FEDERAL MOGUL HOLDINGS, LTD,MAURITIUS vs. ACIT CIRCLE INTL TAX 1(3)(1), NEW DELHI

ITA No.- 4180/Del/2025 Federal Mogul Holdings Ltd. Tax Treaty. Aggrieved with the said position, the assessee filed a rectification request before the AO on 25.07.2023, submitting that during the subject AY assessee had sold 7.40,30,312 unlisted equity shares of Federal-Mohul Powertrain Solution India Private Limited to Federal-Mogul Investments BV for a total consideration of Rs. 1,39,02,89,259/- and capital gain (LTCG) on the said transaction was Rs. 56,49,45,513/- and said capital gains on the said sale was not chargeable to tax in India.

2.1 However, the same was rejected by the AO for the reason that the assessee itself has reported the amount of capital gain of Rs. 56,49,45,513/- as the total amount of LTCG chargeable at special rates in India as per DTAA and hence, it was not a mistake apparent from record and was outside the purview of section 154 of the Act. The AO issued a show cause notice dated 07.06.2024 to assessee wherein the assessee was show caused as to how the rectification request qualifies as a mistake apparent from record and as to why request of assessee for rectification u/s 154 of the Act, should not be rejected. The AO further noted that in response to the show cause notice dated 07.06.2024, the assessee submitted its response vide letter dated 17.06.2024 and held that the response of the assessee was perused and was found untenable.

ITA No.- 4180/Del/2025 Federal Mogul Holdings Ltd. 2.2 The relevant extract of the order dated 22.07.2024 of the AO is rejecting the rectification application filed by the assessee on 25.07.2023 is reproduced as under:

Assessee had filed its return of income for Av 2018-19 on 30.11.2018 declaring income of Rs. 56.49:45.510/- and claiming a refund of Rs. Nil-. Return was processed by CPC and order u/s 143(1) of the Act was passed on 02.11.2019 and a demand of Rs. 30,56,16,480/- was raised Further, rectification orders were passed by CPC u/s 154 of the Income Tax Act, 1961 on 03.05.2020, 28.08.2020 & 29.09.2020 in which the demand was reduced to Rs. 7,64,04,110/- 2 Further, assessee has filed a rectification request on 25.07.2023, therein assessee submitted that during the subject AY assessee had sold 7.40,30,312 unlisted equity shares of Federal-Mohul Powertrain Solution India Private Limited to Federal-Mogul Investments BV for a total consideration of Rs. 1,39,02,89,259/- and capital gain (LTCG) on the said transaction is Rs. 56,49,45,513/- and said capital gains are not chargeable to tax in India 3. On the perusal of rectification application and information available on record it is found that in the ITR for subject AY, assessee, itself has reported the amount of capital gain of Rs. 56,49,45,513/- as the total amount of LTCG chargeable at special rates in India as per DTAA 4 As assessee, itself has reported the amount of capital gain of Rs. 56,49,45,513/- as the total amount of LTCG chargeable at special rates in India as per DTAA, hence, it is not a mistake apparent from record and is outside the purview of section 154 of the Act.

5. Accordingly, a show cause notice dated 07.06.2024 was issued to assessee wherein the assessee was show caused as to how the rectification request qualifies as a mistake apparent from record and as to why request of assessee for rectification u/s 154 of the Act, should not be rejected.

6. In response to the show cause notice dated 07.06.2024, assessee submitted its response vide letter dated 17.06.2024. Response of the assessee has been perused and found untenable.

7. Accordingly, as discussed above, the request of the assessee on the said issue for rectification u/s 154 of the I. T. Act is rejected.”

ITA No.- 4180/Del/2025 Federal Mogul Holdings Ltd. 3.1 Before the Ld. CIT(A), the assessee submitted that as per Article 13 of the India-Mauritius Tax Treaty, the capital gains arising on the transfer of equity shares, acquired prior to April 1, 2017, was not liable to be taxed in India and could only be taxed in Mauritius. It was further submitted that the assessee had filed its Income Tax Return ('ITR') reporting the LTCG of INR 56,49,45,513 arising on these sale of shares in view of Article 13 of the India-Mauritius Tax Treaty wherein as it was provided that the capital gain on the shares being acquired in an Indian Company before 1st April 2017 can only be taxed in Mauritius but however, thereafter from 1st April 2017 onwards, the shares acquired in Indian Company after 1st April 2017 would be taxable.

