FIFTH THIRD MAURITIUS HOLDINGS LIMITED,MAURITIUS vs. ASSITANT COMMISIONER OF INCOME TAX (INTERNATIONAL TAX) CIRCLE 2(3)(1), MUMBAI

The assessee has taken the following grounds: “1. On the facts and circumstances of the case and in law, the assessment order under Section 143(3) read with Section 144C(13) of the Income-tax Act, 1961 ("Act") (hereinafter referred to as "Impugned Order") passed pursuant to the directions of the Dispute Resolution Panel ("DRP"), assessing the total income of the Appellant for the subject assessment year at INR 88,22,44,867/- as against returned income of INR 59,57,25,985 and taxing the differential amount of INR 28,65,18,882 as 'other income', is erroneous and bad in law and deserves to be set aside. 2. The Ld. AO/DRP erred on facts and in law, in alleging that the Appellant had transferred the shares of SLK Global Solutions Private Limited ("SLK India") (now Coforge Business Process Solutions Pvt Ltd.) ("Coforge BPS") to Coforge Limited at an inflated sale price and then arbitrarily recharacterizing a part of the 'capital gains' as 'other income' in the hands of the Appellant (i.e. 20.80% of sale consideration amounting to INR 28,65,18,882) without any legal basis, and solely based on extraneous considerations, conjectures and surmises, and ignoring the facts underlying the transaction and submissions of the Appellant. 3. On the facts and circumstances of the case and in law, the Ld. AO/DRP erred in casting aspersions on the sale price agreed for transaction of sale of shares of SLK India (now Coforge BPS) between Appellant and Coforge Limited (a listed Indian company) without any basis, and in further alleging that Fifth Third Bank, National Association ("FTBNA"), an affiliate of Appellant, had provided a purchase commitment to SLK India/Coforge BPS for the purposes of inflating sales consideration without appreciating that: a) Provision of purchase commitment was a precondition of Coforge Limited in its binding offer to purchase equity interest of SLK India; b) The transaction between FTBNA and SLK India/Coforge BPS was a genuine and Bonafide transaction as FTBNA has genuinely been availing services from SLK India as agreed under purchase commitment, which has even been accepted by Ld. AO; c) FTBNA was a major customer of SLK India even pre-sale of shares and the purchase commitment is in line with the past purchases; and ) the sellers other than the Appellant

The brief facts of the case are that the assessee filed the return by declaring total income of Rs.59,57,25,985/- and claimed of refund of Rs.14,53,30,590/-. The case was selected for scrutiny under CASS. The assessee a wholly owned subsidiary of “Fifth Third Investment Company (A US Corporation)”, is engaged in investment holding activities for “Fifth Third Bancorp Group”. The assessee managed its investment portfolio by making strategic decision on buying and holding investment. During the impugned assessment year, the assessee had declared income from other sources amount to Rs.59,57,25,985/- dividend from

Finally, the Ld. AO passed assessment order wherein he re-characterized 20.80% of sale consideration of as “other income” which comes amount to Rs.28,65,18,882/- that is 20.80% of total transaction amount to Rs.1,37,74,94,626/-, being average of proportion of purchase commitment, to projected turnover of SLK India and its subsidiaries considering the valuation report under DCF method. The Ld. AO alleged that only purpose of providing purchase commitment by FTBNA to SLK India was artificially inflate the value of shares of SLK India and FTBNA has not got any benefit out of giving such purchase commitment. Accordingly, the addition was confirmed amount to Rs.28,65,18,882/-. Being aggrieved assessee filed an appeal before us.

The Ld. AR argued filed a paper book comprising pages 1 to 200 which has been placed on record. The Ld. AR contended that the Ld. AO has re-characterised the income which is declared by the assessee as a capital gain. The Ld. AO had wrongly considered the income from other sources and considering the purchase commitment in proportion basis calculated the rate of 20.80% on 5 years commitment of FTBNA. The Ld. AR prayed for deletion the addition made by the Ld. AO.

The revenue cannot challenge the sale consideration agreed between two independent third parties. That too between two listed groups, that is ‘Coforge’ and assessee. The genesis of proposed addition is based on an irrelevant baseless deduction in the draft assessment order that FTBNA will look the guaranteed purchase as a tax deductible expenses in its resident country. There is no embargo under the Act to sale unquoted shares at price greater than prescribed in FMV. He further argued that character of receipts being capital gains in the hands of the assessee cannot be characterized merely for higher tax.

