WORLD SPORT GROUP (MAURITIUS) LTD, MUMBAI V. DCIT (IT) 4(3)(2), MUMBAI

ITA 1891/MUM/2017

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World Sport Group (Mauritius) Ltd (WSGM) appealed against the reassessment order for the Assessment Year 2010-11, which was based on the income received from a Facilitation Services Deed (FS Deed) with MSM Satellite (Singapore) Pte Ltd. The primary contention was that the income had already been taxed in India under the hands of World Sport Group India Pvt Ltd (WSGI), and thus, reassessing the same income in the hands of WSGM constituted double taxation. The Tribunal examined the validity of the reassessment proceedings, focusing on whether the income had indeed escaped assessment and whether the conditions for reopening the assessment under Section 147 were met.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302477 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 26-02-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 16-03-2017
• Other Referred Cases: DHFL Venture Capital Fund vs. ITO, Bang Securities Pvt. Ltd. vs. ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Search and seizure; Double taxation relief; Principle of natural justice; Deemed to accrue or arise in india; Permanent establishment; Wholly owned subsidiary; Block assessment; Revocable transfer; Retraction; Reason to believe; Reassessment proceedings; Set aside
• Section: 147; 131; 68; 148; 271(1)(c); 90; 143(3); 142(1); 153A; 143(2); 43; 9(1); 115A; 9(1); 9(1); 2(A); 73; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘I‘ BENCH MUMBAI BEFORE: SHRI M.BALAGANESH, ACCOUNTANT MEMBER & SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.1891/Mum/2017 (Asse ssment Year :2010-11) World Sport Group (Mauritius) Limited C/o. BMR & Associates LLP Chartered Accountants BMR House 36B, Dr. RK Shirodkar Parel, Mumbai – 400 012 Vs. The Deputy Commissioner of Income tax (International Taxation)- 4(3)(2) 17 th Floor Air India Building Nariman Point Mumbai – 400 021 PAN/GIR No.AABCW6217H (Appellant) .. (Respondent) Assessee by Shri Madhur Agarwal Revenue by Ms.Surbhi Sharma Date of Hearing 27/02/2023 Date of Pronouncement 24/03/2023 आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in ITA No. 1891/Mum/2017 for A.Y.2010-11 preferred by the order against the final assessment order passed by the Assessing Officer dated „Nil‟ u/s.147, r.w.s.143(3) & 144C(13) of the Income Tax Act, hereinafter referred to as Act, pursuant to the directions of the ld. Dispute Resolution Panel (DRP in short) u/s.144C(5) of the Act dated 28/12/2016 for the A.Y.2010-11. ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 2 2. The assessee has raised the following grounds of appeal:- “1. Based on the facts and circumstances of the case and in law, the AO/ Hon'ble Dispute Resolution Panel-2, Mumbai ('Hon'ble DRP) have erred in assessing the total income of the Appellant at Rs 125,00,00,000. 2. Based on the facts and circumstances of the case and in law, the AO has erred in initiating, and correspondingly the Hon'ble DRP has erred in upholding the initiation of the reassessment proceedings under section 147 of the Act. 3. Based on the facts and circumstances of the case and in law, the AO/Hon'ble DRP have erred in assessing the receipts pursuant to the Facilitation Services Deed ('FS Deed') as income of the Appellant disregarding that such receipts are already taxed in the hands of World Sport Group (India) Private Limited ('WSGI") and thereby resulting in double taxation of same income which is against the principles of natural justice. 4. Based on the facts and circumstances of the case and in law, the AO/Hon'ble DRP have erred in assessing the receipts pursuant to the FS Deed as income in the hands of the Appellant disregarding the fact that the Award passed by the ICC International Court of Arbitration ('Arbitration Tribunal') on November 13, 2015 held that the FS Deed was validly rescinded by MSM Satellite (Singapore) Pte Ltd (MSM) and consequently, directing the Appellant to return the entire amount received pursuant to the FS Deed along with interest and legal costs. 5. Based on the facts and circumstances of the case and in law, the AO/Hon'ble DRP have erred in assessing the amount received by the Appellant pursuant to the FS Deed as income in the hands of the Appellant merely on receipt basis disregarding the fact that there was no real income that actually accrued or can even be deemed to accrue to the appellant. 6. Based on the facts and circumstances of the case and in law, the AO/ Hon'ble DRP have erred in concluding that WSGI is a place of management permanent establishment ('PE') of the Appellant and that the Appellant has dependant agent PE in India under the India-Mauritius tax treaty ("tax treaty") by placing reliance on certain unsubstantiated assumptions, surmises and conjectures. Without prejudice to the no PE claim of the Appellant, the AO/Hon'ble DRP have also erred in not considering the fact that as per Article 7 of the tax treaty, only the income which is attributable to the PE in India should be taxed on a net basis. 7. Based on the facts and circumstances of the case and in law, the AO/Hon'ble DRP have erred in holding that WSGM is a tax resident of India under section 6(3)(ii) of the Act and thereby contradicting its own position of treating WSGM as a tax resident of Mauritius while concluding that WSGM has a PE in India under the tax treaty. ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 3 8. Based on the facts and circumstances of the case and in law, the AO/ Hon'ble DRP have erred in concluding that the amount received by the Appellant pursuant to the FS Deed should be treated as fees for technical services ('FTS') under section 9(1)(vii) of the Act. Without prejudice to the above, even assuming without admitting that the amount received by the Appellant pursuant to the FS Deed qualifies as FTS under section 9(1)(vii) of the Act, the AO/Hon'ble DRP have erred in taxing the receipts at the rate of 40 percent and not at the rate of 10 percent under section 115A of the Act. 9. Based on the facts and circumstances of the case and in law, the AO has erred in not categorically stating in the final order that the reassessment proceedings in case of the Appellant have been concluded on a 'protective basis' pursuant to the directions of the Hon'ble DRP 10. Based on the facts and circumstances of the case and in law, the AO has erred in not categorically stating in the notice of demand issued under section 156 of the Act along with the final order that the demand has been raised on a 'protective basis' and will not be recovered from the Appellant. 11. Based on the facts and circumstances of the case and in law, the AO has erred in initiating penalty proceedings under section 271(1)(c) of the Act without appreciating that initiation of penalty proceedings in case of a protective assessment is not tenable. The Appellant prays for leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing, of the appeal.” 