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28-08-2019, Golden Bella Holdings, Section 90, 234A, 234B, Tribunal Mumbai

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4 months 2 weeks ago #10673 by amit
Section - 90, 234A, 234B, 234C
Order Date - 28-08-2019
Favouring - Assessee
Court - Tribunal Mumbai
Appellant - Golden Bella Holdings Ltd.
Respondent - DCIT
Citation - 919Taxpundit3
Appeal No. - ITA No. 6958/MUM/2017
Asstt. Year - 2013-14



This is an appeal filed by the assessee. The relevant assessment year is 2013-14. The appeal is directed against the assessment order dated 29.09.2017 passed by the Deputy Commissioner of Income Tax (International Taxation)- 2(3)(2), Mumbai ( in short the ‘AO’) u/s143(3) r.w.s. 144C(13) of the Income Tax Act 1961, (the ‘Act’).

2. The grounds of appeal filed by the assessee read as under:

1. The AO grossly erred by taxing the entire amount of interest income of INR 15,16,43,836 received by the Appellant at 40% (plus surcharge and cess) and denying the Appellant relief of beneficial rate or interest at 10% under Article 11 of the India - Cyprus Double Taxation Avoidance Agreement ("DTAA") based on an erroneous finding that the Appellant is not the beneficial owner of the interest income.

2. The findings of the AO on the facts and in law are erroneous based on the following grounds and hence the order of the AO is liable to be set aside:

i. The AO erred in concluding that the Appellant was not the beneficial owner of INR 15,16,43,836 received as interest income from ADAMAS Builders Private Limited (“ABPL") on compulsorily convertible debentures (“CCD”)issued by ABPL to the Appellant and has thereby erred in denying the Appellant relief under Article 11 of the India- Cyprus DTAA.

ii. The AO erred in fact and in law in holding that the Appellant was not the beneficial owner of the interest income by arbitrarily concluding that the Appellant did not have 'dominion and control' over the interest income, despite failing to prove that had any contractual or legal obligation to pass on the interest income to another person.

iii. The AO erred in fact and in law in concluding that the Appellant was merely set up as a shell or a conduit company for the passage of funds between Green World Developments Ltd ( GWDL") and ADAMAS Builders Private Limited ("ABPL") and therefore not entitled to claim benefits under Article 11 of the India - Cypru DTAA by disregarding all the factual and legal submissions made by the Appellant during the course of the assessment proceedings.

iv. The AO has relied on assumptions and presumptions to conclude that the Appellant is not the beneficial owner of the interest income notwithstanding the fact that no evidence or allegation is on record stating that the Appellant acted on the instructions of GWDL.

v. The AO wrongly disregarded all facts furnished by the Appellant to demonstrate the independence of the Appellant company in Cyprus and wrongly concluded that the Appellant is a mere conduit without supporting such finding with any proof, particularly when the burden of furnishing such proof is on the revenue.

vi. The AO has incorrectly distinguished the reliance on Circular No. 789 issued by the CBDT on a mere technicality and has denied treaty relief under the DTAA to the Appellant.

vii. The conclusions of the AO are contrary to the Income Tax Act and the DTAA. The denial of treaty benefits sought to be made by the AO is contrary to Section 90 of the Income Tax Act and Article 11 of the Treaty.

viii. The AO has not discharged the burden of proof and has made incorrect findings based on surmises and conjecture.

ix. The AO has disregarded the fact that the board of directors of the Appellant had the requisite expertise and knowledge to take informed business decisions and that the decision to make investments were made unanimously thereby demonstrating substance and independence.

x. The AO has ignored the fact all important commercial decisions were made at the Appellant's office in Cyprus which shows commercial operations in Cyprus.

xi. It is grossly erroneous on part of the AO to record a finding that the Appellant was unable to disprove any of the findings of the AO and unlawfully shift the
burden of proof when additionally such findings were baseless and unsupported by proof.

xii. The AO erred in finding the Appellant to be a conduit and does not possess the CCD in its own right when no evidence is on record to support a finding that GWDL had legal control or had otherwise exercised such control in the upstreaming of interest income.

xiii. The AO and CIT(A) has erred in law and has levied interest under Section 234A, Section 234B and Section 234C of the Income Tax Act mechanically w thout due application of mind.

3. Briefly stated, the facts are that the appellant is a company incorporated on 01.08.2011 under the laws of Cyprus with the objective of undertaking business activities of an investment holding company. It filed its return of income for AY 2013-14 on 29.11.2013 showing a total income of Rs.15,16,43,840/- from interest on Compulsorily Convertible Debentures (CCDs) in Adams Builders Private Limited (ABPL), an Indian private limited company and such interest was duly offered to tax @ 10% in accordance with the beneficial provisions of Article 11 of the DTAA

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