The Ld. AR submitted a synopsis of argument. The relevant part of the synopsis of argument is reproduced as below: “II. SUMMARY OF ARGUMENTS (I) The provision of a purchase commitment by FTBNA to SLK India was merely an assurance provided to a third party of genuine availment of services based on past trends. It was not given to inflate the sales consideration.

Table 2 above clearly shows that FTBNA has constantly been a key customer of SLK entities in the past. Upon going through the above table, it can be observed that SLK India has been deriving approximately 55% (on an average) of its revenue from services being rendered to FTBNA. Thus, the average proportion of revenue of SLK India from FTBNA for past 5 years (i.e, ~55%) is much higher than the alleged 20.80% as highlighted by the AO for years post sale of shares.

Accordingly, in the future projections of SLK entities also, revenues from FTBNA were included. Considering that the Appellant selling the shares is a part of FTB group, the buyer being a third party sought assurance in the form of a purchase commitment for the projected revenues from FTBNA by the SLK entities, which is also a standard market practice (please refer to para 17 below for a snapshot of certain market precedents). In order to provide that comfort to the buyer of the shares, FTBNA provided such purchase commitment. This clearly proves that FTBNA had not provided purchase commitment to SLK India to inflate thesales consideration for the Appellant but to provide a comfort to the buyer of shares to enable the Appellant to offload its shares of SLK India.

Also, it is not a case, where the AO has alleged/established any round tripping of funds -in the sense, that Coforge Limited has paid excess sale consideration to the Appellant, which FTBNA has repaid to SLK India in the form of service fee for future services. Had that been the case, FTBNA would not have availed services beyond the purchase commitment, which is not the case here- FTBNA has availed services worth much more than the purchase commitment (please see Table 3 below, paragraph 20).

It is respectfully submitted that absent any specific provision in the Act, the revenue authorities cannot challenge the quantum of sales consideration of shares in relation to a transaction occurring between third parties. It is an undisputed fact that the Appellant and Coforge Limited were not associated enterprises ("AE") under the Act, rather they were independent third parties, both under the umbrella of listed groups.

The Appellant submits that the law is well settled that if two parties to a contract have understood the terms of a contract in a particular way, it is not open to the tax department to re-write the terms thereof. In CIT vs. Arun Dua: (1990) 186 ITR 494 (please refer to page 31-32 of this synopsis) the Hon'ble Calcutta High Court observed that if a company and its employee had understood the agreement in a certain way and had acted upon that agreement,it is not open to the Income-tax Officer to give another interpretation and tax the assessee on a hypothetical basis. Hon'ble Delhi High Court in D.S. Bist & Sons vs. CIT: (1984) 149 ITR 276 (Delhi) (please refer to page 33-35 of this synopsis) has expressed the same view. Thus, two independent contracting parties viz., the Appellant and the promoters of SLK India on one side

Reliance is also placed on a judgment in Chryscapital Investment Advisors (India) Private Limited vs. DCIT: (2015) 376 ITR 183 (Delhi) (please refer to pages 36-59; relevant para 43 at page 58 of this synopsis) and the judgment of the Hon'ble High Court at Bombay in Principal Commissioner of Income-tax vs. New Silk Route in Income Tax Appeal No. 216 of 2016 (please refer to page 60 to 69 of this synopsis). In both these decisions the Assessing Officer had disallowed a part of the bonus payable by the assessee therein to two of its director employees who also happened to be shareholders on the footing that the bonus was to be re-characterised as dividends. The High Court noted that the bonus was not paid in proportion to the shareholding and, hence, it could never be re-characterised as dividend and, hence, the entire bonus had to be allowed as a deduction. On a parity of reasoning if two different set of shareholders (i.e. Appellant and promoters of SLK India) sold the same shares on the same day to one purchaser (i.e. Coforge Limited), it is not open to the Revenue to treat the sale price as different for both the shareholders, viz., INR 16,946.48 for the Indian promotors and INR 13,421 for the Appellant [i.e. INR 137,74,94,626 (representing sale consideration received by Appellant) less INR 28,65,18,882 (representing 20.80% of the sale consideration, assessed as 'income from other sources' by the AO) divided by 81,285 (representing the number of shares sold by Appellant)).

It is further submitted that the Assessing Officer has no power to re-characterise a receipt in the absence of a statutory provision to that effect [see DIT Vs. Besix Kier Dabhol SA (2012) 26 Taxmann.com 169 (Bom) (pages 70-72 of this synopsis); PCIT Vs. Aegis Ltd (2019)102 Taxmann.com 495 (Bombay) (pages 74-76 of this synopsis)). Such power is to be found in Chapter X-A but those provisions have not been invoked by the Assessing Officer.

