9911796707
TMI Blog2023 (10) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... nvertible Debentures (CCDs) by alleging that the Appellant is not eligible for the beneficial provisions of Double Taxation Avoidance Agreement (DTAA) entered between India and Singapore. 2.1 The Ld. AO and Ld. Panel basis own surmises and conjectures has grossly erred on facts and in law in denying the beneficial provisions of DTAA between India and Singapore without appreciating that the Appellant has duly furnished a Tax Residency Certificate ('TRC') obtained from the Singapore Revenue Authorities evidencing its residential status of Singapore and being entitled to avail the DTAA benefits. 2.2 The Ld. AO and the Ld. Panel has grossly erred on facts and in law by alleging that the Appellant lacks economic substance in Singapore as per the Limitation of Benefit (LOB) clause in India-Singapore DTAA and denying the DTAA benefit without appreciating that the Appellant fulfills all conditions of LOB clause as prescribed under the DTAA. 2.3 The Ld. AO has grossly erred in ignoring the facts that the Appellant has obtained all necessary approvals and complied with necessary filings in reference to impugned transaction of CCDs issued by Fortis Hospotel Limited (FHTL) with regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r market value was lower of CCD without appreciating that the same is backed-up with the report of a reputed independent third valuer namely M/s Duff and Phelps. 5.2 The Ld. AO has not appreciated that the sale consideration on INR 2444 per CCD has itself been accepted by the Ld. AO while computing the capital gain on sale of CCD by the Appellant. 5.3 The Ld. AO failed to appreciate that the Ld. Panel has not provided any observation or direction to verify the fair market value of CCD. 6. The Ld. AO and the Ld. Panel grossly erred on facts and in law in treating the transaction of sale of CCD as sale of equity instruments, without appreciating that the Appellant has never claimed it as an equity instrument and has always claimed that CCDs are debt unless converted into equity. 6.1 The Ld. AO failed to appreciate that, in any case, both sale of equity as well as debt instruments were not taxable in India prior to 1st April 2017 as per Article 13(4) of DTAA between India & Singapore. 7. That the Ld. AO has grossly erred in law by enhancing the income which was not subject matter of dispute raised in draft assessment order and before Ld. Panel. 7.1 The Ld. AO has gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment holding company for RHT Trust. In turn, FGHIPL (i.e., the COMPANY) wholly owns Fortis Healthcare Management Limited (FHML), an Indian incorporated company. Further, as per the laws in Singapore, all assets of the Trust has to be held by the trustee manager directly in its capacity as trustee-manager or indirectly through one or more holding subsidiaries. Accordingly, RHT Trust made all the investments via the Assessee, being its 100% subsidiary through money raised from IPO and debts/ loans obtained by the Assessee. 5. The Assessee had subscribed to, inter alia, 87,04,000 CCDs of face value of Rs. 1,000 each issued by Fortis Hospotel Limited ("FHTL") in October 2012 for an aggregate consideration of Rs. 870,40,00,000/-. The subscription to CCDs issued by FHTL was made by the Assessee with due intimation to Reserve Bank of India ("RBI") which was duly acknowledged and approved by the RBI vide letter dated 13th August, 2013 (enclosed at pages 116 to 117 of the paper book Volume 1). 6. 51% of the said CCDs (44,39,040 CCDs) were sold during the previous year relevant to assessment year under consideration to Fortis Healthcare Limited ("FHL") for aggregate sale consideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ievance of the Assessee raised by grounds of appeal Nos. 2 to 6 is thus limited to the denial of the exemption under Article 13(4) of the Tax Treaty qua capital gains earned on sale of CCDs. 12. Facts relevant to the adjudication of the case are as under: The structure of the assessee group is below: * RHT was listed on the Singapore Stock Exchange on 19th October, 2012 with a business proposition to invest in medical and healthcare assets and services. RHT Trustee Manager Pte. Ltd. (Trustee Manager) acts as the Trustee Manager of RHT whereas Fortis Healthcare International Limited (FHIL) is the Sponsor of RHT and holds 28% units in RHT. The list of other substantial unit holders of the Trust as of 26 June 2013 is as under- S. No. Name of the Unit holder No. of Units % 1 Fortis Healthcare International Limited 220,676,944 28.00 2 DBS Nominees Pte. Ltd. 100,777,514 12.79 3 Raffles Nominees (Pte.) Ltd. 87,805,600 11.14 4 Citibank Nominees Singapore Pte. Ltd. 85,192,400 10.81 5 HSBC (Singapore) Nominees Pte. Ltd. 37,194,655 4.72 6 DBSN Services Pte. Ltd. 24,901,075 3.16 * the Assessee had made investments in various entities operating in the healthca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Paper Book Volume-1. * It was originally intended that RHT Group ultimately holds 100% equity interest in FHTL by acquiring remaining 51% equity interest in FHTL. For this purpose, FHL had submitted an application on 12 June 2013 to HUDA for approval to transfer the 51% equity interest in FHTL to FHML. Copy of said letter is enclosed as per pages 105- 108 to Paper book - Volume I. Despite repeated follow ups, approval has not been granted. As the requirement for FHL to hold at least 51% in FHTL was imposed from HUDA in its letter dated 3 January 2006, a waiver of this condition or approval from HUDA is required before FHL could sell its 51% interest in FHTL to FHML. The Assessee would like to categorically mention before your Honour that FHL was continuously following up with HUDA to accord their approval so that FHL could transfer its 51% shareholding in FHTL in favour of FHML so the condition with respect to maintenance of shareholding could be maintained and complied with, however after much follow-ups for around 2 years and upon no response from HUDA, the Assessee decided to transfer the CCD's held in FHTL in favour of FHL to achieve the following objective- (A) 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase such Investor CCDs for the Put Option Consideration (defined in Clause 7.1.2)." 13. In this background of investment, earning of interest on CCDs in India and subsequent sale of CCDs, it was argued that the capital gains earned on sale of CCDs by the assessee is not liable to tax in India by virtue of the exemption available under Article 13(4) of the Tax Treaty. 14. The ld. AR argued that the Assessee is having valid Tax Residency Certificate (TRC) and TRC is one of the prerequisites for the non-resident's entitlement to beneficial provisions of the DTAA. As per provisions of section 90(4) of the Act, a non- resident shall not be entitled to claim any relief under the DTAA unless a certificate of his being resident of the country outside India is obtained from the Government of that country. It was argued that the TRC should be considered to be a conclusive evidence to determine whether the person is a resident of the contracting state. The ld. AR placed reliance on CBDT Circular No. 789 dated 13th April, 2000, validity of which was upheld by the Hon'ble Supreme Court in Union of India vs. Azadi Bachao Andolan (263 ITR 706) and on the decision of the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2017-18. The ld. AR submitted that by no stretch of imagination, the assessee company can be regarded as a shell company/conduit entity. 17. It was submitted that the Assessee is wholly owned by RHT, a business Trust listed on Singapore stock exchange. In that view of the matter, it is the submission of the Assessee that it should be regarded as a listed company on a recognized stock exchange of Singapore. In this connection, the Assessee seeks to draw support from the provisions of section 2(18)(B)(c) of the Act, which provides that the wholly owned subsidiary of a listed company would be regarded as "a company in which public are substantially interested". On a parity of reasoning, the Assessee, owned wholly by RHT, a business Trust listed on the recognized stock exchange in Singapore should be regarded as listed on a recognized stock exchange of Singapore, applying the Non-Discrimination Article of the Tax Treaty (Article 26), thereby satisfying the first condition. 18. With regard to the Annual expenditure, it was submitted that the assessee incurred more than $ 2,00,000 on operations in the contracting State. The expenditure incurred is as under: S. No. Nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s situated wholly in India. With the amendment by the Finance Act, 2016 w.e.f. 1.04.2017, amended section 6(3) of the Act reads as under: "a company is said to be a resident in India in any previous year, if (i) it is an Indian company; or (ii) its place of effective management, in that year, is in India." Explanation - For the purposes of this clause "place of effective management" means a place where key management and commercial decisions that are necessary for the conduct of business of an entity as a whole are, in substance made. " From a reading of amended section 6(3) of the Act it follows that a foreign company would be said to be not-resident in India in any previous year if its place of effective management in that year is not in India. * POEM in the case of a company engaged in active business outside India shall be presumed to be outside India if majority of meetings of the board of directors of the company are held outside India. * In case of companies engaged in active business outside India, the determination of POEM would be a two stage process: (i) Identifying or ascertaining the person(s) who actually take the key management and commercial deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transaction, thus lacked beneficial ownership. The AO further held that the TRC is not sufficient to establish the tax residency as the substance of transaction established otherwise due to control and management of the assessee company is not present in Singapore, but rather in India. This AO held that the assessee company is not entitled to the treaty benefits of India- Singapore DTAA, and accordingly income from sale of CCDs and interest income was subject to tax as per IT Act. 3. Assessee Contention before Hon'ble Bench:- 3.1 During the proceeding, the assessee contended that it was eligible for the benefits under the DTAA owing to the fact that it had obtained a valid TRC from the Singapore Revenue authorities. The assessee further countered the finding of the AO to state that its business transactions are of economic substance as it incurred requisite expenses in the 24 months preceding of the disposal of CCDs. Finally, the assessee stated that its receipts are squarely covered under the provision of the Article 13(5) of DTAA as the Limitation of Benefit article of DTAA has no effect. 