FULLERTON FINANCIAL HOLDINGS PTE. LTD.,SINGAPORE vs. THE ASSISTANT COMMISSIONER OF INCOME-TAX - (INTERNATIONAL TAXATION), CIRCLE 2(3)(1) - MUMBAI, MUMBAI

Per: Smt. Beena Pillai, J.M.:

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ITA No.1137/Mum/2025; A.Y. 2022-23
Fullerton Financial Holdings Pte. Ltd.

The present appeal filed by the assessee arises out of order dated 18/12/2024 passed by CIT(DRP-1), Mumbai-2 for assessment year 2022-23 on following grounds of appeal :
“
The below-mentioned grounds and sub-grounds of appeal are independent and without prejudice to each other.
Ground No. 1: The Draft Assessment Order, Directions issued by the Dispute Resolution Panel and the Final Assessment Order, are erroneous, contrary to law, without juri iction, and bad in law;
1.1 On the facts and in the circumstances of the case and in law, the draft assessment order dated 31 March 2024 passed by the Learned ACIT (International Taxation) - 2(3)(1), Mumbai ("the juri ictional assessing officer") under section 143(3) read with section 144C(1) of the Income-tax Act, 1961 ('the Act'), the final assessment order dated 16 January 2025 passed by the Learned
ACIT (International Taxation) 2(3)(1), Mumbai ('Ld. AO') under section 143(3) read with section 144C(13) of the Act and the directions issued by the Learned Dispute Resolution Panel ('Ld.
DRP') dated 18 December 2024 under section 144C(5) of the Act
('DRP Directions') are erroneous, contrary to law, without juri iction, and/or invalid, and/or bad in law and are ought to be quashed and the capital gain be held not taxable under the DTAA.
Ground No. 2: Final Assessment Order barred by limitation:
2.1 The Appellant submits that considering the facts and circumstances of its case and the prevailing law, the impugned order dated 16 January 2025 passed u/s. 143(3) r.w.s. 1440 (13) of the Act is ab initio void as it is barred by limitation u/s. 153 of the Act and, therefore, ought to be struck down/quashed. Your
Appellants pray the assessment be quashed.
Ground No 3: Validity of the assessment proceedings:
3.1 On the facts and circumstances of the case and in law, the AO erred in initiating and/or concluding the assessment proceedings under section 144C read with section 143(3) of the Act without issuing a valid notice under section 143(2).
Ground No. 4: The AO/DRP erred in taxing as capital gains the amount received from the sale of shares of Fullerton India Credit

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Fullerton Financial Holdings Pte. Ltd.

Company Limited (FICCL) to Sumitomo Mitsui Financial Group
(SMFG):
4.1 On the facts and circumstances of the case and in law, the AO/DRP erred in bringing to tax as capital gains the amount received on the sale of shares of FICCL to SMFG.
4.2 The AO/DRP has erred in holding that the Appellant is not entitled to the benefit under Article 13(4A) of the Double Taxation
Avoidance Agreement (DTAA) entered into and subsisting between the Government of the Republic of India and the Government of the Republic of Singapore ("India - Singapore DTAA").
4.3 The AO/DRP erred in applying Article 24A of the India-Singapore
DTAA to deny the benefits under Article 13(4A), which is erroneous, and contrary to law.
4.4 The AO/DRP erred in not considering the purpose of Article 24A and the core elements in Articles 24A(1) and 24A(2), and instead directly invoking Article24A(3) of the India-Singapore DTAA read with Article 24A(2) of the DTAA to deem the Appellant a "shell or conduit company".
4.5 The AO/DRP failed to appreciate that the Appellant did not arrange its affairs to access the DTAA, nor is the Appellant a shell or conduit entity. Therefore, the benefits under Article 13(4A) of the DTAA should be granted.
4.6 The finding by the AO/DRP that the assessee did not have genuine business operations in Singapore and engaged in treaty shopping is perverse and erroneous and ought to be quashed.
4.7 The AO/DRP have failed to appreciate the evidences and documentation filed before them, which substantiate that the Appellant had genuine and continuous business operations/activities in Singapore. Therefore, the benefits under Article 13(4A) of the DTAA should be granted.
4.8 In addition to the above grounds, the AO/DRP erred in denying the Appellant's claim of the benefit under Article 13(4A) of the India-
Singapore DTAA by disregarding the Inland Revenue Authority of Singapore ('IRAS') Certificate furnished by the Appellant.
4.9 In addition to the above grounds, the AO/DRP erred in disregarding the certificate issued by an independent accounting firm prepared under the Singapore Accounting Standards.

