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TMI Blog2021 (10) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... DTAA". 2. "Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in directing the Assessing Officer to follow the decision of Hon'ble ITAT on Interest income from foreign currency loan and Securities, ignoring the fact that, in India, the assessee is involved in only FII activity and no banking license has been granted by the RBI to the assessee for banking activities in India thus, assessee is not involved in any bona fide banking activities which is one of the prerequisite to claim exemption under Article 11(3)(c) of India-Mauritius DTAA" 3. "Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in directing the Assessing Officer to follow the decision of Hon'ble ITAT on Interest income from foreign currency loan and Securities, ignoring the fact that, the assessee has not furnished any document demonstrating immediate source of funds and also the immediate application of the income to demonstrate that the interest income is beneficially owned by it and it is not a conduit company for the benefit of third person, which is one of the prerequisite to claim exemption under Article 11(3)(c) of India-Mauri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ievance raised in this appeal, we find this issue is also covered in favour of the assessee by orders of the coordinate benches in assessee's own case. The lead order in this case is the order dated 16th December 2016 for the assessment year 2011- 12. In this order, the coordinate bench upheld the treaty protection under article 11(3) of the India Mauritius Double Taxation Avoidance Agreement in principle but referred the matter to the file of the Assessing Officer for the limited examination of the question as to whether the assessee satisfied "beneficial ownership" requirement. The matter, however, did not end at that. This order was subsequently recalled for the limited purposes of deciding the "beneficial ownership" aspect on the merits. In the order dated 2nd July 2018, the coordinate bench decided this aspect also in favour of the assessee and observed as follows: 3. The appellant before us is a limited liability company which is incorporated, registered and tax resident of Mauritius. During the previous year relevant to the assessment year under consideration, assessee had, inter-alia, earned interest income of Rs. 94,57,45,856/- from investments in debt securities made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stand that the order passed by the Tribunal dated 16.12.2016 (supra) was recalled u/s 254(2) of the Act vide order dated 10.01.2018 (supra) only to the extent of the issue of 'beneficial ownership'. 4. In this background, we have heard both the parties on the issue of 'beneficial ownership' under Article 11(3)(c) of the India-Mauritius Tax Treaty qua the interest income of Rs. 94,57,45,856/- earned by the assessee. On this aspect, we find that the DRP required the assessee to explain as to how it fulfils one of the requirements of Article 11(3)(c) of the IndiaMauritius Tax Treaty which prescribes that such interest must be 'beneficially owned' by the assessee. As per the DRP, the aforesaid was one of the pre-requisites before Article 11(3)(c) of the India-Mauritius Tax Treaty could be applied to say that the interest income in question was not taxable in India. The DRP has reproduced the submissions put forth by the assessee wherein assessee asserted that the interest income of Rs. 94,57,45,856/-earned from investment in debt securities was beneficially owned by it. Assessee specifically drew attention of the DRP to CBDT Circular no. 789 dated 13.04.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by Hyundai Motor India Ltd. to the assessee was disallowed u/s 40(a)(i) of the Act on the ground that the payer therein, i.e. Hyundai Motor India Ltd. had not deducted the requisite tax at source. The Tribunal in the aforesaid decision, inter-alia, examined the provisions of Article 11 of the India-Mauritius Tax Treaty and concluded that the assessee was indeed the 'beneficial owner' of such interest income. The relevant extract of the decision referred to reads as under :- "The doubts expressed by the DRP with regard to beneficial owner of the interest income are devoid of any legally sustainable basis. No case has been made out by the revenue for the beneficial owner of the interest income being entities other than Mauritian entities in question. In terms of article 11(3), interest arising in a Contracting State (i.e. India, in this case) shall be exempt from tax in that State (i.e. India) provided it is derived and beneficially owned by, inter alia, by any bank carrying on a bona fide banking business which is a resident of the other Contracting State (i.e. Mauritius). There is no dispute that Mauritian entities in question were carrying out banking business in Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 13.04.2000 (supra) of the CBDT is quite eloquent, whose relevant content reads as under :- "2. ........ It is hereby clarified that wherever a Certificate of Residence is issued by the Mauritian Authorities, such Certificate will constitute sufficient evidence for accepting the status of residence as well as beneficial ownership for applying the DTAC accordingly." [underlined for emphasis by us] Ostensibly, as per the clarification issued by the CBDT, wherever a Certificate of Residency is issued by the Mauritian authority, such Certificate will constitute sufficient evidence for accepting the status of residence as well as the beneficial ownership for applying the provisions of the India-Mauritius Tax Treaty. Thus, in our considered opinion, the aforesaid clarification by the CBDT supports the assertion of the assessee that based on the Certificate of Tax Residency issued by the Mauritian authority there is sufficient evidence to accept the position that the 'beneficial ownership' of the impugned interest income is with the assessee. 9. At this point, we may note that the CBDT Circular no. 789 dated 13.04.2000 (supra) is specifically in the context of incomes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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