3.2 In regard to non-applicability of the LOB clause to 13(5), the assessee argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstance, as it has made investments in other than CCDs subscribed in FHTL and has done all business activities in Singapore under the law of Accounting and Corporate Regulatory Authority of Singapore Ministry. Therefore, it cannot be regarded as a shell company/conduit entity. 3.3.6 Rule of Consistency:-Assessee submitted that the interest earned on CCDs have been offered to tax in India in the tax return filed in India @ 10% as provided under the Tax Treaty and it was accepted by the assessing officer in past assessment years. Therefore, Revenue is estoppel from taking a different view in the matter in a later year, without there being any change in facts or change in law and place reliance on decision in the case of Radha Soami Satsang vs. CIT : 193 ITR 321 (SC) and CIT vs. Excel Industries : 358 ITR 295(SC). 3.3.6 Place of effective management ("POEM") is in Singapore:- Assessee submitted that there were two Directors of the appellant namely, Mr. Gurpreet Singh Dhillon and Mr. Ravi Malhotra who were tax resident of Singapore and Hong Kong respectively and the place of effective management of the assessee company cannot be said to be in India, as the decisions by the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in groups of unit holders in Religare health Trust namely the Fortis Group entities and institutional lenders. As per its website, the main unit holders/investors of the RHT include Mauritius based company Fortis Healthcare International Ltd. (Fortis Mauritius) (27.6% shareholding), DB Nominees (Singapore) Pte. Ltd., Citibank Nominees Singapore Pte. Ltd. and Raffles Nominees Pte. Ltd. 4.1.7 The main unit holders/investors in Fortis Mauritius are the Trustee Manager, Fortis Healthcare Ltd., Fortis Healthcare Holdings Pvt. Ltd. and the individuals Malvinder Singh, Japna Malvinder Singh, Shivinder Singh and Aditi Shivinder Singh. 4.1.8 Thereafter funds were gathered at the level of RHT Trust by way of an IPO and pumped into the Fortis group companies in the form of debt and equity. In return, the Fortis group companies provided interest income and management fees to the assessee company which in turn was passed on to RHT Trust for annual distribution to the unit holders. 4.1.9 Venture was originally only sponsored by Fortis India, its overall management was also taken control by Fortis India in 2015. 4.1.10 From public domain information available, Fortis India established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers on 04.02.2019 coinciding with the time when it had finally divested all its stakes in Fortis group assets. 4.1.18 As on date, the T rust website states that it has ceased to have any operational business and it is a cash trust. 4.1.19 On the original advancement of debt of INR 874 crores to FHTL against issue of 87,04,000 no. of CCDs for a face value of INR 1000 per CCD, no basis of adopting such fair market value was furnished. 4.1.20 Though the option of converting the CCDs into equity was available upto 2030 (i.e. 18 years), the conversion was made in a much short time period. No commercial reason for the same was provided for such urgency. 4.1.21 The valuation report submitted by the assessee cannot be accepted as the variables taken to compute the fair market value of CCDs have not been justified. The transaction therefore lacks commercial sense. 4.1.22 There is no commercial sense in the transactions under consideration which have been made between related parties, valuation and sharp price of value of CCDs are unsubstantiated, the conversion of CCDs were made within a short span of time and the gains have been treated as exempt under treaty provisions, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o other expenses passive nature like realised and unrealised foreign exchange loss as well as the notional losses like unrealised fair value loss on derivatives which is not related to operation of entity but has been claimed by the assessee as operating expenditure should be excluded while applying the threshold expenditure test. Needless to say that minus the said non-operating expenses, the assessee fails to satisfy this test and turns out to be a conduit entity within the meaning of LOB clause DTAA. viii. In regard to the principle of consistency claimed by the applicant, it is pertinent to consider the last paragraph (para 15) of the ruling of the Hon'ble Apex Court in Radha Soami Satsang case, an accordingly, the ruling may not be treated as a authority on aspects which have been decided for general observation. The observation is quoted as under:- "The counsel for the revenue had told us that the facts of this case being very special, nothing should be said in a manner which would have general application. We are inclined to accept this submission and would like to state in clear terms that the decision is confined to the facts of the case and may not be treated as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove and in AO/DRP orders,) that the