Taxpublishers.in - InterestingDecision/IDDT_044.htm - Tax Publishers Your Tax Solution Hub

Share via Whatsapp 102 Views


The Tax Publishers Re-opening of case due to change of opinion - No new facts - Capital gains - Indo-Singapore DTAA - Treaty shopping - Denial of DTAA benefits alleging ownership from USA - Piercing of veil *Facts:* Assessee is a non-resident Private equity entity incorporated at Singapore with tax residency certificate (TRC) issued by Singapore government. Shares of one private limited company Agile Electric owned by assessee were sold to Igarshi India ltd for consideration of Rs 421 crores. Entire capital gains was returned and assessed as exempt under Article 13(4) of Indo-Singapore DTAA. Subsequently revenue issued a reassessment notice citing the owners were only an arm of the US parent and thus only a conduit entity with Singapore arm as a treaty shopping conduit thus warranting reassessment. Assessee's plea was they were entitled to the benefits of Singapore DTAA and they had proved their independent existence with TRC, audited statements including limitation of benefits (LOB) clause not being applicable to them as the spend thresholds in Singapore exceeded the LOB amounts as per Singapore DTAA. Revenue rejected the same and pressed for submissions for a hearing of case afresh for reassessment. Assessee appealed via a writ. Held in favour of the assessee that the reopening was bad and was only on change of opinion based on surmises and conjectures. TRC award conclusive. LOB submissions are to be accepted and all these have been made by assessee on original assessment itself. Beneficial ownership restriction clause of Singapore DTAA was applicable only for interest, dividends and royalties and not for capital gains. Reopening for reassessment was quashed. *Ed. Note:* Treaty shopping allegations, TRC, LOB, sham conduit entity are all issues on DTAA which need good robust documentation support and structuring to be well thought over before making investments to avail DTAA benefits. Mauritius and Singapore DTAA's with India have many such cases. Time and again CBDT circulars, Azadi Bachao Andolan, Vodafone cases are cited for benefit of assessee's. The pre-cursor case to this writ case is also enclosed herewith. *Case:* Blackstone Capital Partners (Singapore) VI FDI Three Pte. Ltd. v. Asstt. CIT 2023 TaxPub(DT) 765 (Del-HC)

The Tax Publishers

Re-opening of case due to change of opinion - No new facts - Capital gains - Indo-Singapore DTAA - Treaty shopping - Denial of DTAA benefits alleging ownership from USA - Piercing of veil

Facts:

Assessee is a non-resident Private equity entity incorporated at Singapore with tax residency certificate (TRC) issued by Singapore government. Shares of one private limited company Agile Electric owned by assessee were sold to Igarshi India ltd for consideration of Rs 421 crores. Entire capital gains was returned and assessed as exempt under Article 13(4) of Indo-Singapore DTAA. Subsequently revenue issued a reassessment notice citing the owners were only an arm of the US parent and thus only a conduit entity with Singapore arm as a treaty shopping conduit thus warranting reassessment. Assessee's plea was they were entitled to the benefits of Singapore DTAA and they had proved their independent existence with TRC, audited statements including limitation of benefits (LOB) clause not being applicable to them as the spend thresholds in Singapore exceeded the LOB amounts as per Singapore DTAA. Revenue rejected the same and pressed for submissions for a hearing of case afresh for reassessment. Assessee appealed via a writ.

Held in favour of the assessee that the reopening was bad and was only on change of opinion based on surmises and conjectures. TRC award conclusive. LOB submissions are to be accepted and all these have been made by assessee on original assessment itself. Beneficial ownership restriction clause of Singapore DTAA was applicable only for interest, dividends and royalties and not for capital gains. Reopening for reassessment was quashed.

Ed. Note: Treaty shopping allegations, TRC, LOB, sham conduit entity are all issues on DTAA which need good robust documentation support and structuring to be well thought over before making investments to avail DTAA benefits. Mauritius and Singapore DTAA's with India have many such cases. Time and again CBDT circulars, Azadi Bachao Andolan, Vodafone cases are cited for benefit of assessee's.

The pre-cursor case to this writ case is also enclosed herewith.

Case: Blackstone Capital Partners (Singapore) VI FDI Three Pte. Ltd. v. Asstt. CIT 2023 TaxPub(DT) 765 (Del-HC)