3.2 The Ld. CIT(A) agreed with the assessee submission in principle that it was clear from the aforementioned amended Article 13 of the DTAA between Indian and Mauritius, that the shares in Indian Company acquired prior to 1st April 2017 was not taxable in India. However, the Ld. CIT(A) noted that to substantiate the position that these shares in Indian company were acquired prior to 1st April 2017, the assessee was stated to have placed on record (in his written submissions) the copy of Shares Certificates issued by FM Powertrain but however, in the documents filed only the copy of Financial Statements of FM Powertrain were submitted. The Ld. CIT(A) noted that it was the responsibility of the assessee to submit the copy of share certificates to prove its contention but it appears that the assessee deliberately 5

ITA No.- 4180/Del/2025 Federal Mogul Holdings Ltd. withheld them to be placed before the office of the CIT(Appeals). In light of the above conduct of the assessee the Ld. CIT(A) held that he was not inclined to accept the contention of the assessee that the mistake in the ITR was an inadvertent error as the same was being repeated in the appellate proceedings also even when numerous opportunities were availed by the appellant in appeal before this office. Accordingly, the Ld. CIT(A) dismissed the appeal of the assessee. The relevant findings of the Ld. CIT(A) are reproduced as under:

“6. I have carefully considered the facts of the case, rectification order and submissions filed by the appellant.

7. Grounds of appeal

no. 1 to 8 are inter-related and are dealt herewith together. 7.1 In support of the contention on the grounds of appeal as raised, the appellant submitted that FM Holdings is a company established and registered under the laws of Mauritius and is a tax resident thereof. The appellant also submitted that being a tax resident of Mauritius, the Appellant is eligible for availing the beneficial provisions of the Double Taxation Avoidance Agreement ('DTAA') between India and Mauritius. 7.2 It was stated by the appellant that during the year under consideration, it sold 7,40,30,312 unlisted equity shares of Federal-Mogul Powertrain Solutions India Private Limited (FM Powertrain) to Federal-Mogul Investments BV (Purchaser) for a total consideration of Rs. 139,02,89,259/-. The transaction was concluded on the basis of sale purchase agreement dated 21.09.2017. On the sale of such equity shares appellant has earned LTCG of Rs. 56,49,45,513/-. 7.3 On perusal from the return of income filed by the appellant, it is seen that the appellant has declared the income of Rs. 56,49,45,510/- while filing the return of income on 30.11.2018. In this case there is only one issue involved that tax rate was not correctly computed on the amount of Rs. 56.49,45,510/- being the capital gain declared by the appellant as LTCG chargeable at special rates in India as per DTAA between India Mauritius. 7.5 The appellant specifically stated that as per Article 13 of the India-Mauritius Tax Treaty, the capital gains arising on the transfer of equity shares, acquired prior to April 1, 2017, are not liable to be taxed in India and can only be taxed in Mauritius. As informed, the Appellant filed its Income Tax Return ('ITR') reporting the LTCG of INR 56,49,45,513 arising on these sale of shares in view of Article 13 of the India-Mauritius Tax Treaty wherein as it is provided that the capital gain on the shares being acquired

6. ITA No.- 4180/Del/2025 Federal Mogul Holdings Ltd. in an Indian Company before 1st April 2017 can only be taxed in Mauritius, however, thereafter from 1st April 2017 onwards, the shares acquired in Indian Company after 1st April 2017 will be taxed in India. 7.6 Further, the appellant submitted that this sale of shares by the appellant are not taxed in India being acquired prior to 1st April 2017 but due to an inadvertent mistake on the part of the assessee in reporting/ presentation of this capital gain in the ITR, the tax demand of Rs. 7.64,04,110/- was raised, however, the same was not taxable in India in view of Article 13 of the India-Mauritius DTAA. 7.7 The submission of the appellant has been duly considered as well as the detailed set of numbered documents in support of its claim as filed by the appellant containing copy of tax residency certificate copy of intimation order/rectification orders issued from time to time, copy of the financial statements of FM Powertrain, etc. 7.8 Further, on perusal of per Article 13 of the India-Mauritius Tax Treaty, it is noticed that the capital gains arising on the transfer of equity shares by the appellant, which were acquired prior to April 1, 2017, are not liable to be taxed in India and can only be taxed in Mauritius. Article 13 of India Mauritius tax treaty states as under: "3A Gains from the alienation of shares acquired on or after 1st April 2017 in a company which is resident of a Contracting State may be taxed in that State. 3B. However, the tax rate on the gains referred to in paragraph 3A of this Article and arising during the period beginning on 1st April, 2017 and ending on 31st March, 2019 shall not exceed 50% of the tax rate applicable on such gains in the State of residence of the company whose shares are being alienated.