assessee company is failing in the principal purpose test, exists only on paper for all practical purposes and the sole purpose of creating this company was to evade taxes. Hence the general provision envisaged by the Circular 789 is not applicable in this case. 5.1.2. The plea of the assessee is that it has been issued a TRC by the Singapore Tax Authority. Whether the TRC is conclusive to decide the tax residency, it was decided in a number of rulings referring to the case of Vodafore BV case, i.e. Tiger Globals (AAR), BID Co, (AAR) and Redington (Chennai High Court). The relevant observations made by the Hon'ble Apex Court in the Vodafone Case, in regard to sufficiency of TRC, at para-98, is reproduced as under:- Hon'ble Supreme Court in the case of Vodafone Intl. Holding v. Union of India [2012] 17 taxmann.com 202/204 Taxman 408 stated that, "98. It is to be noted that LOB and look through provisions cannot be read into a tax treaty but the question may arise as to whether the TRC is so conclusive that the Tax Department cannot pierce the veil and look at the substance of the transaction. DTAA and Circular No 789 dated 13.04.2000, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectors. It is an undoubtable conclusion derived from the facts of the case that the company was established with the sole and principal purpose of tax avoidance. 5.1.6 It is relevant to consider here that though the tax residency is stated to be established to take benefit of Singapore tax treaty network with various countries and not just India, in effect the entire investment made by the assessee was with India only, in respect of which the benefit of India- Singapore DTAA is being claimed. As is evident from their financial statements filed with the assessee, It had made investment mostly in India. Thus, the real intention of the assessee is to avail the benefit of India- Singapore treaty. 5.2 Look through approach where DTAA contains LOB Clause 5.2.1 The look-through approach: In "look through approach" the real beneficiary of the income is found out. It means to ignore the corporate structure and look through the realities of the transactions. It may also be called to look into the substance ignoring the legal form. Under this approach, a company will be denied treaty benefits if the company is owned or controlled, directly or through one or more other companies, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should lead the group and the company's shareholder's influence will generally be employed to that end This obviously implies a restriction on the autonomy of the subsidiary's executive directors. Such a restriction, which is the inevitable consequences of any group structure, is generally accepted, both in corporate and tax laws. However, where the subsidiary's executive directors' competences are transferred to other persons/bodies or where the subsidiary's executive directors' decision making has become fully subordinate to the Holding Company with the consequence that the subsidiary's executive directors are no more than puppets then the turning point in respect of the subsidiary's place of residence comes about. Similarly, if an actual controlling Non- Resident Enterprise (NRE) makes an indirect transfer through "abuse of organization form /legal form and without reasonable business purpose" which results in tax avoidance or avoidance of withholding tax, then the Revenue may disregard the form of the arrangement or the impugned action through use of Non-Resident Holding Company, re characterize the equity transfer according to its economic s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odafone's case observed about the concept of Substance over the form as under: "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 structures. 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 transaction in question is a sham or tax avoidant." 5.3.3 Doctrine of substance over form: The tax doctrine of "substance over form" is a judicial creation applied in many countries. It is often used by the courts in cases where a taxpayer has constructed a scheme of transactional relationships on documents only or primarily to obtain tax benefits. If the tax motivation outweighs the business purpose and/or profit objective of the transaction, courts will decide that "form" (written contracts and arrangements) does not reflect the "substance"(the real deal/picture) and on that basis may deny the intended tax benefits. This is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nage it, i.e., the right to decide how it shall be used; and the right to the income from it. these rights are in fact liberties: the owner has a liberty to use it, in contrast with others who are under a duty not to use or interfere with it." (c) The assessee company has not demonstrated dominion over either of the property. It is categorically brought out the bank account cannot be operated independently and neither part time Singapore director has acted independently and the key decisions which are required to address the share transactions are actually taken by ultimate parent in British Virgin Islands and beneficially owned by Mr. Sandeep Murthy who is claimed to be citizen of USA. Further fund actually pass through Singapore entity without actual retention. Thus the dominion test has not been satisfied by the assessee company claimed