3. We have heard rival submissions and perused the materials available on record. World Sport Group (Mauritius) Ltd (WSGM in short) is a private company limited by shares incorporated in Mauritius on 04/06/2007. The main business activity of WSGM is to trade in sub- license of media rights of various sports events like Foot Ball, Golf, Cricket and others. WSGM is a tax resident of Mauritius holding category 1 global business license. It holds a valid Tax Residency Certificate (TRC) issued by Mauritius Revenue authority and is eligible to claim benefit under the India Mauritius Tax Treaty. WSGM does not have any office or fixed place of business or in other form of Permanent Establishment (PE) in India as defined under the treaty and considering the beneficial provisions of the treaty, there is no taxable income in India during the year under ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 4 consideration. In view of the above, WSGM filed „Nil‟ income tax return for A.Y.2010-11 in response to notice issued u/s.148 of the Act. 3.1. WSGM entered into a Facilitation Services Deed (FS Deed) with MSM Satellite (Singapore) Ptd Ltd (MSM in short) recording the facilitation services to MSM in connection with the agreement between Board of Control for Cricket in India (BCCI in short) and MSM (BCCI-MSM agreement) dated 25/03/2009 for obtaining license for Indian Sub- continent Media Rights of Indian Premier League (IPL) pertaining to the period of 2009-2016. Under the Facilitation Services Deed, MSM agreed to pay to WSGM a total facilitation fee of Rs.425 Crores over a period of 8 years as per the agreed payment schedule for facilitation services linked to the matches to be played in each IPL season and subject to other terms and conditions. During the year under consideration, MSP paid Rs.125 Crores under the Facilitation Services Deed to WSGM. The facilitation Services Deed was subsequently rescinded by MSM on 25/06/2010 based on allegation that WSGM made a false representation, which induced MSM to enter into the Facilitation Services Deed. As per MSM, WSGM had represented that Indian Sub-continent Media Rights for the period 2009-2016 vested with WSGM through an agreement with BCCI dated 23/03/2009 and therefore, in a position to negotiate with BCCI for MSM. However, no such agreement was ever entered into between WSGM and BCCI. Instead, the agreement for the said Indian Sub-continent Media Rights was actually entered between BCCI and WSGM on 15/03/2009 which required WSGM to find the broadcast partner within a stipulated time frame as WSGM could not find a broadcast partner within specified time limit, the 15/03/2009 agreement between BCCI and WSGM was terminated on 24/03/2009 at 3 AM and the underlying Indian Sub-continent Media Rights automatically reverted to BCCI. Thus, WSGM did not own the Indian Sub-continent Media Rights to ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 5 be able to facilitate the agreement between BCCI and MSM for such Indian Sub-continent Media Rights for the period 2009-2016. WSGM filed a request for arbitration with the ICC International Court of Arbitration (Arbitration Tribunal in short) on 28/06/2010 to challenge the rescission of the Facilitation Services Deed by MSM. MSM had filed a suit before the Hon‟ble Bombay High Court to prevent WSGM from proceeding with the arbitration (anti-arbitration injunction). Single Bench of Hon‟ble Bombay High court dismissed the MSM suit against which appeal was filed before the Division Bench, which overruled the decision of the single Bench. On filing of appeal by the applicant before the Hon‟ble Supreme Court of India, the Hon‟ble Supreme Court confirmed the contention of WSGM and held that the arbitration must proceed. The Arbitration Tribunal issued the Arbitration award (award in short) on 13/11/2015 and held that MSM had validly rescinded the Facilitation Services Deed and therefore, holding the Facilitation Services Deed to be a void ab initio contract. The arbitrator further directed WSGM to refund the sum of Rs.125 Crores to Multi Screen Media Pvt. Ltd (MSM India in short) alongwith interest and legal costs. Accepting the award, WSGM refunded a sum of Rs.125 Crores on 25/05/2016 from its Barclays bank account maintained in Mauritius alongwith interest of Rs.42.09 Crores and legal cost of Rs.12.79 Crores. The assessee filed the detailed break-up on repayment of facilitation fee alongwith interest and legal costs together with relevant extract of Barclays bank account statement reflecting the said repayment before the ld. DRP. 3.2. A search and seizure action was carried out u/s.132(1) of the Act in the case of World Sport Group (India) Pvt. Ltd (WSGI in short) on 21/04/2010. The ld. Assistant Commissioner of Income Tax, Central Circle-20, Mumbai completed the assessment proceedings of WSGI for the A.Y.2010-11 and passed an order u/s.153A r.w.s. 143(3) r.w.s. 144C(3) ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 6 of the Act on 27/05/2014 taxing the facilitation fee of Rs.125 Crores as business income in the hands of WSGI by holding WSGI as the permanent establishment of WSGM. 3.3. The ld. AO initiated re-assessment proceedings in the case of the assessee herein by issuing the notice u/s.148 of the Act on 19/01/2015. In response, the assessee filed „Nil‟ return of income on 15/04/2015. The ld. AO provided the reasons for reopening the assessee‟s case through letter dated 20/08/2015. The assessee filed the objections to the said reasons before the ld. AO. The ld. AO disposed of the objections by the assessee by passing a speaking order separately on 23/11/2015. 3.4. The reasons recorded for reopening the assessee are reproduced as under:- 1 Search and seizure action u/s.132 of the Income Tax Act, 1961 was carried out in the case of World Sport Group (India) Private Limited (hereinafter referred to as WSGI) and at the residential premises of its Chief Executive Officer Shri Venu Parmeshwaran Nair on 21.04.2010. WSGI is a 100% subsidiary of World Sports Group Pte Limited. 2 World sports Group Pte Limited is one the leading Sports Marketing Media and Event Management Company, having its headquarters at Singapore. WSGI is engaged in the business of promoting and organizing sports events in India. The Board of Control for Cricket in India (hereinafter referred to as BCCI) is the governing body which is responsible for administration of all cricket related activities in the country. The BCCI launched the Indian Premier League (IPL), professional Twenty 20 cricket league created and promoted by the BCCI and backed by the International Cricket Council. BCCI's IPL sub- committee awarded global media rights for broadcast of IPL Matches to WSGI- MSM in January, 2008 for ten years. Media Rights License Agreement was signed individually by WSGI and MSM Singapore (MSM in short) with BCCI for their respective territories. Media Rights to WSGI was sold for a value of USD 642 Million for global rights excluding Indian Sub continent for 2008-2012 and global rights for 2013-2017. Media rights to MSM were sold for a value of USD275.4 Million for Indian sub continent for the period 2008-2012. BCCI cancelled the contract for media rights of MSM on 14/3/2009 at around 10.50 pm against which MSM filed a petition on 15th March 2009 before the Hon'ble High Court of Bombay ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 7 At the urgent hearing before the Bombay High Court, an interim stay was granted to MSM. However, thereafter, the BCCI filed its response before the Court stating that even before the interim stay had been granted to MSM, the BCCI had licensed the sub continent rights for the IPL season 2009-2017 (9years) to World Sports Group (Mauritius) Ltd (herein after called 'WSGM' or the 'assessee') for a consideration of Rs.4791.89 Crores. After hearing both sides in detail, the High Court vacated the stay on the ground that third party rights had already been created and therefore the stay had become in fructuous. Although the stay was vacated, the arbitration petition continued as MSM was left with a claim for damages for breach of contract. However, in order for MSM to get the rights from the BCCI, the rights had to revert back to the BCCI from WSG Mauritius, in whom the rights had already vested. Accordingly, MSM started negotiations with BCCI through Shri Lalit Kumar Modi, the then Chairman and Commissioner, IPL and the common directors of WSGI and WSGM, Mr. Venu Nair and Mr. Andrew Georgiou to relinquish the rights to BCCI to enable MSM to secure the rights directly from BCCI. This resulted in two transactions whereby MSM entered into the facilitation agreement with WSGM dated 25.03.2009 and separately MSM entered into the media rights agreement with the BCCI for the period 2009-2017. As per the agreement dated 25.3.2009 between WSGM and MSM, the facilitation services are stated to be as WSGM assisting MSM in finalizing the BCCI /MSM agreement in relation to finalizing bids for media rights in connection with the IPL The fresh agreement by MSM with the BCCI was for a total period of 9 years and for exclusive television broadcast rights for the Indian subcontinent for a total license fee of Rs.4791.89 Crores payable in installments over the entire 9 year period. The facilitation agreement between MSM and WSGM was for a consideration of Rs. 425 Crores (including the option fee of US$25 million) payable in installments over the duration of that agreement which was co- terminus with the media rights agreement. It was noticed that the MSM made certain payments to WSGM towards facilitation fees as per the agreement dated 25.3.2009 entered into between the two parties. The periodical payments spread over from 2009 to 2016 amounts to Rs.425 Crores. Out of this, the payment was made during FY 2009-10 to the tune of Rs.125 Crores and these payments were made by MSM through their bank account from Singapore. 