It is further submitted that even assuming the Assessing Officer was justified in re- characterising the consideration as being an amount paid for the commitment given by FTBNA, then, in such an event since FTBNA has given the commitment, it can only be FTBNA which can be assessed in respect of the consideration attributable to that commitment and the Appellant cannot be assessed in respect thereof. It is submitted that if the Revenue had chosen to assess FTBNA, the same would be in the nature of business profits in the hands of FTBNA, and since FTBNA has no permanent establishment in India, the same would not be taxable in India.

In view of the aforesaid legal framework, it follows that: a. Shares of SLK India will qualify as capital assets within the meaning of section 2(14) of the Act. Receipts on account of transfer of a capital asset shall be chargeable to tax in the hands of the Appellant as capital gains income.

The Ld. DR argued and stated that the entire transaction is coloring device to inflate the price of the shares. It is found that the SPA includes commitment of assessee to purchase from SLK India and held that the entire sums received by the assessee is not fully the nature of ‘Capital Gain’. The excess value of share for ‘purchase guarantee’ is in nature of the ‘Other Income’. So, the Ld. AO admittedly calculated the 20.80% of amount received by assessee on sale of shares of SLK India Rs.28,65,18,882/- is treated as other income which is inflated in during the transactions. The Ld. DR invited our attention in the order of the DRP in para no.5.3 which is reproduced as below: “5.3. Discussion of the DRP: 5.3.1 Facts: During the subject AY, the Assessee transferred 81,285 equity shares (or 9% of the paid up equity share capital) of SLK Global Solutions Private Limited ("SLK India") to Coforge Limited (erstwhile NIIT Technologies Limited) for consideration amounting to Rs. 137,74,94,626. The Applicant has sold unlisted shares of Indian company, SLK Global Solutions India (SLK India) to Coforge Ltd., an IT support solutions company. Apart from the sale of the shares, the Applicant also furnished a commitment of service purchase from SLK India. The sales consideration was agreed between the parties vide share purchase agreement dated April 12, 2021 ("SPA I") wherein Coforge Limited agreed to make a strategic investment in SLK India and acquired 60% of the shares of SLK India (9% from Assessee and 51% from promoters) during the subject AY at purchase price ofRs. 16,946.48 per share. Such consideration per share was arrived basis the valuation report (valuing the shares of SLK India) prepared in accordance with Discounted Cash Flow Method ("DCF Method"). Applicant Assessee claimed the gains on sale of aforementioned shares as not liable to tax in India in view of Paragraph 13(3A) of India-Mauritius Tax Treaty. 5.3.2. In draft assessment order, Ld. Assessing Officer found that the SPA included commitment of Applicant to purchase from SLK Global Solutions Private Limited (Coforge Business Process

The Ld. DR submitted that the Ld. AO has correctly appreciated the substance of the transaction and has rightly held that the consideration received by the assessee was not solely attributable to the transfer of shares of “SLK India”. The facts on record clearly demonstrate that the purchase commitment provided by “FTBNA”, an affiliate of the assessee group, was an integral and inseparable component of the overall transaction and substantially influenced the valuation of the shares acquired by Coforge Limited. The Ld. DR contended that the valuation of shares under the Discounted Cash Flow (DCF) method was significantly dependent upon the projected future revenues of SLK India and its subsidiaries. The projected revenues included substantial assured business from FTBNA under the purchase commitment arrangement. Therefore, the enhanced valuation of the shares was directly linked to the purchase commitment and not merely to the intrinsic worth of the shares. In the absence of such commitment, the valuation adopted by Coforge Limited would have been materially lower. The Ld. DR argued that the purchase commitment was not an ordinary commercial arrangement. The commitment guaranteed future business aggregating to USD 133.9 mn over a period of five years and was executed contemporaneously with the Share Purchase Agreement. The timing and structure of the arrangement clearly establish that the commitment formed an integral part of the acquisition transaction and was intended to provide comfort to the purchaser regarding future revenues and profitability of SLK India. The Ld. DR further submitted that

The Ld. DR contended that the Ld. AO has not disturbed the genuineness of the transfer of shares. Rather, the Ld. AO has only identified and segregated the portion of the consideration attributable to the purchase commitment embedded within the overall transaction value. Therefore, the action of the Ld. AO cannot be construed as questioning the share transfer itself but as determining the true character of the consideration received. The Ld. DR argued that taxation must be based on the real nature and substance of a transaction rather than its nomenclature. Merely because the entire amount was described as share sale consideration in the Share Purchase Agreement (SPA) does not preclude the revenue from examining the true character of the receipt. The principle that substance prevails over form is well recognized in tax jurisprudence, and the revenue is entitled to pierce the form of a transaction where surrounding circumstances indicate that a portion of the consideration relates to obligations or benefits distinct from the transfer of shares. The Ld. DR further submitted that the Assessing Officer adopted a scientific and reasonable methodology for quantifying the portion attributable to the purchase commitment. By comparing the projected turnover arising from the purchase commitment with the overall projected turnover considered under the DCF valuation, the Ld. AO determined

