal is set aside and it is held and declared that Circular No. 789 dated April 13, 2000 (see [2000] 243 ITR (St.) 57 ), is valid and efficacious. 119. It is vociferously articulated that in the present cases, the Revenue has merely stated that there is a scheme for avoidance of tax and has made other baseless allegations. This is not established with reference to any specific factual argument/document. This burden has not been discharged by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 and not do cherry picking to somehow build a case of tax avoidance. On merits 124. Though voluminous submissions were made and extensive arguments were presented during the course of hearings the gist of arguments of both sides are delineated below : Revenue 124.1. The Revenue made very detailed submissions on control management to contend that the control and management of affairs of the applicants vests wholly in India and thus the applicants are also resident under section 6(3) of the Income-tax Act. Thus, this is a case of dual residence and applying the tie breaker rule, i. e., the effective control and management lies in India, the capital gains arises in India and is taxable in India and no treaty benefits are admissible. The Revenue has attempted to argue that that the entire process, starting from the acquisition of shares is VCL to the transfer to Vortex Group is a unified exercise controlled and managed centrally in India by the Capex Group to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 being centrally controlled and managed in India, the Revenue, before this authority submitted their analysis of the entire process, starting from the acquisition of shares is VCL or its process or companies to the transfer of impugned shares to Vortex Group. Applicants 125. Main points of applicants can be summarized as under : -that the allegations raised by the Revenue in relation to the control and management of the applicants based on the board minutes relate to years prior to the year under consideration, mainly the financial year 2007-08 and earlier, which are irrelevant for the purpose of determining the question before the authority. The applicants fail to understand how these can have any bearing in regard to the determination of the taxability of the capital gains in the present case. -that the control and management of the applicants was and has always been situated in Mauritius since incorporation, it is pertinent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 are instances of holding, subsidiary or JV relationship and investments in international ventures including Mauritius. -That applicants hold valid tax residency certificates ( TRC ) issued by the Mauritius Revenue Authority ( MRA ) and Category 1 Global Business Licence issued by the Financial Services Commission, Mauritius. All the members of the board of directors of the applicant during the financial year ( FY ) 2011-12 were Mauritius tax residents or other non-residents of India except a few. The applicant is 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 applicant including those relating to the present trans action, have been taken by the board of directors through board meetings convened, chaired and conducted in Mauritius. The board of the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity 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 of prima facie tax avoidance ? Issue-(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 ? 129. The Revenue during the course of their arguments submitted that the applicants suppressed the fact regarding their intervention in the proceedings before the authority in Application No. AAR 982 of 2010 filed by AASL. On the side of the Department the learned special counsel Mr. Girish Dave contended that the present applicants CCLM and CCOM are intervenors in the A. A. R. No. 982 of 2010 and the intervenors' applications are allowed and they are permitted to argue their case before the authority and finally on July 1, 2011, there was an agreement between the applicants, i. e., CCLM, CCOM and AASL and others after that earlier application was withdrawn by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 5. These intervention applications were not opposed by the Revenue. The tenor of the intervention application suggests that 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 ARR/982/2010 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 26, 2012 and came out with the present applications. It is also an admitted fact that they filed their Income-tax returns on September 29, 2012. Now, the matters have come for admission before us. This admission was vociferously opposed by the Revenue on the ground that in fact this is nothing but a repetition of the ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase 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 the case. Following is the text of miscellaneous applications filed by the present applicants : The Secretary, The Authority for Advance Rulings, New Delhi. Dear Sir/Madam, Re : Capex Com Ltd. Miscellaneous application in connection with Application No. 982 of 2010 filed with the Authority of Advance Ruling ('AAR') We enclose herewith six copies of the miscellaneous application in connection with Application No. 982 of 2010 filled with Authority for Advance Rulings by Aura Atlantic Sec Ltd. We have further enclosed here with a demand draft of ₹ 2,500 favouring 'Authority for Advance Rulings', payable at New Delhi. We understand that the hearing has been scheduled in respect of the above Application No. 982 of 2010 on May 24, 2011. We request you to kindly take the captioned ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 as per section 245Q(1). As per the above form necessary relevant facts must be stated. But in the application filed by them facts regarding intervening filed on May 24, 2011 in A. A. R. No. 982 of 2010 and the applicants admitted as intervenors in A. A. R. No. 982 of 2010, regarding the dismissal of A. A. R. No. 982 of 2010 on July 1, 2011 were not stated in the applications. 138. There was substantial delay in filing the present applications before the Authority for Advance Rulings since the dismissal of AASL application and it seems that the applicants had an apprehension that stating the material facts could lead to rejection of applications at the threshold. 