3 During the assessment proceedings in case of WSGI, it was claimed that this agreement was between two non-resident entities ie MSM and WSGM, Indian entity therefore no income was accrued in India and therefore WSGM was not liable to Indian Tax. As regards the taxability in hands of WSGI also it was claimed that the same was not taxable on grounds that income belong to WSGM. In the whole process, WSGM had conveniently neglected the fact that the source of such income i.e. media rights of BCCI is a property or asset situate in India with an Indian entity, all the negotiations happened in Indian Territory, all the agreement have been signed at Mumbai and signed by common directors of WSGI and WSGM, Mr. Venu Nair and Mr. Andrew Georgiou in India. Therefore, income accrued directly in India u/s 9(1) through an asset or source of income situate in India. Moreover, all the negotiations happened in Indian Territory and by its Indian entity of the Group i.e. WSGI who was already having global rights excluding Indian Sub continent for 2008 -2012 and it fulfills the criteria of being a permanent establishment of the Mauritian entity for the ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 8 purposes of these transactions between WSGM and MSM. The above sum of Rs. 125 Crores received by WSGM from MSM during FY 2009-10 relevant to AY 2010-11, is therefore the income of the assessee within the provisions of the Income-tax Act, 1961 (the 'Act). 4. Relevant provisions for Chargeability of the sum received by WSGM The relevant provisions of the Act read as under: Section 5 of Income Tax Act, 1961 (2) subject to provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person, or (b) accrues or arises or is deemed to accrue or arise to him in India during such year Section 9 Income deemed to accrue or arise in India. (1) The following incomes shall be deemed to accrue or arise in India :- (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India,[] or through the transfer of a capital asset situate in India. [Explanation 1]...... Explanation 2-For the removal of doubts, it is hereby declared that “business connection” shall include any business activity carried out through a person who, acting on behalf of the non-resident,- (a) has and habitually exercises in India, an authority to conclude contracts on behalf of the non-resident, unless his activities are limited to the purchase of goods or merchandise for the non-resident; or (b) (c) habitually secures orders in India, mainly or wholly for the non-resident or for that non-resident and other non-residents controlling, controlled by, or subject to the same common control, as that non-resident: [Explanation 4] For the removal of doubts, it is hereby clarified that expression "through" shall mean and include and shall be deemed to have always meant and included "by means of", "in consequence of or "by reason of" [Explanation 5] For the removal of doubts, it is hereby clarified that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India; (vii) income by way of fees for technical services payable by- (a) the Government; or ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 9 (b) a person who is a resident, except where the fees are payable in respect of services utilized in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; or c) a person who is a non-resident, where the fees are payable in respect of services utilized in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India: Explanation [2]-For the purposes of this clause, fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries"] [Explanation. For the removal of doubts, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and shall be included in the total income of the non-resident, whether or not,- (i) the non-resident has a residence or place of business or business connection in India; or (ii) the non-resident has rendered services in India.) In present case, India has a Double Taxation Avoidance Agreement with Mauritius and therefore provisions of section 90 of the Act shall apply. Section 90 ....................... (2) Where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, as the case may be, under sub section (1) for granting relief of tax, or as the case - may be, avoidance double taxation then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee. The relevant provisions of DTAA are reproduced are herein under: Indo -Mauritius Double Taxation Avoidance Agreement ARTICLE 5-Permanent Establishment- For the purpose of this convention, the term "permanent Establishment" means a fixed place of business through which the business of wholly or partially carried on. 2. The term "Permanent Establishment shall include (a) place of management ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 10 (b) a branch; (c) an office, (d) a factory; (e) a workshop; (f) a warehouse, in relation to a person providing storage facilities for others. (g) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources. (h) a firm, plantation or other place where agricultural or forestry or plantation or related activities are carried on (i) a building site or construction or assembly project or supervisory activities in connection there with, where such site, project or supervisory activity continues for a period of more than 9 months. 3. (i)......................... 4. Notwithstanding the provisions of paragraphs (1) and (2) of this article, a person acting in a Contracting State for or on behalf of an enterprise of the other Contracting State (other than an agent of an independent status to whom the provisions of paragraph (5) apply) shall be deemed to be a permanent establishment of that enterprise in the first mentioned State if: (1) he has and habitually exercise in that first mentioned State, an authority to conclude contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise; or ARTICLE 7-Business Profits – 1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment. 1. Subject to the provisions of paragraph (3) of this article, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment. Where the correct amount of profits attributable to a permanent establishment cannot be readily determined or the determination thereof presents exceptional difficulties, the profits attributable to the permanent establishment may be estimated on a reasonable basis. ARTICLE 14-Independent Personal Services – 1. Income derived by a resident of a Contracting State in respect of professional services or other independent activities of a similar character shall be taxable only in that State unless he has a fixed base regularly available to him in the ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 11 other Contracting State for the purpose of performing his activities. If he has such a fixed base, the income may be taxed in the other Contracting State but only so much of it as is attributable to that fixed base. 5 When the above tax provisions under the Act are considered with reference to the DTAA, then the taxability of WSGM is evident for reasons as under: A) What is the source of Income The fees from facilitation service As per the facilitation agreement dated 25/03/09, WSGM had assisted MSM in finalizing the Media Rights License Agreement' for the Indian sub continent for the period 2009 to 2016 in respect of the IPL from BCCI and in relation to finalizing bids for media rights in connection with the IPL. The relevant extracts of the agreement - Facilitation Deed dated 25/03/2009 between BCCI and MSGM is reproduced hereunder: DEED FOR THE PROVISION OF FACILITATION SERVICES THIS DEED ("Deed") is made the 25th day of March 2009 BETWEEN: (1) WORLD SPORT GROUP (MAURITIUS) LIMITED, a company incorporated under the laws of Mauritius (registered number 017624CI/GBL), with its registered address at 308 James cout, St Denis Street, Port Louis, Mauritius (which expression shall include its successors and assigns) ("WSG"); and (2) MSM SATELLITE (SINGAPORE) PTE. LTD. (formerly known as SET Satellite (Singapore) Pte Ltd, a company organized under the laws of Singapore with its offices at 5 Tampines Central 6, #02-19 Telepark Building, Singapore, 529482 (which expression shall include its successors and assigns) ("MSM") (WSG and MSM shall be collectively referred to as the "Parties") WHEREAS (A) WSG, its affiliates and MSM have previously worked together in connection with the acquisition of media rights to cricket, including with respect to the Indian Premier League (the "IPL"). (B) WSG has assisted MSM in finalizing the BCCI-MSM Agreement (as defined below) and in relation to finalizing bids for media rights in connection with the IPL (collectively, the "Facilitation Services"). (C) In return for performing the Facilitation Services, MSM has agreed to pay to WSG the Facilitation Fee (as defined below) and provide the Bank Guarantees (as defined below) on the terms and conditions hereinafter set out. ........................... Signed and Executed as a Deed For and on behalf of WORLD SPORT GROUP (MAURITIUS) LIMITED By: Name: Andrew Georgiou Designation: Director ...................................... ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 12 Name: Venu Nair Designation: Director Signed and Executed as a Deed For and on behalf of MSM SATELLITE (SINGAPORE) PTE. LTD. By: Name: Michael Grindon Designation: Director IN THE WITNESS OF: .................................. Name: Manjit Singh Further, Shri Venu P Nair, President & Director of WSGI and Director of WSGM and Fresh Brew Communications India Pvt Ltd in his statement recorded on oath u/s 131 of the Act on 22/04/2010, in response to question number 17 replied as under: Q:17 What are the activities undertaken by WSG, Mauritius from its office at Mauritius to earn the Facilitation fee from MSM? Ans. WSG, Mauritius was the contract entity of the IPL Global Rights including the Indian Sub Continent rights (as per March 2009), WSG Mauritius took the facilitation fee in exchange for MSM being allowed to contract for a nine year period 2009-2016, directly with the BCCI IPL instead of through WSGM. Also Shri Manjit Singh, CEO of MSM in his statement recorded on oath during the course of survey action on 25/03/2009 in response to question number 18 responded as under: Q.18 What are the services and what is evidence of services rendered by World Sport Group Mauritius Ltd. which is mentioned in the DEED FOR THE PROVISION OF FACILITATION SERVICES dated 25th March 2009 for which the facilitation fees was paid to World Sport Group Mauritius Ltd. Please provide the same evidence. Also furnish the details of the services rendered by World Sport Group Mauritius Ltd. Ans. This is set out in the above deed. As mentioned earlier, after the BCCI terminated the 21 January 2008 Agreement with MSM Singapore It immediately entered into a Media Rights Agreement for the Indian sub continent with World Sport Group Mauritius. As MSM Singapore was keen to get back the India sub continent rights and further as it wished to obtain these rights from the BCCI as the original rights holder, it was necessary for WSG Mauritius to revert the rights back to BCCI to enable BCCI to license these rights to MSM Singapore. WSG Mauritius terminated its agréement with BCCI to enable the BCCI to license these rights to MSM at the same rights/license fee at which these rights had been licensed to WSG Mauritius WSG Mauritius facilitated the negotiation, execution and relinquished their rights for the consideration of the facilitation fee of Rs.425 Crores. This was the rationale for the facilitation deed. The clauses of the agreement and the statements of Shri Venu Nair and Shri Manjit Singh clearly indicate that the facilitation fees to be paid by MSM to WSGM was in relation to the latter assisting the former in finalizing the Media Rights License Agreement' for the Indian sub continent for the period 2009 to ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 13 2016 in respect of the IPL from BCCI and in relation to finalizing bids for media nights in connection with the IPL. B) Where are the media rights located? The said right was the licence held by BCCI, which is a society registered in India under the Tamil Nadu Societies Registration Act, 1975. Therefore, the right is an asset situated in Indian Territory. This right of transmission, exhibition and otherwise making available of the coverage of the IPL matches and the player auctions was transferred to WSGM by BCCI vide agreement dated 15th March, 2009. C) Whether WSGM has any set up in Mauritius or independent capability to do any business? World Sports Group (Mauritius) Limited (WSGM) was incorporated on 4th June 2007. The registered address of this company is c/o First Island Trust Company Limited, Suite 308, St.James Court, St.Denis Street, Port Lotus, Republic of Mauritius. This company was formed by M/s. First Island Trust Company Limited (FITCO) and the address mentioned above is the corporate office address of FITCO. Share capital of this company as on 31st December, 2008 was US$1 (1 ordinary share of US$1) held by World Sports Holding Limtied, British Virgin Islands. The Directors of WSGM were Mr.Fung Kong Yune Kim, Mr.Denis Sek Sum, Mr.Seamus O'Brien, Mr.Andrew Georgio and Mr.VenuNair, the directors of World Sports Group India Limited, the rest of the directors were employees of FITCO. On surfing about FITCO in the internet, it was seen that this company was engaged in Fiduciary Management and portfolio services of Global clients and is basically a group of accountants and auditors. FITCO has an office in Singapore at First Island Fiduciary Services Pte. Ltd., 79 Robinson Road, #16-01, CPF Building, Singapore 068897 for soliciting clients to set up offshore units in Mauritius. The relevant extracts of statements recorded on oath u/s 131 of the Act on 22/04/2010 and 11/08/2010 of Shri Venu P Nair, President & Director of WSGI and Director of WSGM and Fresh Brew Communications India Pvt Ltd, which are relevant to the context, are reproduced hereunder: Dated 22/04/2010 Q.11 What are all directors and shareholders of WSGI located? Ans: Mr DenisSek Sum in Port Louis, Mauritius, Ms. Stephani Mac Manus and Mr.AndrewGeoriou in Singapore, Mr Venu Nair in Mumbai provide the details of additional directors if any. WSGM is 100% owned subsidiary of WSG Pte Ltd. Singapore according to the best of my knowledge. Q.14 How did the WSG, Mauritius came to acquire these IPL International Media Rights ? Ans. WSG, Mauritius acquired the international rights for the period of 2008 to 2012 under a contract dated 19th February, 2008, from WSG, India after WSG, India secured the Media Rights in Tender Process by BCCI/IPL in 2008. ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 14 Q.15. So apart from this, does WSG, Mauritius undertaken any activity like Sales, Marketing, Seeking, Sponsors, Production Work etc. like its Indian counterpart? What is the role of Mauritius Directors Mr.DennisSek Sam in securing the IPL contract from IPL and executing others. Ans. WSG, Mauritius to the best of my knowledge does not undertake any such activities. MR. Dennis Sek Sam does not have operational role to the best of my knowledge. Q.16 As a director in WSG, Mauritius how many times have you visited the Mauritius office and for what duration? Ans. In my capacity as director, I have been asked by the HQ to attend board meetings and I have attended 2 board meetings since 2008 at the Mauritius office. ....................... Q.27 Please state who represented WSG, Mauritius during the entire course of negotiations during the meeting wherein the aforesaid fees for facilitation services was discussed and deliberated upon. Ans. WSGM was represented by Mr.Andrew Gerogiou and Mr. Venu Nair during the final negotiations with MSM Management. Q.35 For the IPL Global Rights that WSGM holds, it is quite apparent from your answer to the previous queries that the entire business activities were