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Fullerton Financial Holdings Pte. Ltd.

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Fullerton Financial Holdings Pte. Ltd.

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Fullerton Financial Holdings Pte. Ltd.

was filed by the assessee on 26.10.2022, declaring total income at Rs. NIL. The case was selected for scrutiny and notice under section 143(2) of the Act was issued.Subsequently, notices u/s 142(1) of the Act was issued on various dates calling upon assessee to furnish details. The assessee was issued show cause notices on various dates in respect of return filed for the year under consideration. In response to the notices issued, the assessee filed its submission electronicallyon
ITBA/
e- assessment.
2.1 The Ld.AO observed that assessee is an investment holding company incorporated in Singapore in 2003, wholly owned by Temasek Holdings Private Limited ("Temasek"), a body corporate constituted under the Singapore
Minister for Finance
(Incorporation) Act 1959, which is wholly owned by the Government of Singapore through the Minister for Finance. It was submitted that Temasek is a Fifth Schedule entity under the Singapore Constitution.Scanned and reproduced is the statutory board and Government Companies under fifth schedule :-

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ability to raise financing independently and for ease of management and regulatory compliance as India may have different rules from other juri ictions. Such structures are common in the investment management industry, thus its affairs were clearly not arranged with the "primary purpose"
to take advantage of sub-article 4 of Article 13. Article 24A should not apply as the mischief for which it is intended as articulated in sub-article 1 is not present in our case.
• For FFH to perform its principal activity, i.e., as an investment holding company, it avails operations related services from Fullerton Financial Holdings (International)
Pte. Ltd FFHI. FFHI is the management company where all the employees are hired to support the operations of FFH as a strategic investor. FFHI renders management services to FFH and charges a management fee plus mark-up on an arms-length basis. Such management fee expenses are expenses incurred for operations of FFH.
• FFH has submitted documents in past submissions filed with your goodself, which confirms
FFH's annual expenditure on operations in Singapore was more than SGD
200,000 for each of the 12-month periods in the immediately preceding period of 24 months from the date of disposal of shares in FICCL (i.e., 30 November 2021), specifically:
(a) FFH's financials for Calendar Year 2019, CY 2020 and CY 2021, which encapsulate expenses incurred in the profit and loss account statement. Additionally, FFH also submitted details of invoices and service agreements as 10
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requested by your goodself in relation to certain expenses incurred;
(b) A letter dated 31 August 2023 issued by KPMG LLP
Singapore (FFH's statutory auditor), which determines the expenditure incurred to satisfy the aforesaid expenditure test; and (c) Letter from Inland Revenue Authority of Singapore
("IRAS") dated 22/09/2023, which confirms that FFH's annual significant expenditure on operations in Singapore was more than SGD 200,000 for each of the 12-month periods in the immediately preceding period of 24 months from the date of disposal of shares in FICCL (i.e., 30
November 2021).
• The words "expenditure on operations" in sub-articles 3 and 4 of Article 24A are to be interpreted considering the purpose sought to be achieved by sub-articles 1 and 2 of Article 24A. FFH is clearly not a shell or conduit entity under sub-article 2 of Article 24A as it was incorporated for bona fide business purpose and it has operations in Singapore as explained above.
• The above view is supported by the Delhi (I)AAR ruling in the case of BG Asia Pacific Holding (P.) Ltd.,reported in [2021]
125 taxmann.com 2. In that case, the AAR accepted that the taxpayer did not have employees on its payroll and the payroll cost of the employees was initially borne by a subsidiary and then recharged to the taxpayer, which was 11
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part of the operations expense for purposes of satisfying the SGD 200,000 expenditure criteria.
• To this end, we wish to refer your goodself to the Hon'ble
Delhi Tribunal observation in the case of Reverse Age Health
Services [2023] 147 taxmann.com 358 that the veracity of expenditure incurred in Singapore is a subject matter of scrutiny in Singapore. The Hon'ble Tribunal observed as under:
"Even the treatment of the assessee company as 'Shell' or 'conduit' also do not hold any water in as much as the veracity of the expenditure incurred by the assessee in Singapore was a subject matter of tax scrutiny in Singapore and the same has been accepted to be genuine by the Singapore tax authorities as per assessment orders mentioned elsewhere."
• It was submitted that the Singapore IRAS letter clearly states that it had made its determination after reviewing the entirety of "the financial statements, tax computation and additional information"; the IRAS letter is submitted as Annexure 2 to submission dated 3 March 2024. It is therefore factually erroneous to assume that the Singapore
IRAS had not verified the content, allocation, basis of allocation, questioned the commercial expediency.
2.7. The Ld.AO after considering the submissions rejected the claim of non-taxability of capital gains by invoking Article 24A(3) of the India-Singapore DTAA and observed as under:
The submission made by the assessee has been perused carefully but the same is not tenable for the reasons discussed in detail in following paragraphs.

