AETNA GLOBAL BENEFITS (SINGAPORE) PTE LTD vs. DEPUTY COMMISSIONER OF INCOME TAX

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W.P.(C)/9633/2023HC DelhiDLHC01027700202308 April 2024Bench: HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV,HON'BLE MR. JUSTICE YASHWANT VARMA3 pages
AI SummaryAllowed

What did the High Court hold?

The Delhi High Court held that the challenge raised was no longer res integra, referencing its prior judgment in Angelantoni Test Technologies SRL vs Assistant Commissioner of Income Tax. The Court reiterated the settled law that investment in shares of an Indian subsidiary is a capital account transaction and does not give rise to income. This principle was supported by the judgment in Nestle SA Versus Assistant Commissioner of Income Tax, which in turn relied on the Bombay High Court's decision in Vodafone India Services Pvt. Ltd. v. Union of India, a decision accepted by the CBDT. Consequently, the fundamental premise of the Revenue that the investment amounted to income which had escaped assessment was found to be flawed. The Court found no basis for the transaction forming a live link for reasons to believe that income had escaped assessment. Therefore, the impugned notices dated March 4, 2023, and April 15, 2023, issued under Sections 148A(b) and 148, and the impugned order dated April 15, 2023, issued under Section 148A(d) of the Act, were quashed.

What were the facts?

The petitioner, Aetna Global Benefits (Singapore) Pte Ltd, a non-resident company, challenged proceedings initiated under Section 148A of the Income Tax Act, 1961. These proceedings pertained to investments made by the petitioner in an Indian company, funded by its shareholders and income earned outside India. The petitioner contended that the subscription of share capital in the Indian company was a capital account transaction and not income, thus the initiation of action under Section 148 of the Act was unsustainable. The impugned notices were dated March 4, 2023, and April 15, 2023, with an order under Section 148A(d) dated April 15, 2023.

What were the issues?

1. Whether the initiation of proceedings under Section 148A and Section 148 of the Income Tax Act, 1961, is sustainable when the transaction in question is an investment in share capital of an Indian company by a non-resident, which is contended to be a capital account transaction and not income. Assessee's contentions: The petitioner argued that the investment in shares of an Indian company is a capital account transaction and does not give rise to any income. Therefore, the premise of income escaping assessment is flawed, and the initiation of action under Section 148A and Section 148 of the Act is unsustainable. The petitioner relied on the High Court's judgment in Angelantoni Test Technologies SRL vs Assistant Commissioner of Income Tax and the principle laid down in Nestle SA Versus Assistant Commissioner of Income Tax, which cited the Bombay High Court's decision in Vodafone India Services Pvt. Ltd. v. Union of India, accepted by the CBDT. Revenue's contentions: The judgment does not record specific arguments made by the revenue.

Which sections of the Income-tax Act were involved?

Section 148A,Section 148

AI-generated summary — verify with the full judgment below

$~55 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 9633/2023 & CM APPL. 36913/2023

AETNA GLOBAL BENEFITS (SINGAPORE) PTE LTD ..... Petitioner

Through: Mr.Ajay Vohra, Sr.Adv with

Mr.Aditya Vohra, Adv.

versus

DEPUTY COMMISSIONER OF INCOME TAX ..... Respondent

Through: Mr.Puneet Rai, Sr.SC with

Mr.Ashivini Kumar and

Mr.Rishabh Nangia, Advs.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR

KAURAV

O R D E R %

08.04.2024

1.

We note that the challenge which stands raised before us is no longer res integra in light of the judgment rendered by this Court in Angelantoni Test Technologies SRL vs Assistant Commissioner of Income Tax, Circle Int Tax 1(1)(1) & Ors. [2023 SCC OnLine Del 8486]. 2. The record would reflect that the Section 148A of the Income Tax Act, 1961 ["Act"] proceedings impugned herein pertain to certain investments made by the petitioner, a non-resident company, in an Indian company out of the funds raised by its shareholders and from income earned outside India. The subscription of share capital in the Indian company would undoubtedly be a “capital account” This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 04/07/2025 at 01:06:58

transaction. It is in the aforesaid context that it is contended that the initiation of action under Section 148 of the Act would not sustain. 3. We note that while dealing with an identical question, we had in Angelantoni Test Technologies, held as follows:- “6. It is settled law that investment in shares in an Indian subsidiary cannot be treated as „income‟ as the same is in the nature of “capital account transaction” not giving rise to any income. In Nestle SA Versus Assistant Commissioner of Income Tax (W.P.(C) No. 12643/2018), this Court held that the allegation of the Revenue that the investment in the shares of Indian subsidiary amounted to income‟ is flawed. The relevant portion of the said judgment is reproduced hereinunder:

“24. The principal objection of the Petitioner that its investment in the shares of its subsidiary cannot be treated as „income‟ is well founded. The decision of the Bombay High Court in Vodafone India Services Pvt. Ltd. v. Union of India (supra) holding such investment in shares to be a „capital account transaction‟ not giving rise to income was accepted by the CBDT. Para 2 of Instruction No.2 of 2015 dated 29th January, 2015 reads thus:

“2. It is hereby informed that the Board has accepted the decision of the High Court of Bombay in the above mentioned Writ Petition. In view of the acceptance of the above judgment, it is directed that the ratio decidendi of the judgment must be adhered to by the field officers in all cases where this issue is involved. This may also be brought to the notice of the ITAT, DRPs and CIT(Appeals).”

25.

Therefore, the fundamental premise of the Respondent that the above investment by the Petitioner in the shares of its subsidiary amounted to „income‟ which had escaped assessment was flawed. The question of such a transaction forming a live link for reasons to believe that income had escaped assessment is entirely without basis and is rejected as such.”

4.

Following the aforesaid, we find ourselves unable to sustain the impugned notices dated 04 March 2023 and 15 April 2023 issued under Sections 148A(b) and 148 respectively and the impugned order This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 04/07/2025 at 01:06:58

dated 15 April 2023 issued under Section 148A(d) of the Act. 5. The writ petition is according allowed. Consequently, the aforenoted impugned notices and the impugned order are hereby quashed.

YASHWANT VARMA, J.

PURUSHAINDRA KUMAR KAURAV, J. APRIL 08, 2024/MJ

This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 04/07/2025 at 01:06:58

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