conducted by WSG India and income earned/accrued was out of Indian rights/assets. Agreements were signed in India and there is virtually no set up in Mauritius. Therefore, it is clear that is a pure tax evasion mechanism adopted by WSG, Singapore to escape tax liability in India. Please comment. Ans. The entire process was done by a team which involved team from WSGI and legal team from Singapore and Mr.Georgiou, director of WSGM. We believe we have followed an arms length transaction based on tax advice. I am not well versed with tax issues. Dated 11/08/2010 Q.3 What is the present status of Media rights agreement between WSG, India and BCCI as well as WSG, Mauritius' facilitation fees agreement with MSM, Singapore. Ans. BCCI terminated the ROW media rights agreement as per their letter dated 28th June 2010, a copy of which I am providing now. This termination of rights of WSG, India is illegal and against which a suit has. been filed by us before Bombay High Court. Similarly, MSM, Singapore terminated their facilitation agreement with WSG, Mauritius on 23rd June, 2010, a copy of which I am providing now. WSGM has sent the notice for arbitration in Singapore. MSM, Singapore had filed a suit in Bombay High Court against WSG, Mauritius for repayment of part facilitation fees of Rs. 125 crore received by them. Q.8 When the first contract was signed on 21st January 2008 between MSM, Singapore and WSG, India, option fee was to be payable to WSG, India for the risk it claimed to have taken. But on 15th March 2009, there was a mutual termination agreement among BCCI, WSG India and WSG, Mauritius and then ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 15 the rights were assigned by BCCI to WSG, Mauritius as per mutual understanding of the parties concerned. Had WSG, India got any consideration for relinquishing its rights and assigning the same to WSG, Mauritius. Ans. No. Further from the e-mails of Shri Venu Nair and others in World Sports Group, in the computer back-up taken during the course of search and seizure action. it is seen that in many occasions, Ms. Stephanie MacManus, Senior Vice President and Group Legal advisor of World Sports Group Pte. Limited had informed the senior management of the group that at least one trip had to be undertaken to conduct the board meeting within the financial year Similarly, there is no office set up for WSGM. Ms. Stephanie MacManus, in her mails, was discussing about arranging meeting at one of the hotels in Mauritius Various agreements/deeds entered into by World Sports Group with MSM and/or BCCI were signed by the following persons Date Agreement Signatories from WSGI/WSGM Purpose of agreement 15th March 2009 Deed of Mutually Agreed Termination Seamus between BCCI, WSGI and WSGM WSGI: Seamus O'Brien, Venu Nair WSGM: Seamus O'Brien & Venu Nair To revert back the rights of WSGI to BCCI and to assign it in favour of WSGM 15 th March 2009 Media Rights Licence Agreement between BCCI and WSGM Andrew Georgiou & Venu Nair To assign the Media Rights of Indian Sub- continent to WSGM 25 th March 2009 Indian Rights Termination Confirmation Letter issued by BCCI Venu Nair & Seamus O’Brien Indian Media Rights relinquished to BCCI to pave way for MSM to acquire the same. 25 th March 2009 Deed for the provision of Facilitation Services between Venu Nair & Andrew Georgiou Facilitation fees of Rs.425 Crore to be paid by ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 16 MSM & WSGM MSM to WSGM D) Employees/Personnel of WSGM or WSGI and effective place of entering into all the contracts with MSM and/or BCCI As per the statement on oath of Shri Venu Nair dated 22/04/2010, he does not draw any salary from any concern other than WSGI. This implies that whatever duties he has performed in the course of his employment, everything should be attributable to WSGI. In no circumstances, he can be claimed as an employee of WSGM. The entire negotiations which culminated in the Deed dated 25th March 2009 between MSM and WSGM took place at Mumbai when Mr. Venu Nair and Mr. Andrew Georgiou, who represent the WSG group and are common directors in WSGM and WSGI, were present and actively participated. The Deed was signed by WSGM in Mumbai. The extension letters issued by Mr Lalit Modi, the then IPL, Chairman and Commissioner dated 17th March 2009 and 20th March 2009 to WSGM was hand delivered in Mumbai and it was addressed to Shri Venu Nair and Mr.Andrew Georgiou, Similarly, Indian Rights termination confirmation letter issued by Shri Lalit Modi on 25th March 2009 to WSGM was counter signed by Shri Venu Nair and Mr.Seamus O'Brien on the same day in Mumbai. Further, Mr Lalit Modi, Chairman and Commissioner of IPL (Suspended), in his statement recorded on oath u/s 131 of the Act on 05/05/2010, in reply to question number 21, referring to the agreement between BCCI and WSGM dated 15/03/2009, has inter alia, replied as under: .....On the 15th March early morning at the Chandra Gupta suite at the Maurya Sheraton, we signed an agreement with WSG Mauritius and in the morning the Sony moved Court at the judges house for a stay...." Maurya Sheraton is hotel located in the Indian Territory. From the above, following facts emerge:  WSGM does not have any kind of set up in Mauritius or any existence on its own to conduct any business. It had subscribed capital of US $1 only as on 31/12/2008.  The WSGM had no employee base which it had of its own which helped it to earned facilitation fees from MSM in India.  All the negotiations for Media Rights deal with BCCI and MSM were done in India by the employees and directors of WSGI in which WSGM had no role at all. The same set of people (WSGI) do all the work in India but receive money in a foreign entity which they themselves control.  The control, management, planning and decision for entire execution of the relevant agreements were done in India.  The Board Meetings conducted at Mauritius, if any, were only for name sake designed to evade tax in India and not for any decision making affecting the procurements and/or subsequent exploitation of IPL rights. ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 17  WSGM was never represented by any Mauritius based person/director.  The entire process of acquiring the rights and subsequent arrangements were done on behalf of WSGM by a team of WSGI in India including Mr.Venu Nair and Mr. Andrew Georgiou, who represented the WSG group and are common directors in WSGM and WSGI. These directors were already taking decisions for acquisition of media rights by WSGI from BCCI.  It is the same set of directors who first vide agreement dated 15/3/2009 reverted the media rights from WSGI to BCCI to enable WSGM to acquire the same from BCCI and then vide separate agreement dated 15/3/2009 executed agreement for acquiring media rights by WSGM from BCCI  WSGM has had no role in securing the IPL rights from BCCI and neither did it enter into any kind of sales, marketing, production, or other activity in relation to the same.  MSM, Singapore filing a suit against WSGM in Bombay High Court also suggests that for all practical purposes the place of agreement, its execution, employee strength and strategic control/planning were all based and done from India.  The fact that WSGI did not get any consideration from WBGM for relinquishing its right to the latter or even for services rendered by Mr Venu Nair to WSGM, though he was getting remuneration only from WSGI, clearly shows that the transactions between the two entities were not independent or at arm's length and the reasons behind it were that principally both the entities were operational from India and inclusion of WSGM was a device to evade tax.  The place of business pertaining to this transaction is Mumbai or in some occasions in New Delhi (when the Media Rights were awarded to WSGM by BCCI), both located in Indian Territory Thus, in effect, the entire activity in respect of acquisition of media rights by WSGM and its subsequent reversion back to BCCI and provision of facilitation service to MSM was planned, conducted, managed and controlled in India only by WSGI through its employees and directors who were also controlling WSGM though the payment was made by MSM to WSGM outside India. 