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management fee, as discussed above. Assessee has failed to provide supporting for services received, time spent by the FFIH, how services received were used by it, how time spent by FHIH for other group entities is cross charged etc. the onus in on the Assessee to prove that the expenses claimed to be made for the operations are indeed made for operations
………………
7.1.7 There is no legal validity of the letter from IRAS and KPMG.
Assessee has simply stated that there is no requirement under Article
24A and no reasonable grounds to question the exercise (a) by KPMG
LLP to apply Singapore accounting rules and (b) by the Inland Revenue
Authority of Singapore ("IRAS") of its authority to apply Singapore tax law to determine and satisfy itself that FFH has met the SGD 200,000
expenditure criteria in the relevant periods under the DTAA. The Assessee has conveniently stated that there is no requirement under Article 24A to question the exercise (a) by KPMG LLP to apply Singapore accounting rules and (b) by the Inland Revenue Authority of Singapore
("IRAS") of its authority to apply Singapore tax law to determine and satisfy itself that FFH has met the SGD 200,000 expenditure criteria in the relevant periods under the DTAA. This contention of the Assessee is not correct. There is no provision at all in DTAA or the Act enabling/authorizing KPMG or IRAS to issue such letter. Further, the Assessee is not taking benefit in Singapore, but in India ……………….
………………………..
7.3 The Directors' fee is also paid by FFH to group companies. Again, no supporting as the benchmarking of these payment is provided, Further,
FFH paid insurance premium fees in relation to Directors and Officers
Liability insurance. However, as it may be seen that FFH has no employee and the directors are appointed by group entities only, any expense for these directors can not be attributed to the operational expenses of the assessee. Assessee has stated that benchmarking is not mentioned as a requirement under Article 24A. Assessee has also stated that fees of only three directors are paid to the group companies because such directors are employed by the group companies and remaining three directors received payments directly from FFH.
However, no details regarding the same is provided by the Assessee.
Assessee has further stated that board of directors and officers exercise control over FFH. Not paying director fee to Directors directly and paying the same to group entities clearly show that the Directors are acting as nominees of group entities. The Assessee has also failed to 14
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provide details to prove that the group entities have provided services to the Assessee.
7.3.1 Further, Assessee has claimed that directors and officers'
insurance premium was paid by FFH to protect the directors and officers from liability that may emanate from activities and decisions undertaken by the employees of FFHI as directors and officers in the course of carrying out their duties and rendering services to FFH. As discussed earlier regarding management fee, fee, the Assessee has failed to provide supporting for services received, time spent by the FFIH, how services received were used by it, how time spent by FHIH for other group entities is cross charged etc. the onus in on the Assessee to prove that the expenses claimed to be made for the operations are indeed made for operations. As these Director's exp. are also of similar nature, same arguments are applicable to these expenses also.
2.9. The Ld. AO thus passed draft assessment order disallowing the beneficial treatment under Article 13(4A) of India Singapore
DTAA as claimed by the assessee. On receipt of the draft assessment order, the assessee preferred appeal before the DRP.
3. The DRP after considering the submission of the assessee upheld the observation of the Ld. AO.
3.1. On receipt of the DRP direction, the Ld. AO passed the impugned order making addition in the hands of the assessee, the amount received at Rs. 8,03,11,61,532/- on the sale of shares of Fullerton India Credit Company Limited to Sumitomo
Mitsui Financial Group.
Aggrieved by the order of Ld. AO, the assessee is in appeal before this Tribunal.
4. The Ld.Senior Counsel placed his arguments by raising following propositions: -
Proposition No. 1: Incorrect invocation of Article 24A(1) of the India-
Singapore DTAA - Affairs of the Appellant Not Arranged with the Primary Purpose of Availing Treaty Benefits

