TMI Blog2022 (3) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... te clause is generally incorporated in a statute to give overriding effect to a particular section of the statute as a whole. Meaning thereby that section 68 of the Act requiring an assessee to discharge its onus of identity, genuineness and creditworthiness, could no more be invoked when the specified transactions in question pertain to a person (defined in sub-section 6 (i)) located in the notified jurisdictional area. We wish to make it clear that Cyprus had been included in the notified list w.e.f. 01.11.2014 but removed on 21.04.2017 with retrospective effect from the former date which is nowhere an issue at all. Whether the assessee s compulsorily convertible debentures fall under non-obstante clauses in sub-sections (2) to (4) of section 94A? - We notice with the able assistance of both the parties that such transactions are in the nature of borrowals only which have been duly covered under section 94A(2) wherein provisions of Chapter X are applicable than subs-section (4) exigible in case of receipt or credit of any sum from any person located in the notified jurisdictional area. We wish to observe here that even if the Revenue s stand is accepted that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s effect reads as follows :- 4. Ground nos. 1 8 are general in nature and do not require any specific adjudication. Ground nos. 2 to 6 are relate to addition of ₹ 18,86,00,000/- u/s 94A(4) of the Act. The AO's observations in making the said addition are as under: The AO in the assessment order stated that during the year under consideration, the appellant company received Compulsorily Convertible Debentures (CCDs) from M/s. Alexandria Real Estate Cyprus No.1 Ltd. of 1,88,60,000 with face of ₹ 101- for each CCD and the total amount received against for subscription of CCDs was ₹ 18,86,00,000/-. The ARE Cyprus is an investment holding company registered in Cyprus and is wholly owned by Alexandria Real Estate Equities LP (ARE LP) which in tum is ultimately owned by Alexandria Real Estate Equity Inc. (ARE Inc.) incorporated in USA and is a listed company in USA. ARE Cyprus invested in CCDs of the appellant company out of the funds infused by its parent and ultimate parent i.e. ARE LP and ARE Inc., which are both resident of USA. The AO held that since the investing company was based at Cyprus and Cyprus was notified as a Notified Jurisdictional Area u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CD amount of ₹ 18,86,00,000/- from ARE Cyprus was received much before the release of CSDT Notification No.86j2013 dated 01.11.2013. Accordingly, invoking section 94A(4) of the Act is legally unsustainable and thereby entire proceedings of ld. AO are vitiated. It was submitted that the AO had no clue of CSDTs rescinding order issued on 14.12.2016 itself while completing the assessment u/s 143(3) on 29.12.2016. 4.2 In course of appellate proceedings, the AR submitted the details of source of investment of ARE Cyprus, such as confirmation of ARE Cyprus of investment into appellant company, copy of incorporation document of ARE Cyprus, financial statements of ARE Cyprus and copies of Foreign Inward Remittance Certificate issued by the bank upon receipt of remittance from ARE Cyprus and copy of Form FC-GPR for the convertible debentures issued, Valuation Certificate by the CA and Certificate of Company Secretary towards allotment of shares. The above evidences were forwarded to the AO seeking a Remand Report vide this office letter 07.01.2019. The jurisdictional AO submitted Remand Report dated 19.02.2019, which was endorsed by the Addl.CIT, Range-16, Hyderabad dated 05.03.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... points emerge: a) The AO in the assessment order initially made a discussion throwing light on the three parameters i.e. identity of the transaction, genuineness of the transaction and creditworthiness of the transaction. Accordingly, he held that as creditworthiness of the investing company was not established, it was a sham transaction. Thereafter, he shifted his opinion to the provisions of section 94A(4) and invoked the same treating that the same was Notified as per CBDTs notification 86/2013 dated 01.11.2013 through SO 4625 GI/13 and made the addition of ₹ 18,86,00,000/- u/s 94A(4) of the Act. b) In the remand report it was mentioned by the jurisdictional AO that removal of Cyprus from the list of Notified Jurisdictional Area u/ s 94A was rescinded with effect from the date of issue of the notification with retrospective effect from 01.11.2013 but since genuineness with regard to source of investment made by the investing company was not established by the appellant, the AO held that the addition may be sustained. 4.5 Hence, it becomes imperative to go through the provisions of Section 94A(4) of the Act, which reads as under: (4) Notwithstanding anyt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. As a result, the grounds raised in this regard are allowed. 3. Learned CIT-DR vehemently contended during the course of hearing that there is hardly any dispute on admitted facts herein inter-alia indicating the assessee to have received CCDs (Compulsorily Convertible Debentures) totaling to ₹ 18,86,00,000/- with face value of ₹ 12/- each from M/s. Alexandria Real Estate Cyprus No.1 Ltd ( ARE Cyprus ). And that as per the Assessing Officer s detailed discussion in Para 3 onwards in the assessment order, it is clear that the said latter entity had infact had availed loans from shareholders and borrowals from M/s. Alexandria Finance LLC. 4. Mr. Sai took us to the Assessing Officer s findings in paragraphs 4 to 6 that not only the assessee had failed to prove creditworthiness of the cypriot entity but also he noticed that the said tax jurisdiction was covered as a notified jurisdictional area under the provisions of section 94A of the Act vide notification dt.01.11.2013. Mr. Sai next admitted very fairly that Cyprus stands removed from the list of other notified tax jurisdictions as per Circular No.15 of 2017 dt.21.04.2017. He however quoted hon ble ape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed under this Act, unless the assessee furnishes an authorisation in the prescribed form authorising the Board or any other income-tax authority acting on its behalf to seek relevant information from the said financial institution on behalf of such assessee; and (b) in respect of any other expenditure or allowance (including depreciation) arising from the transaction with a person located in a notified jurisdictional area shall be allowed under any other provision of this Act, unless the assessee maintains such other documents and furnishes such information as may be prescribed34b, in this behalf. (4) Notwithstanding anything to the contrary contained in this Act, where, in any previous year, the assessee has received or credited any sum from any person located in a notified jurisdictional area and the assessee does not offer any explanation about the source of the said sum in the hands of such person or in the hands of the beneficial owner (if such person is not the beneficial owner of the said sum) or the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory, then, such sum shall be deemed to be the income of the assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at such transactions are in the nature of borrowals only which have been duly covered under section 94A(2) wherein provisions of Chapter X are applicable than subs-section (4) exigible in case of receipt or credit of any sum from any person located in the notified jurisdictional area. We wish to observe here that even if the Revenue s stand is accepted that the assessee had failed to prove creditworthiness, it could at best invoke Chapter X of the Act wherein such a transaction is treated to have been executed between associated enterprise within the meaning of section 92A only and not under sub-section (4) of 94A in foregoing terms. We thus uphold the learned CIT(A) s directions deleting the impugned addition on account of removal of Cyprus as a notified jurisdictional area u/s 94A of the Act. 9. Now comes the equally important aspect in the Revenue s arguments that we ought to direct the assessee to prove the creditworthiness of the cypriot entity qua the impugned compulsorily convertible debentures sums in tune with the assessment findings. We note with the able assistance of both the parties that the CIT(A) has nowhere dealt with the Assessing Officer s detailed discus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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