6 From the above discussions following aspects are evident: (i) As evident from the agreement dt 25/3/2009 also, the WSG, its affiliates have previously worked together in connection with the acquisition of media rights to cricket, including with respect to the Indian Premier League. WSGM had previously acquired media rights to cricket, and as the General Object of WSGM was to engage in global business as permitted under the Financial Services Development Act, 2001. This shows that acquisition of such commercial/business rights was the business of the world sports group for past several years and such ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 18 commercial rights would therefore be in nature of business assets only. As per Explanation 4 to section 9(1) the word "through" shall mean and include and shall be deemed to have always meant and included "by means of", "in consequence of" or "by reason of". Hence any income "in consequence of or "by reason of an agreement made in India for acquiring and reverting back subsequently, any business/commercial right from BCCI in India would accrue or arise in India and any income from exploitation of such rights shall be business profits. (ii) Even under the contract dated 25/3/2009, the consideration paid by MSM is stated for providing facilitation service and assisting MSM in finalizing the BCCI-MSM Agreement and in relation to finalizing bids for media rights in connection with the IPL which is taxable as business profits as the group was engaged in such activities since earlier years. (iii) WSGI is a PE of WSGM in India because of the following reasons: WSGM does not have any kind of set up in Mauritius or any existence on its own to conduct any business. The WSGM had no employee base which it had of its own which helped it to earned facilitation fees from MSM in India. All the negotiations for Media Rights deal with BCCI and MSM were done in India by the employees and directors of WSGI in which WSGM had no role at all. The same set of people (WSGI) do all the work in India but receive money in a foreign entity which they themselves control. Thus the control, management, planning and entire decision for execution of the relevant agreements for this transaction was located in India through WSGI The entire transaction embodied in the facilitation services agreement has been negotiated and finalized by WSGI from India acting on behalf of WSGM and thus the fees carned by WSGM for facilitation services have been earned by the efforts made by the staff and Directors of WSGI for No consideration was received by WSGI or by its directors providing the facilitation services in India. The provisions of entire services for the earning of the Facilitation fees by WSGM were clearly rendered in India by WSGI. The WSGI - BCCI Agreement on 25th March 2009 for the rest of the world media rights contains a clause (27.5) by virtue of which WSGI could seek a termination of the MSM - BCCI Agreement dated 25th March 2009 by BCCI in the event of default of payment by MSM to WSGM. Without claiming WSGI as agent or PE of WSGM, on what basis, WSGI is responsible for ensuring the payment from MSM and under what authority, it can seek termination notice to MSM for default of its payment to WSGM are some of the questions which WSGM is not in a position to explain. Even the MSM later filed a suit against WSGM in India showing that entire management and control was in India WSGI is 100% subsidiary of World Sports Group Singapore Pte Limited, this is a part of the WSG group. Therefore WSGI cannot be deemed to be an agent of an independent status for the purpose of the treaty. Therefore, even under this clause 4 of Article 5, WSGI would be treated as a PE of the WSGM ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 19 (iv) As WSGM has provided facilitation service and assisted MSM in finalizing the BCCI-MSM Agreement and in relation to finalizing bids for media rights in connection with the IPL under the contract dated 25/3/2009, such receipts are in the nature of fee for technical services u/s 9(1)(u) of the 1 T act and taxable in India. No relief under DTAA is available in absence of any clause for fee for technical services under the treaty with Mauritius. Hence alternatively, the income is also taxable as fee for technical services u/s 9(1)(vii) of the IT act 7. Since during the assessment proceedings for AY 2010-11 in case of the WSGI, the said Indian company has denied Rs 125 Crores to be their income at all and contended that the alleged facilitation agreement was between two non- resident entities i.e MSM and WSGM, therefore no income was accrued in India and therefore WSGM was not liable to Indian Tax As regards the taxability in hands of WSGI also it was claimed that the same was not taxable on grounds that income belong to WSGM. Hence the income needs to be taxed in hands of WSGM as the conditions of taxability in its hands are also satisfied. 8. As no return of income has been filed by World Sports Group (Mauritius) Ltd for AY 2010-11 declaring the income from the aforesaid transaction either as business profits or as fee for technical services, based on the above findings, I have reason to believe that the income of Rs. 125 Crores, chargeable to tax under the Act, has escaped assessment within the meaning of section 147 of the Act. Hence, it is a fit case for initiation of proceedings u/s 147 of the Income Tax Act, 1961 by issuing notice u/s.148 of the Income Tax Act, 1961.” 3.5. From the perusal of the para 7 of the reasons recorded reproduced supra, it could be seen that the ld. AO of the assessee herein was of the opinion that WSGM has received Rs.125 Crores but had stated that the said receipt does not constitute income accruing in India as the facilitation agreement was between two non-resident entities i.e. MSM and WSGM. Therefore, WSGM had pleaded that they were not liable to Indian income tax. But WSGI (Indian entity) also claimed that the same was not taxable in their hands as the amount was received by WSGM and that the said money belongs to WSGM. But it is a fact on record that the ld. AO while framing the search assessment for A.Y.2010-11 u/s. 153A r.w.s.143(3) r.w.s. 144C(3) of the Act on 27/05/2014 in the hands of WSGI, had already assessed the very same facilitation fee and Rs.125 Crores as income in the hands of WSGI. While arriving at this conclusion on 27/05/2014, in the assessment proceedings of WSGI, the ld. Assessing Officer of WSGI had categorically stated that Mauritius entity (WSGM) has ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 20 not done any work at all enabling them to receive facilitation fee of Rs.125 Crores. In other words, the entire activities were carried out only by WSGI and that the Assessing Officer of WSGI was justified in his action of taxing the receipt of Rs.125 Crores towards facilitation fee as income in the hands of WSGI for A.Y.2010-11 in the search assessment completed on 27/05/2014. We find that the ld. AO does not even whisper about the completion of search assessment for A.Y.2010-11 in the hands of WSGI on 27/05/2014 while recording the reasons for reopening the assessment in the hands of WSGM on 19/01/2015. It is pertinent to note that assessment in the hands of WSGM was reopened on 19/01/2015 which is after the date of completion of assessment for A.Y.2010-11 in the hands of WSGI on 27/05/2014. This goes to prove that as on the date of recording the reasons for reopening the assessment in the hands of WSGM, the ld. AO was conscious of the fact that the very same sum of Rs.125 Crores already assessed on substantive basis in the hands of WSGI in the search assessment completed on 27/05/2014. Since WSGI had denied the taxability of Rs.125 Crores in their hands, the ld. AO as a matter of abundant caution is trying to reopen the case of the assessee herein i.e. WSGM with a contingency that in case WSGI succeeds in their plea in appellate proceeding, the sum of Rs.125 Crores would at least get taxed in the hands of the assessee herein i.e. WSGM. Hence, the entire reasons recorded for reopening the assessment clearly postulates a contingent event and there is absolutely no direct formation of