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Proposition No. 2: Incorrect invocation of Article 24A(2) of the India-
Singapore DTAA: Appellant is not a Shell or Conduit Entity]
9. At the outset, it is submitted that the Appellant is an investment holding company indirectly wholly owned by Temasek, which is wholly- owned by the Government of Singapore, which is the other Contracting
State that has signed the DTAA with India
10. The 2005 amendment to the India-Singapore DTAA was aimed at promoting FDI into India, for which the capital gains exemption had been granted as a protocol to the DTAA. The Appellant's investment in FICCL is precisely the type of foreign direct investment benefiting India
11. Article 24A is a Limitation of Benefit Clause (LOB) that is placed in tax treaties to prevent treaty shopping. There is no treaty shopping in the present case, nor any third party or country involved, as the Appellant is wholly owned by the Government of Singapore. Hence, on the first principle, there is no reason to invoke Article 24A to deny
Article 13(4A) relief to the Appellant, ultimately owned by the Government of Singapore.
12. It is respectfully submitted on a pure reading of Article 24A(1) and (2) that, prior to invoking Article 24(3) of the India-Singapore DTAA, the threshold conditions set out in Article 24A(1) and (2) must first be satisfied
• Article 24A(1) of the India-Singapore DTAA states that a resident of Singapore shall not be entitled to the benefits of Clause 4A or Clause 4C of the India-Singapore DTAA, where the affairs of the company are arranged with primary purpose to avail benefits under the India-Singapore DTAA
• While Article 24A(2) of the India-Singapore DTAA, a Singapore resident entity would not be eligible for treaty benefits if such entity is a "shell or conduit" company, i e. it is an entity which has nil or negligible business operations in Singapore or does not 16
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have real or continuous business activities undertaken in Singapore.
13. The Appellant was incorporated in 2003 (i.e., even prior to the 2005
amendment to the India-Singapore DTAA) as an investment holding company, indirectly wholly owned by Temasek, which is wholly owned by the Government of Singapore. It is not in dispute that the Appellant is part of the Temasek Group based in Singapore. Since the ultimate ownership is of the Governmentof Singapore itself, the affairs of the Appellant cannot he said to have been arranged pesmarily obtain treaty benefits under the India-Singapore DTAA
14 It may also be noted that, as evidenced to the lower authorities (and not disputed), the Appellant is incorporated and resident of Singapore, and all decisions relating to its investments and disinvestments, as well as all related activities, are undertaken and carried out froes Singapore.
15. It is also an undisputed fact that the Appellant has consistently filed itsreturns in Singapore and has been assessed to tax therein. The Appellant has furnished substantial documentation evidencing its genuine business presence and continuous business operations in Singapore, including;
• Tax Residency Certificate (TRC) issued by the Singapore tax authority (refer to Page Nos. 11 and 12 of the Factual PB),
• Profile and credentials of the Board of Directors (refer to Page Not.
1357 to 1363 of the Factual PB),
• Minutes and presentations from board meetings held in Singapore from 2008 to 2021 (referto Page Nos. 1337 to 1354 of the Factual PB),
• Audited Financial statements (refer to Page Nus. 279 to 935 of the Factual PB),

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• Details of bank accounts used to receive proceeds (refer to Page
No. 130 of the Factual PB),
• Constitution of the Appellant (refer to Page No. 1270 of the Factual PB); and • Business profile of FFH as published by the Accounting and Corporate Regulatory Authority (Secretary Board) (refer to Page
Nos. 1314 to 1332 of the Factual PB).
16. It is submitted that the Hon'ble Supreme Court of India in the case of AzadiBachaoAndolan [2003] 263 ITR 706 (SC) (refer to Page No. 76 of the Legal PB) upheld the Circular 789 dated April 13, 2000, which stated that a Certificate of Residence issued by competent authorities would suffice to establish tax residence and beneficial ownership status.
17. As is evident from the above, the affairs of the Appellant were not arranged with the primary purpose of securing the benefit under Article
13(4A) of the India-Singapore DTAA. This fact is not disputed by the AO or DRP.
18. The Appellant, alongwith its subsidiary AIPL., began investing in FICCL, in the 2000s, with the principal objective of long-term investment. This investment was consistent with the Appellant's stated business purpose as an investment holding company. The Appellant is a bona fide long-term investor with a global portfolio, including investments in Singapore, India, Cambodia, the People's Republic of China, Malaysia and other Asian Countries (refer to Page No. 26 of the factual PB) It is not an entity with nil, negligible, or non-continuous business operations, and hence Article 24A(2) has no application
19. Further, the profit loss before tax of the Appellant in Singapore, as provided in the audited financials, which shows a consistent income, is as under:

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FFH
Standalone
P/L
(In S$OOO)

FY2024 FY202
3
FY2022
FY2021
FY202
0
FY2019
Total
Income

7,61,45
6
15,932
7,289
18,51,57
0
8,534
23,48,29
1
Total
Expenses
(including impairment)

65,225

17,259 2,37,03
6

89,918

98,925

67,873

Profit/(Loss
) before tax

6,96,23
1

-1,327
-
2,29,74
7
17,61,65
2
-90,391 22,80,41
8

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Appellant/AIPL, have continued to exist both within and outside India, and their investments likewise continue to be held in and outside India.
1) Corporate business purpose of a transaction:
Based on the above and the absence of treaty shopping/ conduit/ inter- positioning, the corporate business purpose over 15 years is self-evident and undisputable.
24. The Appellant held its investment in FICCL for over a decade before disinvesting in 2021. This long-term holding clearly negates any suggestion that the investment was made with the intent to merely claim treaty benefits under the India-Singapore DTAA. Further, there was no need to interpose a shell or conduit in Singapore when the ultimate entity, Temasek, is a government-owned entity and is based in Singapore. Moreover, a conduit entity is one that merely serves as an intermediary for another entity that is not entitled to the benefits of the DTAA. In the present case, the Appellant cannot be a conduit for its parent entity, which is government-owned and itself eligible to claim benefits under the India-Singapore DTAA
25. The AO and DRP have misapplied and misinterpreted Article 24A to deny the benefit of Article 13(4A) of the India-Singapore DTAA by directly going to Article 24A(3) and without satisfying the pre-conditions of Article 24A(1) and (2) and the intended objects of the Article 24A/LOB clause and the mischief it intended to address.
26. Article 31 of the Vienna Convention on the Law of Treaties, 1969
(VCLT) (refer to Page No. 71 of the Legal PB) mandates that a treaty shall be interpreted in good faith in accordance with the ordinary meaning of its terms in their context and in the light of its object and purpose.
27. The purpose of Article 24A was to curb treaty shopping by entities of third states lacking economic substance in Singapore and interposing themselves solely to obtain benefits under the DTAA. This anti-abuse

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provision, however, can never be applied to the Appellant for the reasons stated above.
28. The purpose of the Limitation of Benefit (LOB) Clause has also been explained by the Hon'ble Supreme Court of India in the case of AzadiBachaoAndolan (Supra) - (refer to relevant Para 102 to 104 on Page No. 101 of the legal PB).
29. Further, the Appellant submits that Article 24A(1) and (2) of the India-Singapore DTAA are not applicable, as the affairs of the company are not arranged or structured with the primary purpose of availing treaty benefits. The Appellant cannot be regarded as a shell or conduit entity, as it does not fall within the definition of an entity having no or negligible business operations or lacking continuous business activities carried out in Singapore.
30. It is submitted that the action of the AO/DRP in invoking Article
24A(3) to treat the Appellant, which is ultimately owned by Temasek, as a deemed shell or conduit entity, is contrary to the terms and intended objects and purpose of Article 24A and contrary to the principles of treaty interpretation.
31. Further, the Appellant would rely on the case of BG Asia Pacific
Holding (Pte) Ltd (2021) 125 taxmann.com 2 (AAR-New Delhi) (refer to Page No. 111 of the Legal PB), wherein the AARwas considering Article
24A and has held that it cannot be said that the affairs of BCI Asia were arranged with the primary purpose to take advantage of the benefits of Article 13(4) on the sale of shares of GOCL. (refer Para 30 to 36 on Page Nos. 125 and 126 of the legal P
32. In addition, it is a settled proposition of law that while interpreting a provision introduced to remedy a mischief, the mischief sought to be addressed and the intended purpose of the legislature must be considered. This principle has been consistently applied by various
Courts, including

