Case Law Details
Blackstone FP Capital Partners Mauritius V Limited Vs DCIT (ITAT Mumbai)
Undoubtedly, the core issue arising for consideration in the corresponding appeal of the assessee is, whether the long term capital gain arising out of sale of shares of an Indian company would be taxable in India. It is the stand of the assessee that since the assessee is having a TRC issued by Mauritius Revenue Authority, long term capital gain would not be taxable in terms of the treaty provisions. However, taxability or otherwise of long term capital gain has to be considered on substantive basis while dealing with the merits of the issue in the appeal proceedings. At this stage, the Bench is required to consider the prima facie case, balance of convenience and the irreparable injury which may be caused to either of the parties due to grant or refusal of stay. Admittedly, the assessee is a non-resident company and has neither any physical presence nor assets in India. Therefore, in our considered opinion, the assessee must pay 20% of the outstanding demand as agreed, within a period of two weeks from the date of this order and furnish the proof of such payment before the Tribunal as well as the AO Further, to safeguard the interest of revenue, for the balance 80% of the outstanding demand the assessee is directed to furnish a corporate guarantee from one of its associate enterprise in India, having assets exceeding the outstanding tax liability. The corporate guarantee, as noted above, shall be furnished by the assessee before the AO within a period of six weeks from the date of this order. Subject to fulfillment of the aforesaid conditions, recovery of the balance 80% of the outstanding demand shall remain stayed for a period of 180 days from the date of this order or till disposal of the appeal, whichever is earlier.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Captioned application has been filed by the assessee seeking stay of realization of outstanding demand amounting to Rs. 1,57,57,67,597/-, including interest charged under section 234B and 234C of Income Tax Act, 1961 for the assessment year 2016-17.
2. Shri Porus Kaka, learned Counsel for the assessee submitted, assessee is a non- resident company and is a tax resident of Mauritius. He submitted, the dispute in the appeal relates to addition on account of long term capital gains arising out of sale of shares of an Indian Company viz. CMS Info. Systems Ltd. He submitted, being a tax resident of Mauritius, a valid Tax Resident Certificate (TRC) has been issued by the Mauritius Revenue Authority on yearly basis. Therefore, the assessee is entitled to avail the benefits granted under the India-Mauritius Double Taxation Avoidance Agreement as well as CBDT Circular No. 789/2000 and Circular No. 682/1999, which are binding on the departmental authorities. He submitted, once TRC has been issued, assessee’s income from long term capital gain would not be taxable as per the treaty provisions, as held by the Hon’ble Supreme Court in case of Union of India and Anr. vs. Azadi Bachao Andolan and Anr [2003] 263 ITR 706 (SC). He submitted, in assessment year 2014-15, though, the assessee had incurred long term capital loss, however, in terms of the treaty provisions, the assessee neither sought set off nor carry forward of such loss, which was accepted by the department. He submitted, applying this same principle of rue of consistency, long term capital gain cannot be made taxable in India. Thus, he submitted, the assessee has a strong case on merits. Further, he submitted, the assessee had moved an application for stay of recovery of the outstanding demand before the Assessing Officer (AO). He submitted, in course of discussion/hearing, though, the AO had agreed to stay recovery of the outstanding demand, subject to, assessee paying 20% of the outstanding demand, however, subsequently, the Assessing Officer has reversed his position and declined to pass any order granting stay of recovery of the outstanding demand. Though, no formal order has been passed and technically the stay application is still pending.
3. Learned Counsel submitted, the assessee is still willing to pay 20% of the outstanding demand, subject to, stay of recovery of the balance of outstanding demand.
4. Learned Departmental Representative submitted, in addition to 20% of the outstanding demand, the assessee must also furnish adequate security to secure the balance outstanding demand.
5. We have carefully considered the rival submissions and perused the materials on record. Undoubtedly, the core issue arising for consideration in the corresponding appeal of the assessee is, whether the long term capital gain arising out of sale of shares of an Indian company would be taxable in India. It is the stand of the assessee that since the assessee is having a TRC issued by Mauritius Revenue Authority, long term capital gain would not be taxable in terms of the treaty provisions. However, taxability or otherwise of long term capital gain has to be considered on substantive basis while dealing with the merits of the issue in the appeal proceedings. At this stage, the Bench is required to consider the prima facie case, balance of convenience and the irreparable injury which may be caused to either of the parties due to grant or refusal of stay. Admittedly, the assessee is a non-resident company and has neither any physical presence nor assets in India. Therefore, in our considered opinion, the assessee must pay 20% of the outstanding demand as agreed, within a period of two weeks from the date of this order and furnish the proof of such payment before the Tribunal as well as the AO Further, to safeguard the interest of revenue, for the balance 80% of the outstanding demand the assessee is directed to furnish a corporate guarantee from one of its associate enterprise in India, having assets exceeding the outstanding tax liability. The corporate guarantee, as noted above, shall be furnished by the assessee before the AO within a period of six weeks from the date of this order. Subject to fulfillment of the aforesaid conditions, recovery of the balance 80% of the outstanding demand shall remain stayed for a period of 180 days from the date of this order or till disposal of the appeal, whichever is earlier. The corresponding appeal of the assessee is directed to be fixed for hearing on out of turn basis on 31.08.2021, as consented by learned counsels appearing for the parties. Since, the date of hearing of the appeal was announced in the presence of learned counsels appearing for the parties, issuance of separate hearing notice to the parties is hereby dispensed with. It is made clear, the parties should not take any unnecessary adjournment and must ensure early disposal of the appeal. We further make it clear, if any of the conditions of this order are violated, the stay granted shall automatically stand vacated.
6. In the result, stay application is partly allowed in the terms indicated above.
Order pronounced in the open court on 2nd August, 2021.