belief based on tangible material with the ld. AO that income has escaped assessment in the hands of WSGM warranting reopening u/s.147 of the Act. In fact in para 7 of the reasons recorded, the ld. AO is only trying to portray that WSGI has taken a stand that Rs.125 Crores is not taxable in their hands and that the said stand has already been accepted by the department in the hands of WSGI, which is not the fact. This is evident from the assessment framed in the hands of WSGI for A.Y.2010-11 ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 21 u/s.153A r.w.s. 143(3) r.w.s. 144C(3) on 27/05/2014 wherein the very same sum of Rs.125 Crores was added as income in the hands of WSGI. 3.6. Hence, it could be seen that a sum of Rs.125 Crores towards facilitation fees has already been taxed by the Assessing Officer in the hands of WSGI for A.Y.2010-11 in the search assessment completed on 27/05/2014. In the reasons recorded for reopening the assessment, the ld. AO of WSGM is seeking to tax the very same sum of Rs.125 Crores in the hands of WSGM. Once the Revenue has taken a stand to tax the income in the hands of one assessee on substantive basis, then it will not be open to the Revenue to initiate re-assessment proceedings to tax the very same sum in the hands of another assessee. If this plea is entertained, it would give long rope to the Revenue to compromise on the formation of belief based on tangible information that income of the assessee has escaped assessment warranting reopening u/s.147 of the Act. It is pertinent to note that the addition of Rs.125/- Crores has been made in the hands of WSGI on substantive basis for A.Y.2010-11. The very same sum of Rs.125 Crores is sought to be added in the hands of WSGM for A.Y.2010-11 on substantive basis. Hence, the basic formation of belief that income of the assessee has escaped assessment fails. In fact on perusal of the provisions of Section 147 of the Act, we are of the considered opinion that the expression used thereon is „Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment‟. The reasons recorded by the ld. AO in the instant case only go to prove that Assessing Officer has reason to believe that income chargeable to tax “may escape assessment”. Hence, this is a clear case of formation of belief of the ld. AO based on a contingent event happening at a future date. In our considered opinion, reopening of assessment cannot be done in this manner. ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 22 3.7. We find that the ld. AR had rightly placed reliance on the decision of the Hon‟ble Jurisdictional High Court in the case of DHFL Venture Capital Fund vs. ITO reported in 358 ITR 471. In this regard, the facts of the case before the Hon‟ble High Court are as under:- “3. The Petitioner is registered with the Securities and Exchange Board of India as a Venture Capital Fund under the SEBI (Venture Capital Fund) Regulations, 1996. The Petitioner was constituted under a trust deed dated 19 August 2005 of Dewan Housing Financial Corporation Limited. The object of the trust is to carry on activity of a venture capital fund and to raise resources through schemes to make portfolio investments. The Petitioner floated the DHFL Real Estate Management Fund - 1 (Dream Fund - 1) which is a close ended fund with a focus in the Indian real estate and allied sectors. A private placement memorandum is circulated to target investors such as institutional investors and ultra high net worth individuals with whom separate contribution agreements are entered into in respect of the scheme. Clause 15.1 of the deed of trust provides as follows : "15. Revocation of Contributions by 75% Majority Consent 15.1 Save as otherwise provided in the Contribution Agreement of the respective Scheme, the Contributors shall be entitled to revoke the Contributions to a Scheme, at any time during the term of that Scheme, in accordance with the terms and conditions set out in the Scheme Documents of that Scheme, for any reason, including but not limited to circumstances resulting from any adverse tax consequences (for either the Trust or the Contributors) or any direction of any statutory authority, provided that no such revocation shall take effect unless the consent of Contributors holding Units of that Scheme representing not less than 75% of the total Contributions to that Scheme, has been obtained, in this behalf pursuant to the other Scheme Document of that Scheme read with this Trust Deed." 4. For Assessment Year 2007-08 the Petitioner filed a return of income claiming the status of an AOP. Exemption was claimed from income chargeable to tax under Section 10(23FB) on the ground that the income was of a Venture Capital Fund. The Assessing Officer in the order of assessment under Section 143(3) dated 29 December 2009 determined the total income of the Petitioner at Rs.110.76 Crores and denied the exemption under Section 10(23FB) on the ground that the Petitioner was in breach of the SEBI guidelines relating to investment conditions and restrictions on a Venture Capital Fund. The CIT (A) dismissed the appeal and proceedings are pending before the Tribunal. 5. For Assessment Year 2008-09, which is the Assessment Year under consideration the Petitioner had an income of Rs.32.83 Crores. In the computation of income the Petitioner claimed that the contributions by its investors in terms of the trust deed and contribution agreements constituted revocable transfers under the provisions of the Act and hence, the income accruing to the fund was not liable to tax in the hands of the Petitioner, but in the hands of the investors / contributors in proportion to their respective contributions. A similar note was appended in the notes to the accounts. On 27 December 2010 an order of assessment was passed under Section 143(3) by ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 23 which the Assessing Officer held that the contributors to the scheme have practically no control over it and hence, the provisions of Sections 61 and 63 were not applicable. In the circumstances, the total income of Rs.32.83 Crores was held to be exigible to tax. In appeal, the Commissioner (Appeals) came to the conclusion that there was a revocable transfer within the meaning of Sections 61 to 63 and the income which arose to the trust was taxable in the hands of the contributors and not in the hands of the Petitioner. The order of the CIT (A) also took note of the fact that the Petitioner had substantiated its case that the beneficiaries of the trust had offered in their hands the income distributed from the fund and which had been assessed by the Revenue. Consequently, it was held that when the share of income received by the contributors from the fund had been included in the total income of the contributors and was offered to tax by the contributors, it was not open to the department to proceed to tax the same income again in the hands of the fund. Against the order of the CIT(A) for Assessment Year 2008-09, the Revenue is in appeal before the Tribunal. 