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• Heydon's case, (1584) 3 Co Rep. 7a, p 7h: 76 ER 637 (refer to page 497 of the legal PB)
• Commissioner of Income-tax vs. Sodra Devi [1957) 32 ITR 615
(SC) (refer to page 503 of the legal PB)
33. In view of the above, the action of the AO/ DRP in directly applying
Article 24A(3) to hold the Appellant (which is ultimately owned by the Government of Singapore) to be deemed to be a shell or conduit-without satisfying Article 24A(1) or 24A(2) is not in accordance with the treaty and law
34. It is submitted that neither the AO, nor the DRP, nor even the Department in its submissions dated August 4, 2025, filed before the Hon'ble Tribunal, has raised any objection to the preliminary proposition that Article 24A(3) of the DTAA cannot be invoked without first establishing that the preconditions under Article 24A(1) and (2) are satisfied. Instead, Article 24A(3) has been invoked in a mechanical and erroneous manner, without establishing that the preconditions under Article 24A(1) and (2) were met. This is wholly contrary to a plain reading of Article 24A(1) and (2), the object and purpose of Article 24A to prevent treaty shopping and contrary to the good faith and the object and purpose of LOB clauses and defeats the very objective of the tax treaty to promote mutual investments
Proposition No. 3: Certificates Issued by the Inland Revenue Authority of Singapore and an Independent Auditor Should Be Respected
35. Without prejudice to the aforesaid contentions, the Appellant submits that the invocation of Article 24A(3) is misconceived. The Appellant placed on record a certificate issued by the IRAS (Tax authorities in Singapore) and a Certificate from an Independent
Accounting Firm (KPMG) to demonstrate compliance with Article 24A(3) threshold.

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insurance charges for directors, SAP-related expenses, audit expenses, etc. Further, the total expenditure on audit fees and directors' fees alone is higher than the threshold of SGD 2,00,000 as required in Article
24A(3) of the DTAA
43. The Appellant respectfully submits that it has satisfied the requirements of Article 24A(3) of the India-Singapore DTAA. Under this provision, an entity is deemed to be a shell or conduit company if its annual expenditure on operations in the Contracting State is less than $$200,000. In the present case, the Appellant has incurred operational expenditure in Singapore exceeding the prescribed threshold, including, inter alia, management fees, directors' fees, insurance charges fordirectors, SAP-related expenses, and audit expenses. Documentary evidence substantiating these expenditures has been duly furnished before the AO and the DRP.
44. In addition to the expenditures noted above, the Appellant has also incurred other operating expenses in Singapore, including company secretarial expenses, legal and professional fees, Citibank and investment banker fees (specifically in connection with the transaction in question), and miscellaneous administrative expenses.
45. The nature of the substantial expenditure incurred by the Appellant, along with relevant pages of the paper book, is set out below:
Management fees paid to Fullerton
Financial
Holdings
(International) Pte. Ltd. (‘FFHI’)
FFHI renders management services to the Appellant. FFHI and the Appellant entered into a management services agreement in 2009 under which the former renders management services to the Appellant and charges a management fee of a cost plus 10
percent mark-up.

Appellant avails operations-related services from FFHI, as the employees reside in FFHI. Such services include
Investment
Planning,
Investment
Research,
Investment
Execution,
Investment
Approval,
Portfolio
Management, Risk Management and 26
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Compliance, Finance, Treasury, HR.
Corporate Communications, Legal, etc
Director’s Fees
The board of directors and officers provide leadership and strategic guidance, direction and thrust to the operations of the Appellant. The board of directors and officers exercise control over the Appellant and at the same time, remain accountable to the shareholders of the Appellant to formulate and review overall strategy and operations policy, to create, protect and enhance the Appellant's wealth and resources and report it to the various stakeholders in a fair and transparent manner.
Director’s and Officer’s
Insurance
The Appellant incurs insurance premium fees in relation to Directors and Officers
Liability insurance to protect the directors and officers from liability that may emanate from activities and decisions undertaken by the directors and officers in the course of carrying out their duties and rendering the services for the operations of the Appellant.

SAP related expense
The Appellant avails licensed software and related software support and maintenance services from SAP
/
software license used. It utilizes the software services from SAP for its operations, viz., to maintain its financials and group accounts consolidation.
Audit Fees
This expenditure has been incurred by the Appellant for conducting statutory audit services in order to report its financials, which is a statutory requirement under the Singapore
Companies Act and for statutory audit services rendered to the Appellant.
Investment banker fees
This is the fees itself paid to the investment banker (i.e. Citigroup Global
Markets Singapore Pte. Ltd.) on the transaction of sale of shares of FICCL, being the capital gains involved in the appeal.
Company Secretary Fees
The fee has been incurred by the Appellant for carrying out its statutory compliances, maintenance of the corporate records, etc.
Legal Fees
Legal fees are paid in connection with inter-alia drafting of share purchase agreement, etc., on the transaction of 27
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sale of shares of FICCL, being the capital gains involved in appeal.

