TMI Blog2024 (2) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... various other documents have been submitted by the assessee before the departmental authorities. Whereas, neither the AO, nor DRP, except making vague allegations regarding the status of the directors and the structure of the company have held that since, the assessee is a mere paper company, it is not entitle to treaty benefits. This, in our view, is against the spirit of CBDT Circular no. 789, dated April 13, 2000 and the ratio laid down by the Hon ble Supreme Court in case Union of India Vs. Azadi Bachao Andolan ( 2003 (10) TMI 5 - SUPREME COURT ). In a recent decision of Blackstone Capital Partners (Singapore) VI FDI Three PTE. Ltd. ( 2023 (2) TMI 35 - DELHI HIGH COURT] it has been held that once the assessee holds a valid TRC, the Departmental Authorities cannot go behind it to question residential status. In the facts of the present appeal, except making vague allegations, the departmental authorities have failed to bring on record any cogent material to substantiate their allegations that the assessee is merely a paper company, hence, cannot be treated as a genuine tax resident of Mauritius. Interestingly, though, the AO has made various allegations regarding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer verified the records and found that as per the returns filed by the assessee for past assessment years, it is continuously claiming loss. Taking note of the fact that, on one hand, the assessee is claiming loss, on the other hand, the remittance of Rs. 160 crores was made to the assessee without deduction of tax. The Assessing Officer reopened the assessment under section 147 of the Act. In response to the notice issued under section 148 of the Act, the assessee filed its return of income on 29.04.2021 declaring net long term capital loss of Rs. 33,34,167/-. In course of assessment proceedings, the Assessing Officer called upon the assessee to furnish information relating to transactions in purchase and sale of shares in Indian companies. From the information/details furnished by the assessee the Assessing Officer noticed that in the year under consideration, the assessee has received total sum of Rs. 407,32,20,235/- towards sale of shares of four Indian companies. Whereas, it has claimed net long term loss of Rs. 33,34,167/-. On verifying the computation of income, the Assessing Officer found that the assessee has computed the capital gain in respect of sale of shares b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return of income furnished for the year under consideration, the assessee has shown the gain from sale of shares in India, including the sale of shares of Noida Cyber Park Pvt. Ltd. He submitted, since, the assessee is a tax resident of Mauritius capital gain, is not subject to tax in India under India Mauritius DTAA, as shares were purchased prior to 01.04.2017. Further, he submitted, Rs. 162 crores referred to by the Assessing Officer in the reasons recorded is the gross sale consideration, out of which, the cost of acquisition has to be deducted for computing capital gain. Therefore, he submitted, the Assessing Officer s observations that the amount of Rs. 162 crores has escaped assessment, is wholly erroneous. He submitted, reasons must have nexus with formation of belief and formation of belief cannot be on vacuum. In support of such contention, he relied upon the decision of the Hon ble Supreme Court in case of ITO Vs. Lakhmani Mewal Das (1976) 103 ITR 437. Further, he submitted that there was no tangible material available before the Assessing Officer to reopen the assessment. He submitted, the information based on which the Assessing Officer reopened the assessment wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritius holding a valid TRC is entitled to treaty benefits. He submitted, there is not disputed between the parties that the shares, sales of which, resulted in capital gain were purchased by the assessee prior to 01.04.2017. Thus, he submitted, in terms of Article 13(4) of India Mauritius DTAA, long-term capital gain arising on sale of shares is exempt. He submitted, as per CBDT Circular No. 789, TRC is the determinative factors for tax residency. Therefore, the departmental authorities cannot go behind the TRC to decline the treaty benefits to the assessee by questioning the residential status of the assessee. In support, he relied upon the following decisions: 1) MIH India (Mauritius) Ltd. Vs. ACIT (Delhi ITAT), ITA No.1023/Del/2022 2) Blackstone Capital Partners (Singapore) VI FDI Three PTE. Ltd. Vs. ACIT (IT) 9. Thus, he submitted, under no circumstances long-term capital gain arising to the assessee on sale of shares can be made taxable in India. 10. Learned Departmental Representative submitted that, since, huge remittances were made to the assessee without deduction of tax at source and the issue was never examined at any stage due to mere processing of ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer, the assessee had claimed exemption on capital gain arising on sale of shares by taking shelter under Article 13(4) of India Mauritius tax treaty. However, both the Assessing Officer and learned DRP have rejected assessee s claim by holding that assessee being a mere paper company is not entitled to treaty benefits. 15. In our view, the reasoning, on which, the departmental authorities have denied assessee s claim of benefit under Article 13(4) of the tax treaty are unacceptable. It is evident, in course of proceedings before the departmental authorities, the assessee has furnished all materials and evidences to establish its residential status, bank statements reflecting details of investments made in foreign currency, Foreign Inward Remittance Certificate (FIRC) and various other documents have been submitted by the assessee before the departmental authorities. Whereas, neither the Assessing Officer, nor DRP, except making vague allegations regarding the status of the directors and the structure of the company have held that since, the assessee is a mere paper company, it is not entitle to treaty benefits. 16. This, in our view, is against the spirit of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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