FTSA Holdings B.V. Vs DCIT (ITAT Bangalore)
Section 69 Can’t Be Invoked Where Investment Is Recorded & Source Explained: Bangalore ITAT Deletes ₹13.20 Cr Addition on Foreign Share Investment
Bangalore Bench of the ITAT, in FTSA Holdings B.V. vs DCIT (International Taxation) (ITA No. 643/Bang/2025, AY 2019-20, order dated 23.12.2025), granted major relief to a Netherlands-based non-resident company by holding that Section 69 has no application where the investment is duly recorded in books and the source of funds is satisfactorily explained.
The case arose from a reassessment u/s 147 r.w.s. 144C wherein the AO treated ₹13.20 crore invested by the Assessee in its Indian subsidiary (Humanetics Innovative Solutions India Pvt. Ltd.) as unexplained investment u/s 69, alleging failure to prove source. Though the Assessee later furnished extensive evidence including FC-GPR filings, RBI approvals, foreign inward remittance certificates, bank statements, valuation report, share certificates and audited financials, the DRP upheld the addition, brushing aside even the AO’s favourable remand report accepting the fund flow.
The Tribunal found that the Assessee had produced overwhelming documentary evidence establishing that the funds originated from its US parent company, were routed through regular banking channels, duly reflected in its books and financial statements, and supported by RBI filings. It held that Section 69 applies only where investments are not recorded in the books, and once the investment is recorded and the nature and source are explained, the deeming fiction cannot be invoked. The ITAT also observed that valuation issues and timing of share allotment were irrelevant for invoking Section 69.
Accordingly, the Tribunal held that the ₹13.20 crore investment could not be treated as unexplained income in the hands of a non-resident Assessee. However, as a matter of verification, it directed the AO to verify the Assessee’s annual accounts evidencing receipt of funds from the US parent and, upon satisfaction, delete the addition. The appeal was thus partly allowed, granting substantive relief to the Assessee.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. ITA No. 643/Bangalore/2025 is filed by M/s. FTSA Holdings B.V., Netherlands (the Assessee/Appellant) for Assessment Year 2019–20 against the Assessment Order passed by the Deputy Commissioner of Income Tax, International Taxation, Circle (1) (1), Bangalore (the Ld. Assessing Officer) for Assessment Year 2019–20 on 30.01.2025 wherein the addition of Rs. 13,20,00,000/-was made in the hands of the Assessee u/s. 69 of the Income Tax Act 1961.