allowable or justifiable, especially when this is a matter governed by Singapore law and Corporate and Accounting Standards, and most importantly, accepted by the Treaty Partner as having satisfied the requirements of Article 24A(3).
50. Further, it is submitted that judicial authorities have consistently held that expenditures incurred to keep a company in existence, such as audit fees, staff costs, maintenance charges, and other office-related expenses, are allowable, even in cases where no active business is being carried out. The mere absence of business activity does not render such expenses non-genuine or disallowable Importantly, the tax authorities are not empowered to question the commercial viability or necessity of such expenditure, especially where such expenses are incurred in the ordinary course of maintaining the corporate structure and fulfilling statutory obligations. The decisions are as follows
• BG Asia Pacific Holding (Pte) Ltd (2021] 125 taxmann.com 2
(AAR-New Delhi) (refer to Page No. 111 of the legal PB)
• R.B. BansilalAbirchandSpg&Wvg. Mills vis. CIT (1971) 81 ITR 34
(Bombay) (refer to Page Nos. 658 to 668 of the legal PB);
• CIT v/s. Ganga Properties Ltd. [1993] 199 ITR 94 (Cal) (refer to Page Nos. 669 to 671 of the legal PB);
• Nakodar Bus Service (P.) Ltd. v/s. CIT (1989) 179 ITR 506 (P&H)
(refer to Page Nos. 672 to 673 of the legal PB).
• CIT v/s. Rampur Timber & Turnery Co. Ltd. (1981) 129 ITR 58
(All) (refer to Page Nos. 674 to 675 of the legal PB),
• AtulBabubhai Shah v/s. JCIT [2020]116 taxmann.com 966
(Ahmedabad Trib.) (refer to Page Nos. 676 to 686 of the legal PB)
51. The only test under Article 24A(3) is whether the expenditure has been incurred for operations in Singapore. The Appellant has clearly fulfilled this requirement. Accordingly, the Appellant has satisfied the conditions under Article 24A(3) and cannot be deemed a shell or conduit company.

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services to the Appellant and charges a management fee of a cost plus
10 percent mark-up. The costs so charged comprised the full salary costs of FFHI employees.
(iii) In order to perform its principal activity, ie, as an investment holding company, it avails operations-related services from FFHI, as the employees reside in FFIII. Such services include Investment Research,
Investment Planning, Investment Approval, Investment Execution,
Portfolio Management, Risk Management and Compliance, Finance,
Treasury, HR, Corporate Communications, Legal, etc.
(iv) The intercompany arrangement within the FFH group, wherein one entity provides services and recharges the corresponding expenses to the recipient entity, is a long-standing practice. This is evidenced by the Management Services Agreement, invoices, payments, etc., between
FFHI and the Appellant, which dates back to 31 March 2009,
(v) It is incorrect to allege that the Appellant failed to provide documentary support for its claims. The AO appears to rely solely on the absence of a timesheet summary to deny the benefit of Article
13(4A), thereby presuming that no evidence has been furnished.
(vi) It is important to note that the Appellant has submitted various documents before the AO/DRP, including extracts of Board of Directors'
meeting minutes, presentations made to the Board in Singapore, profiles of the Board members, and invoices, to substantiate the genuineness of the aforementioned operations-related services.
(vii) At the pain of repetition, the Treaty Partner, viz. The Government of Singapore has accepted that the Appellant satisfies the threshold expenditure test also. As stated above, this being an aspect of Singapore Corporate and Accounting law, and on the facts and circumstances of the case, it ought to be respected.
Re: Ground of Appeal No. 5: Without prejudice to the above, the taxability in the hands of the holding entity:
55. It is respectfully submitted that if the Appellant is deemed a shell or conduit company under Article 24A(3), the capital gains would have been assessable in the hands of its parent or the Government of Singapore, in which case the same will also not be taxable in India under the DTAA.
Re: Ground of Appeal No. 6; Without prejudice to the above, Contingent
Deferred Consideration