The Ld. DR further submitted that the exemption claimed by the assessee under Article 13 of the India–Mauritius DTAA is available only in respect of gains arising from the transfer of shares. Any receipt attributable to a separate commercial commitment or contractual obligation cannot automatically assume the character of capital gains merely because it is embedded within the overall consideration received under the transaction documents. Consequently, the portion attributable to the purchase commitment is not eligible for treaty protection. The Ld. DR contended that the Ld. AO has rightly treated the amount attributable to the purchase commitment as taxable under the residuary head “Income from Other Sources”. The receipt does not arise from the transfer of a capital asset but from a valuable commercial assurance furnished by an affiliate of the assessee group, which enhanced the transaction value and resulted in additional economic benefit to the assessee. In view of the above facts and circumstances, the Ld. DR submitted that the Assessing Officer correctly determined that a portion of the consideration received by the assessee represented compensation attributable to the purchase commitment and not consideration for transfer of shares. Accordingly, the addition of Rs.28,65,18,882/- made under the head “Income from Other Sources” deserves to be sustained and the appeal of the assessee ought to be dismissed. The observation of the Ld. AO contended in the relevant paragraphs 4.13 to 4.16 are reproduced as below:

We have heard the rival submissions and perused the material available on record. The undisputed facts reveal that the assessee, a tax resident of Mauritius, transferred 81,285 equity shares representing 9% of the share capital of SLK Global Solutions Private Limited (now Coforge Business Process Solutions Pvt. Ltd.) to Coforge Limited for a consideration of Rs.137,74,94,626/-. The assessee claimed that the gains arising from the transfer of shares were not taxable in India in terms of Article 13 of the India–Mauritius DTAA. However, the Ld. AO held that a portion of the sale consideration represented compensation attributable to the purchase commitment provided by Fifth Third Bank National Association (FTBNA) and, accordingly, re-characterised 20.80% of the sale consideration, amounting to Rs.28,65,18,882/-, as “Income from Other Sources”.

We find no merit in the approach adopted by the Ld. AO. The entire foundation of the addition rests upon the presumption that the purchase commitment furnished by FTBNA artificially enhanced the value of the shares sold by the assessee. However, no material has been brought on record to establish that the transaction was a sham, colourable device, or a make-believe arrangement. On the contrary, the material placed before us demonstrates that FTBNA had been a longstanding and significant customer of SLK India even prior to the transfer of shares and that the purchase commitment was merely a

We further find that all shareholders, including the assessee and the promoter group, transferred their shares to Coforge Limited at the same agreed price per share. The revenue has accepted the consideration received by the promoter shareholders without any adverse inference while selectively re- characterising a portion of the consideration received by the assessee. Such an approach is inherently inconsistent and unsupported by any statutory provision. It is not open to the Ld. AO to re-write the terms thereof. Respectfully following the order of Hon’ble Calcutta High Court in Arun Dua (supra) it is observed that if a company and its employee had understood the agreement in a certain way and had acted upon that agreement, it is not open to the Income-tax Officer to give another interpretation and tax the assessee on a hypothetical basis. Hon'ble Delhi High Court in D.S. Bist & Sons (supra) has expressed the same view. The statute does not empower the Assessing Officer to bifurcate the agreed sale consideration of shares between independent parties and treat a part thereof as “Income from Other Sources” merely on the basis of conjectures regarding valuation.

It is a settled proposition of law that, in the absence of a specific statutory provision, the revenue cannot rewrite the terms of a commercial contract entered

In view of the foregoing facts and circumstances, we hold that the addition of Rs.28,65,18,882/- made by the Ld. AO by treating 20.80% of the sale consideration as “Income from Other Sources” is based merely on assumptions and surmises without any cogent evidence. Accordingly, the impugned addition is directed to be deleted. The grounds raised by the assessee are allowed.

In the result, the appeal of the assessee bearing ITA No.2010/Mum/2025 is allowed. Order pronounced in the open court on 08th day of June 2026. Sd/- Sd/- (ARUN KHODPIA) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,िदनांक/Dated: 08/06/2026