TMI Blog2023 (1) TMI 1337X X X X Extracts X X X X X X X X Extracts X X X X ..... DTAA will not apply to assessee. This is because assessee does not have a banking business license from the Reserve Bank of India. HELD THAT:- To fall under Clause 3(c) of Article 11 of the DTAA, assessee need not have to be carrying on banking business in India. Assessee should only be a resident of Mauritius and must be carrying on bona fide banking business in Mauritius. We have to note that in the draft assessment order dated 30th March 2015 passed under Section 144C (1) r/w Section 143(3) of the Act, the AO while granting exemption to the interest on ECB has accepted that assessee is carrying on bona fide banking business in Mauritius. So also in the final assessment order dated 28th January 2016. Therefore, the fact that assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal ( ITAT ). The appeal pertains to Assessment Year 2011-12. 2. Respondent-Assessee is a Limited Liability Company incorporated and registered in and tax resident of Mauritius. It is admittedly a Foreign Institutional Investor ( FII ) duly licensed by the Securities and Exchange Board of India ( SEBI ). During the course of assessment proceedings, the Assessing Officer ( AO ) noticed that assessee earned an amount of Rs. 94,57,45,856/- as interest income on securities. Assessee claimed the same as Exempt Income under Article 11(3) of the Indo-Mauritius Double Taxation Avoidance Agreement ( DTAA ). The AO did not accept assessee's claim that the interest income from securities in India was exempt from tax in India as per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal has erred in holding that the assessee is involved in bonafide banking activities ignoring the fact that assessee has even not furnished the financials e.g. Annual reports etc during the course of assessment proceedings, whereas Hon'ble ITAT has itself held that onus is on assessee to demonstrate that assessee is not conduit company for the benefit of third person? (c) Whether on the facts and the circumstances of the case and in law, Hon'ble Tribunal has erred in holding assessee is involved in bonafide banking activities, 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? (d) Withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have to note that in the draft assessment order dated 30th March 2015 passed under Section 144C (1) r/w Section 143(3) of the Act, the AO while granting exemption to the interest on ECB has accepted that assessee is carrying on bona fide banking business in Mauritius. So also in the final assessment order dated 28th January 2016. Therefore, the fact that assessee is carrying on a bona fide banking business in Mauritius is not disputed. Would such an assessee be entitled to exemption from tax in India is what we need to consider. Article 11(3) of the DTAA reads as under: Interest arising in a Contracting State shall be exempt from tax in that State provided it is derived and beneficially owned by: (a) the Government or a local ..... X X X X Extracts X X X X X X X X Extracts X X X X
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