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-Not Taxable in the Absence of Accrual or Receipt
56. As per the terms of the Share Purchase Agreement, SMEG had agreed to pay the said contingent deferred consideration upon fulfilment of certain specified conditions. However, since the stipulated conditions were not met, the contingent consideration of INR 3.36 per share was never paid to the Appellant and will never be paid as the period of the contingent deferred consideration has lapsed
57. SMFG confirmed the non-fulfilment of the conditions and the consequent non-payment of the contingent consideration by way of a written communication dated April 25, 2024 (refer to pages Nos. 1788
to 1790 of the Factual PB)
58. In light of the above, the Appellant requested the AO/DRP to adopt the actual sale consideration received, INR 7,74,43,34,335). (computed at INR 90.84 per share) in place of the assessed consideration of INR
8,03,11,61,532/- (computed at INR 94 20 per share). However, this request was not accepted by the AO/DRP
59. It is respectfully submitted that income which has neither accrued nor been received cannot be brought to tax under the provisions of the Income-tax Act, 1961 or under the DTAA. Notional or hypothetical income, including unrealised contingent consideration, is not subject to tax. Reliance is placed on the following judicial precedents wherein it has been held that deferred contingent consideration is not taxable unless it has accrued or has been received, or the contingency has materialised:
• CIT v/s. Mrs. Hemal Raju Shete (2016) 68 taxmann.com 319
(Bombay) (refer to Page Nos. 602 to 608 of the legal PB),
• Dinesh Vazirani v/s. PCIT [2022] 140 taxmann.com 581
(Bombay) (refer to Page Nos. 638 to 644 of the legal PB),
• Universal Medicare (P.) Ltd. v/s. DCIT [2020] 119 taxmann.com
377 (Mumbai - Trib.) (refer Page Nos. 609 to 625 of the legal PB), and 32
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Fullerton Financial Holdings Pte. Ltd.

• Huntsman Investments (Netherlands) BV v/s. DCIT [2024] 166
taxmann.com 63 (Mumbai -Trib.) (refer to Page Nos. 645 to 657 of the legal PB)
60. In addition, the Hon'ble Supreme Court in CIT v. Balbir Singh Maini
[2017] 86 taxmann.com 94 (SC) (refer to Page Nos. 626 to 637 of the legal PB) has categorically held that capital gains arising from a transaction that does not ultimately materialise constitutes, at best, hypothetical income, and such notional gains cannot be subjected to tax.

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We have perused the submissions advance by both sides in the light of record placed before us.
5. It is noted that, there is no dispute with the revenue on the fact that the assessee is a private company limited by shares incorporated in Singapore, and is a wholly owned portfolio company of Temasek Holdings (Private) Limited, (Temasek) the Singapore-based investment company owned by the Government of Singapore. Thus the assessee functions as Temasek’s dedicated investment and operating platform in the financial services sector across Asia, with a strategic focus on small and medium enterprise (SME) and mass-market banking segments.
Further, It is a matter of record that Temasek is a company wholly owned by the Minister for Finance (Incorporated), a statutory body constituted under the Singapore Ministry of Finance (Incorporation) Act, 1959. 5.1 The assessee had made investment in Fullerton India Credit
Company Limited (FICCL)during the financial year 2009–10, i.e., prior to 01/04/2017, with the primary objective of holding the same as a long-term strategic investment and to facilitate its 35
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business expansion in Asia, consistent with its stated objective of functioning as an investment holding company. The assessee held an aggregate of 8,52,56,357 equity shares of face value
Rs.10/- each in FICCL, which were subsequently transferred to Sumitomo Mitsui Financial Group (SMFG), an unrelated company incorporated in Japan, on 30/11/2021, corresponding to the financial year 2021–22. 5.2 The revenue denied exemption of capital gain under Article
13(4A) of India Singapore Double tax Avoidance Agreement
(DTAA) on the ground that the assessee has no employee and the Directors are appointed by the group entities only. The revenue is thus of the opinion that the expenses of the Directors cannot be attributed to the operational expenses of the assessee.
5.3 The issue, therefore, that arises for consideration is whether, on the facts and circumstances of the case, the assessee satisfies the Principal Purpose Test (PPT) prescribed under Article
24A(1) and (2) of the India–Singapore DTAA for availing treaty benefit under Article 13(AA) in respect of the impugned transaction.
5.4 Before addressing the issue under consideration, it is necessary to understand the constitution of the assessee, placed at pages 1270 to 1312of paperbook :
• The assessee is a company incorporated under the provisions of the Companies Act, Chapter 50 of Singapore, and is registered with the