OHM JUNIPER LONGTERM FUND LIMITED,MAURITIUS vs. DCIT INTL. TAXATION -2(2)(2), NEW DELHI

ITA 2722/DEL/2023Status: DisposedITAT Delhi22 October 2024AY 2018-19Bench: SHRI SAKTIJIT DEY, HON'BLE (Vice President), SHRI M. BALAGANESH (Accountant Member)19 pages
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What did the Tribunal hold?

The tribunal held that the assessee, possessing a valid TRC, is entitled to treaty benefits under Article 13 of the India-Mauritius DTAA. It ruled that STCG from shares acquired before April 1, 2017, amounting to Rs. 25,22,54,936/-, is not taxable, affirming TRC as sufficient proof of residency based on CBDT circulars and Supreme Court judgments. The tribunal found no conclusive evidence to support the AO's claims of the assessee being a shell/conduit company, and accordingly, directed the deletion of the Rs. 33,840 STCG addition and the consequential interest levied under Sections 234B and 234C.

What were the facts?

The appellant, M/s. OHM Juniper Longterm Fund Ltd, a Mauritius-based Foreign Portfolio Investor (FPI) for AY 2018-19, was denied benefits of the India-Mauritius Tax Treaty for Short Term Capital Gains (STCG) by the DCIT. The DCIT asserted that the appellant lacked beneficial ownership, had control and management outside Mauritius, and was a 'see-through entity' without substance. The assessee, holding a valid Tax Residency Certificate (TRC), claimed entitlement to Article 13(4) of the DTAA for STCG on shares acquired prior to 01.04.2017, and also challenged an STCG addition of Rs. 33,840 and consequential interest under Sections 234B and 234C.

What were the issues?

Whether a Mauritius-based FPI with a valid Tax Residency Certificate is entitled to the benefits of the India-Mauritius DTAA, specifically exemption from capital gains tax on shares acquired before April 1, 2017, and whether the Assessing Officer was justified in denying these benefits by asserting lack of beneficial ownership or substance in Mauritius. Also, the validity of an STCG addition and consequential interest levy.

Which sections of the Income-tax Act were involved?

Income Tax Act, 1961: Section 90(2), Income Tax Act, 1961: Section 119, Income Tax Act, 1961: Section 234B, Income Tax Act, 1961: Section 234C, India-Mauritius Double Taxation Avoidance Agreement (DTAA): Article 13(4), India-Mauritius Double Taxation Avoidance Agreement (DTAA): Article 13(3A), India-Mauritius Double Taxation Avoidance Agreement (DTAA): Article 13(3B), India-Mauritius Double Taxation Avoidance Agreement (DTAA): Article 27A, Mauritius Financial Services Act, 2007: Section 71(3)(a), Mauritius Financial Services Act, 2007: Section 71(3)(b), Mauritius Income Tax Act, 1955: Section 73(1)(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “D”: NEW DELHI

Before: SHRI SAKTIJIT DEY, HON’BLE & SHRI M. BALAGANESH

For Appellant: Shri Kanchan Kaushal, Adv
For Respondent: Shri Vizay B. Vasanta, CIT DR, Shri Amit Katoch, Sr. DR
Hearing: 20/09/2024Pronounced: 22/10/2024

PER M. BALAGANESH, A. M.:

1.

The appeal in ITA No.2722/Del/2023 for AY 2018-19, arises out of the order of the Assessing Officer/ DCIT, International Taxation, Circle- 2(2)(2), New Delhi [hereinafter referred to as „ld. AO‟, in short] in Appeal No. ITBA/AST/S/143(3)/2023-24/1053904658(1) dated 23.06.2023. 2. The assessee has raised the following grounds of appeal before us:-

“1. GROUND NO. I-DENIAL OF INDIA-MAURITIUS TAX TREATY BENEFIT

1.

1 On the facts and in the circumstances of the case and in law, the learned DCIT has erred in making addition of Rs. 26,74,29,041 by denying the benefits of the India-Mauritius Tax Treaty by applying the test of beneficial ownership for Arti

The order continues below.

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