to be resident in Singapore. (c) OECD position on such conduit companies: Reliance is also placed on the OECD Committee on Fiscal Affairs report titled "Double Taxation Conventions and the Use of Conduit Companies" International Tax Avoidance and Evasion: Four Related Studies, Issues in International Taxation No 1 (OECD, Paris, 1987). In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby directs that all the provisions of the said Agreement shall be given effect to in the Union of India. Notification : No. GSR 610(E), Dated 8-8-1994 As Amended by Notification No. SO 1022(E), Dated 18-7-2005; No. S.O. 2031(E), Dated 1-9-2011 and No. S.O. 935(E), Dated 23-3-2017 ANNEXURE AGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE REPUBLIC OF SINGAPORE FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME The Government of the Republic of India and the Government of the Republic of Singapore, desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, Have agreed as follows: The preamble of India-Singapore DT AA is reproduced as under: "Whereas the annexed Agreement between the Government of the Republic of India and the Government of the Republic of Singapore for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income has ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he main objectives of this Tax Treaty, which further amplified by incorporation of the same phrase in the Preamble as well as in the recital of Annexed text of the Treaty. Therefore, while interpreting a Treaty, the essential object and purpose of the DT AA i.e. prevention of tax evasion must be factored into a subject transaction, but under no circumstances be ignored while applying a DTAA provision. 6.5 This principle is further legally aligned with the "Vienna Convention on the Law of Treaties 1969". For reference, Article 31 of Section-3 is reproduced below: "SECTION 3. INTERPRETATION OF TREATIES Article 31: General rule of interpretation 1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. 2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes: (a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty; (b) any instrument which was made by one or more parties in connection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, the conduit company i.e. assessee company shall not be provided treaty benefit. 7.2 In India, the McDowell case in 1985 had proceeded on the lines of Ramsay and Burmah Oil and referred to "colourable devices" and "dubious methods" to avoid tax. The McDowell case was effectively the trend setter in Indian jurisprudence to establish that the "ghosts of Fisher and Duke of Westminster" were not existent in India. It was felt then that India would be harsh with tax avoidance and an extremely thin line would run between how tax evasion and tax avoidance could be interpreted and distinguished. 7.3 The Indian Courts have recently decided a number of cases on the basis of principle of "substance over form", particularly when the structure is ascertained as one of tax avoidance. Some decisions are discussed below where the facts are identical to the facts of this case. (i) "The Hon'ble AAR, New DELHI in the case of Tiger Global International Holdings group reported in [2020] 116 taxmann.com 878 (AAR - New Delhi) held that:- "Where real control of applicant-Singapore company was with US resident who was beneficial owner of group structure and applicant derived no capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases can be absolutely similar, but the ratio or legal principle to be applied provides a lens through which the facts of the case should be analyzed. Applying the ratio of Hon'ble Madras High Court in the case of Redington India clearly establishes that artificial structures or set- ups created solely for the purpose of tax-avoidance need not be allowed by the tax authorities. 7.5 From the above discussion, it is fairly evident that the applicant company has no commercial substance. Mere possession of a TRC alone is not sufficient proof of control and management of the applicant company in Singapore. Therefore, it may be safely inferred that the applicant company is a mere conduit/shell company. Various recent decisions as cited above including the AB Singapore case, Tiger Holding cases, Bidvest case, Redington India Ltd case of Madras High Court, Indostar Capital case of the Bombay High Court have declined to give treaty benefits merely on the basis of TRC. T he courts in India and in all parts of the world have resorted to the doctrine of "substance over form" in deciding upon the taxation of international transactions. 