139. We are of the considered opinion that the above facts are very much releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 exemption on capital gains with regard to Double Taxation Avoidance Agreement between India and Mauritius. Thus there is no doubt that the questions raised in the two sets of applications are same. It could be seen that both in the case of AASL where CCLM and CCOM were intervenors and the present applications, the relevant facts are the transfer of impugned shares which are owned by companies incorporated in Mauritius. Thus, it cannot be said that the impugned transaction in the two cases are different. Further the legal reliance on Circular No. 789 and the decision in the case of Azadi Bachao in both set of applications again corroborate that the provision of law as claimed by the applicants governing the impugned transaction is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, equity, fair play and due process that the applicant is heard before the ruling is pronounced. It is respectfully prayed that in the light of the above, that the applicant may be permitted to be present at the hearing of the afore mentioned application and to make its submissions on the issues on which the ruling is sought. 144. The present applicants had contended that in the previous application the applicants are vitally concerned and interested or affected by any ruling which would be pronounced in AAR 982 of 2010. Further they contended that the principal issue in the earlier application is whether the income received by way of sale of VCL shares by CCOM and CCLM to AASL is chargeable to tax under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 obligation to deduct tax under section 195. On these facts, it was held that advance ruling is a determination in relation to a transaction . A transaction always involves the payer and payee. It is not possible to separate an applicant from a transaction while he is seeking a Ruling, since the Ruling relates to a transaction undertaken by him or to be undertaken by him. A ruling also cannot be divorced from a transaction. The question posed before the Income-tax authorities in the case of the recipient and before the Authority for Advance Rulings in the case of the payer is the same, namely, whether the income is assessable to tax. Consequently, the bar in section 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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). Going by the clear language, discretion is implicit in the provision. The first proviso however, qualifies the operation of the main provision in sub-section (2) by placing certain restrictions or limitations on the exercise of power. Each one of the clauses in the proviso operates as a legal bar to the entertainment of the application and hearing the same on the merits. The authority is precluded from 'allowing' the application if the application is hit by any of the embargoes laid down in the proviso. On the basis of the facts stated in the application and the other documents forming part of the record as well as on the basis of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscretion, 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 that no liberty was granted to the present applicant to file fresh application on the same subject matter. Drawing support from the above decision in Microsoft Operations P. Ltd., In re [2009] 310 ITR 408 (AAR) in AAR No. 781 of 2008 we are of the considered view that applications are not maintainable on all the three counts. (Paras 138, 145 and 152 above) 156. Issue -(4) Whether there was a commercial arrangement between the transacting parties implying thereby the consent of the intervenors to withdrawal application by AASL ? 157. It is a fact that there was dispute, discussions, deliberations and subsequently consensus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation 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 India Rules, Notification GSR 367(E) and GSR 368(E), dated May 27, 2014 wherein it is mentioned that respondent includes intervenors. 163. The applicants have further mainly relied upon the judgment of the hon'ble apex court in the case of Saraswati Industrial Syndicate Ltd. v. CIT [1999] 237 ITR 1 (SC) ; [1999] 103 Taxman 395 (SC) in order to contend that the only purpose of granting an intervention application is to entitle the intervener to address arguments in support of one or the other side. 164. That case pertains to the claim of a higher rate of depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 heard. Thus, the facts in the present cases are distinguishable. 167. We are convinced that there was a commercial arrangement between the transacting parties vide agreement dated July 1, 2011 after giving effect to which, the withdrawal could be made possible. We are therefore, of the opinion that after entering into, executing and obtaining additional consideration on account of tax payable and consequently withdrawal of the Authority for Advance Rulings application, the applicants cannot now disregard the entire set of facts to take the plea that it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference 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 word 'same' -not different ; unchanged (everyone was looking in the same direction ; the same car was used in another crime ; saying the same thing over and over). 172. Learned special counsel for the Department further contended that there was no liberty given to the applicant to file fresh application in same subject matter mentioned in AAR 982 of 2010 and the present applications are filed on the similar set of questions to be answered by the authority treated to be continuation of earlier applications. Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant 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 245R(2) ? 179. At the outset we may mention that the relevant para of admission order dated July 20, 2015 reads as under : In order to test the other contentions raised by the Revenue regarding the determination of fair market value is also a scheme to avoid payment of tax. It would be better to admit the matter. 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 ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh 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 Mauritius Ltd., In re [2010] 324 ITR 1 (AAR), Ardex Investments Mauritius Ltd., In re [2012] 340 ITR 272 (AAR) etc. 185. Although, the Authority for Advance Rulings in its admission order, dated July 20, 2015 had mentioned that the determination of fair market value was also a scheme to avoid payment of tax could be examined at the time of final hearing, it is seen that neither the Department nor the applicant presented any fresh arguments despite opportunities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 seems is to transfer the situs of ownership of 15.85 per cent. of MCL/VCL shares owned by Capex group, to Mauritius to avoid capital gains tax in India. 188. In view of the foregoing, we hold that the present applications are barred under clause (iii) of the proviso to section 245R(2). 189. We have held earlier that the applications are not maintainable and are liable to be dismissed and that the applicants can pursue the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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