4. Gains from the alienation of any property other than that referred to in paragraphs 1, 2, 3 and 3A shall be taxable only in the Contracting State of which the alienator is a resident. 7.9 It is clear from the aforementioned amended Article 13 of the DTAA between Indian and Mauritius, that the shares in Indian Company acquired prior to 1st April 2017 are not taxable in India. However, to substantiate the position that these shares in Indian company were acquired prior to 1st April 2017. the appellant stated to have placed on record in his written submissions) the copy of Shares Certificates issued by FM Powertrain, However, in the documents filed only the copy of Financial Statements of FM Powertrain were submitted. It was the responsibility of the assessee to submit the copy of share certificates to prove his contention but it appears that the assessee deliberately withheld them to be placed before the office of the CIT(Appeals). In light of the above conduct of the assessee I am not inclined to accept the contention of the assessee that the mistake in the ITR was an inadvertent error as the same is being repeated in the appellate proceedings also even when numerous opportunities were availed by the appellant in appeal before this office. 7.10 Considering the deliberate attempt of the appellant not to submit the copy of share certificates of FM Powertrain which are important evidence in establishing that the assessee has invested in the shares on the given date, therefore, the contention of the 7

ITA No.- 4180/Del/2025 Federal Mogul Holdings Ltd. appellant is hereby dismissed. Accordingly, the grounds of appeal no. 1to 8 are decided against the appellant and are accordingly dismissed.”

4. Aggrieved with the said order, the assessee filed an appeal before us on the following grounds of appeal.:

“ 1. That in facts and circumstances of the case, the Ld. CTT(A) passed order u/s 250 of the Act without providing adequate opportunity of being heard which is against the principle of natural justice, hence the matter may kindly be set aside 2. That in facts and circumstances of the case, the Ld. CIT(A) has passed order u/s 250 of the Act without appreciating/considering the submissions made by the appellant during the appellate proceedings which is against the principle of natural justice, hence the matter may kindly be set aside 3a. That the long term capital gain is not chargeable in India w.r.t the shares acquired prior to 01.04.2017 and sold pursuant to Share Purchase Agreement dated 21.09.2017 owing to the beneficial provisions of India Mauritius DTAA. Hence, the impugned order is liable to set aside. 3b That the appellant inadvertently reported capital gains under Sr. No. B9(b) of ITR instead of Sr. No. B9(a) which is rectifiable and hence the impugned order is liable to be set aside.

5. That in the facts and circumstances of the case and in law, the Ld. AO has erred in not rectifying the mistakes apparent from record in the intimation dated 02.11.2019 issued under section 143(1) of the Act and ignoring the various judicial pronouncements, hence the impugned order is liable to be set aside.

6. That the appellant craves leave to add, amend, alter and/or withdraw any or all the above grounds at the time of hearing and disposal of appeal.”

ITA No.- 4180/Del/2025 Federal Mogul Holdings Ltd.

“14. In this it can be noticed the assessee appealed to CIT-Appeals on a 154 order and is before the Hon'ble Tribunal. The Ld. CIT-Appeals order, para 7.1 to 7.10, is relied upon. The assessee has failed to furnish any documentary evidence, like share certificates, that shows the same were acquired prior to 1 April 2017. In the absence of this, the Hon'ble CIT-Appeals order may be upheld.

ITA No.- 4180/Del/2025 Federal Mogul Holdings Ltd. above. We notice that only ground for denial of its claim of the assessee for the non- taxability on the sale of the shares of Federal-Mohul Powertrain Solution India Private Limited, in India as per Article 13 of India-Mauritius Tax Treaty by the Ld. CIT(A) was that the assessee failed to provide / produce the share of Federal-Mohul Powertrain Solution India Private Limited to show that the same was acquired by the assessee on or before 01.04.2017. The Ld. CIT(DR) in its submission also submitted that the assessee had failed to furnish any documentary evidence, like share certificates which showed that the same were acquired prior to 1st April 2017. 7.1 However, in appellate proceedings before us, the assessee has claimed to furnished the same alongwith other evidences in the Paper book (page no. 4-133) in support of its claim that the shares of Federal-Mohul Powertrain Solution India Private Limited was acquired by the assessee prior to 1st April, 2017 and the capital gains arising out on the sale of the said share was not taxable in India as per Article 13 of India- Mauritius Tax Treaty. Therefore, after careful consideration, we deem it fit to admit it. Further, the said documents require factual verification as they were neither produced before the AO nor before the Ld. CIT(A). We, therefore, consider it appropriate to set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO for fresh consideration in light of the additional evidences filed by the assessee in accordance with law after giving reasonable opportunity of being heard.

ITA No.- 4180/Del/2025 Federal Mogul Holdings Ltd. Further, the assessee is also at liberty to file any document / details in support of its claim. All the grounds of appeal are allowed for statistical purposes.

Order pronounced in the open court on 23.12.2025.