8 RULINGS BY FOREIGN JUDICIARY ON TAX EVASION PR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore to get benefit of India- Singapore DTAA. In view of above discussion, it is prayed before the Hon'ble bench that the treaty benefits under India-Singapore DTAA be denied to the assessee on account of fiscal evasion of taxes by means of treaty shopping and the income be taxed as per the provisions of the Income Tax Act, 1961." Sd/- (Gangadhar Panda) Commissioner of Income Tax (DR) Intl. Taxn. Bench, ITAT, New Delhi 24. Rebuttal of the Authorized Representative of the assessee is as under: "The funds for investment are sourced substantially from financial institutions or unrelated parties via IPO in the name of RHT . The Assessee was incorporated to make and manage the investments out of the funds raised by RHT and also funds borrowed independently by the Assessee, in accordance with Singapore Business Trust Laws. In this respect, the Assessee seeks to refer to Explanatory Brief released by Monetary Authority of Singapore ("MAS") at the time of introduction of Business Trust Bill in 2004. Paragraph of Explanatory Brief reads as under: "The BT Bill is a new piece of legislation which regulates the governance of BTS. BTs are business enterprises set up as a trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 33,327 50,734 41,213 2 Trustee Manager fees 34,31,098 41,89,711 (Refer Note 1) 3 Professional fees 83,887 18,50,089 7,91,692 4 Realised foreign exchange loss 43,40,757 51,26,604 4,81,588 5 Administrative / Other charges paid to bank etc 27,180 54,354 27,189 6 Interest on Bank 21,42,901 38,04,879 21,73,585 7 Bank Charges 40,318 22,295 (Refer Note 1) Note 1 these expenses were incurred and booked at the year end and hence not shown separately for the period April 2016 till September 2016. Refer pages 95-102 for such details of the paper book Volume - I. Even if the Trustee Manager fee is to be excluded as contended by the Ld. CIT DR (which is disputed), then, too the remaining expenses are in excess of the threshold of S $ 200,000. The Assessee cannot, therefore, be regarded as shell / conduit entity, not entitled to the Treaty benefit, even going by the argument of the Ld. CIT DR. DR's Contention - No need to create trust Assessee's Rebuttal - As mentioned hereinabove, the group intended to raise funds from institutional investors in order to make investments in the healthcare sector. Accordingly, in 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. DR's Contention Mr. Ravi Mehrotra also director of Fortis India Assessee's Rebuttal- A common director in a foreign company and an Indian Company does not mean that foreign company will become the tax resident in India. To determine the residential status of a foreign company, POEM is to be found out, which has been discussed supra. Further. Mr. Ravi Mehrotra was a non-executive director of Fortis India, which had more than 30 directors on its Board during the year under consideration. Hence, having a non-executive Board Member in Fortis India will not lead to creation of POEM for Assessee Company in India, as all its decisions were taken by its own Board of Directors outside India. DR's Contention - Mr. Gurpreet Singh Dhillon is tax resident in India Assessee's Rebuttal - Mr. Gurpreet Singh Dhillon is tax resident of Singapore. The residence of Mr. Dhillon can be proved from the documents submitted at pages 128-134 submitted as Paper-book Volume- 1. From documents, it is clear that he resides outside India and hence not tax resident in India. Rebuttal to judicial precedents relied upon by L d. CIT DR- The Ld. CIT DR relied upon the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submission made by the Ld. CIT DR. It is the case of the Assessee that the Revenue has failed to make out any case of fiscal evasion, before seeking to deny the Treaty benefit to the Assessee, a company incorporated in Singapore and having substantial economic/commercial substance in Singapore. DR's Contention - Board meetings not held in Singapore as Board Resolution s do not show place of meeting: It was contended by the Ld. CIT DR that the board resolutions placed in the paper book do not specifically show place of the meeting and further that passing of Circular Resolution was not permissible. Assessee's Rebuttal- The Board resolutions were signed by the Directors, who resides outside India in accordance with the documents enclosed at pages 128-134 of Paper Book Volume 1. This is sufficient to proof that the Board meetings were held outside India and not in India. In that view of the matter, POEM of the Assessee cannot be said to be in India. DR's Contention-TRC not conclusive It was the submission of the Ld. CIT DR that the TRC was issued by the tax authorities in Singapore on the basis of the representation made by the Assessee and was not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid incomes at the rates provided under the Act is in excess of jurisdiction in as much as the final assessment order is not in consonance/in conformity with the binding directions of the DRP. The assessing officer erred in varying the treatment of the aforesaid incomes in the draft assessment order without any direction in that behalf by the DRP. Independent of the above, once it is held that the Assessee is entitled to the Treaty benefit, the rate of tax applicable to such incomes would have to be as per the Tax Treaty. For the aforesaid reasons the order passed by the assessing officer bringing to tax the aforesaid incomes at the rates provided under the Act calls for being reversed." 25. Heard the arguments of both the parties and perused the material available on record. 26. As per the facts on record, the assessee is a tax resident of Singapore and TRC issued by the Singapore Tax Authorities is on record. The Hon'ble Supreme Court in the judgment of Vodafone International Holdings B.V. vs. Union of India and Anr., has held that Union of India vs. Azadi Bachao Andolan (supra) is correct law and TRC is sufficient evidence to show residence of the contracting state ..... 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