6. In the meantime, the Assessing Officer passed an order on 29 December 2011 for Assessment Year 2009-10 treating the Petitioner as an AOP and brought to tax the income of that year. 7. On 18 May 2012 a notice had been issued by the Assessing Officer under Section 148 for Assessment Year 2008-09. The notice has been issued to "the AOP of the contributors of M/s. DHFL Venture Capital Fund" at the address of the Petitioner. The reasons on the basis of which the assessment is sought to be reopened for Assessment Year 2008-09 are as follows : "During the course of assessment proceedings of M/s DHFL Venture Capital Fund it was noticed that, as per the Trust deed dated 19.08.2005 furnished by the assessee, the body of contributors having minimum 75% of the units had the power to revoke the amount transferred by the contributors to DHFL Venture Capital Fund and not an individual contributor. Obviously, therefore, cumulative contributions made by body of contributors is "revocable transfer" as envisaged in the provisions of sections 61 to 63 of the Act and not that of individual contributors, in light of the stand taken by the DHFL Venture Capital Fund during its assessment proceedings that provisions of sections 61 to 63 are attracted to the transactions between the contributors and DHFL Venture Capital Fund. In view of the above, the income arising from the contributions made by the contributors to DHFL Venture Capital Fund is taxable in the hand of Body of contributors whose members being companies and individuals is "Association of Persons of the contributors" if provisions of sections 61 to 63 are attracted to the transactions between contributors and DHFL Venture Capital Fund as has been claimed by the DHFL Venture Capital Fund during the assessment proceedings for AY 2008-09 as per letter dated 25.12.2010. Therefore, the income of Rs.32,83,77,906/- arising from investment of contributions of the contributors to DHFL, which has been claimed as exempt in the hands of the DHFL Venture Capital Fund, has to be assessed as income in the hands of the "AOP of the contributors" of DHFL Venture Capital Fund. However, it is found that no return of income has been filed by such AOP of the contributors of DHFL Venture Capital Fund and therefore, an amount of Rs.32,83,77,906/- has escaped income of the 'AOP of the contributors of DHFL Venture Capital Fund". Accordingly I have reason to believe that income of Rs. 32,83,77,906/- chargeable ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 24 to tax has escaped assessment within the meaning of the provisions of section 147 r.w.s. 148 of the Income Tax Act, 1961. You are, therefore, required, as per the provisions of section 148 of the Act to furnish a return of income in respect of the 'AOP of the contributors of DHFL Venture Capital Fund" within the time specified in the notice u/s 148 which is enclosed along with this letter." 8. The Petitioner submitted its objections on 20 June, 2012 to the reopening of the assessment. The Assessing Officer by his order dated 9 November, 2012 disposed of the objections and maintained the notice for the reopening of the assessment.” 3.7.1. The Hon‟ble Bombay High Court disposed of the appeal by observing as under:- “13. In the present case, the reasons which have been disclosed make it abundantly clear that the reopening of the assessment is contingent on the provisions of Sections 61 to 63 being attracted to the transactions between the contributors and the Petitioner as has been claimed by the Petitioner. At the cost of repetition, it would be appropriate to emphasize the following extract from the reasons which have been disclosed to the Petitioner : "In view of the above, the income arising from the contributions made by the contributors to DHFL Venture Capital Fund is taxable in the hand of Body of contributors whose members being companies and individuals is "Association of Persons of the contributors" if provisions of sections 61 to 63 are attracted to the transactions between contributors and DHFL Venture Capital Fund as has been claimed by the DHFL Venture Capital Fund during the assessment proceedings for AY 2008-09 as per letter dated 25.12.2010. Therefore, the income of Rs.32,83,77,906/- arising from investment of contributions of the contributors to DHFL, which has been claimed as exempt in the hands of the DHFL Venture Capital Fund, has to be assessed as income in the hands of the "AOP of the contributors" of DHFL Venture Capital Fund." (Emphasis supplied) 14. The reasons for the reopening of the assessment clearly postulate that the reopening is based on the contingency that the provisions of Sections 61 to 63 are held to be attracted to the transactions between the contributors and the Petitioner "as has been claimed" by the Petitioner. The formation of a reason to believe is "if" the provisions of Sections 61 to 63 are attracted. It is on this hypothesis that the Assessing Officer proceeds to record that the income of Rs.32.83 Crores arising from the investment of contributions of the contributories "which has been claimed as exempt in the hands of" the Petitioner has to be assessed as income in the hands of the AOP of the contributors of the Petitioner. Reading the reasons as they stand, it is evident that the Revenue has sought to reopen the assessment in exercise of powers conferred by Section 148 on the hypothesis that should the Tribunal accept the contention of the Petitioner and affirm the view of the Commissioner (Appeals), the income would be exempt in ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 25 the hands of the Petitioner and in such an eventuality should be brought to tax in the hands of an AOP of the contributors of the Petitioner. 15. The jurisdictional requirement for reopening an assessment under Section 148 is the formation of a reason to believe by the Assessing Officer that income has escaped assessment. The formation of the reason to believe and the existence of that reason must be in the present . Recourse can be taken to the provisions of Section 148 where the Assessing Officer has a reason in present, meaning thereby, a reason which is present to his mind when he forms his reason to believe, that income has escaped assessment. Recourse to Section 148 cannot be founded in law on a hypothesis of what would be the position in future should an appeal before the appellate authority, being the Tribunal or the High Court, result in a particular outcome. The statute does not contemplate the reopening of an assessment under Section 148 on such a hypothesis or a contingency which may emerge in the future. 16. The basis on which the Assessing Officer has purported to reopen the assessment is placed beyond any doubt by the affidavit which has been filed in reply to the Petition. As we have noted, there is no ambiguity whatsoever in the reasons which have been communicated to the assessee in the order dated 18 May 2012, but in the affidavit in reply, it has been stated that the income of Rs.32.83 Crores arising from the investment of contributions of the contributors to the Venture Capital Fund which has been claimed as exempt in the hands of the Petitioner should be assessed as income in the hands of the AOP of the contributors of the Petitioner "on a protective basis". Again it has been stated that the issue of taxing the AOP of the contributors of the Petitioner "has arisen from the submission of the Petitioner before the appellate authorities" where the Petitioner has contended that the transactions amount to a revocable transfer and that the income which would arise should be taxed in the hands of the individual contributors. The reopening of an assessment under Section 148 on the basis of a submission which is raised before the appellate authority by the assessee is clearly impermissible because what Section 147 requires is a formation of a reason to believe by the Assessing Officer. In the present case, there is clearly a want of compliance with the jurisdictional condition. The Assessing Officer has not formed a reason to believe that income has escaped assessment since the reopening is based purely on a contingency that may arise upon a particular outcome before the appellate tribunal. 17. Undoubtedly as counsel appearing on behalf of the Revenue submits the concept of a protective assessment is well known to the law of income tax in India. The basis on which a protective assessment is carried out is summed up succinctly in Sampath Ayengar's Law of Income Tax (11th edition, Vol. VI, page 9724) : "Protective assessment - The Assessing Officer may often have to assess the same income in more than one place. Sometimes they may be made by different officers as, for example, where an officer assessing A thinks that certain income belongs to him but another officer assessing B is of the opinion that the income is his. Sometimes the same officer may find that an assessee before him is returning a particular income but is of the opinion that it should be assessed in the hands of a firm or a family and not in the hands of the person who returned it. It has been ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 26 held that the officer may, when in doubt (Not otherwise : CIT v. Shri Ramchandraji Maharaj Ka Bada Mandir [1988] 73 CTR (MP) 79), to safeguard the interests of the Revenue assess it in more than one hand (Lalji Haridas v. ITO [1961] 43 ITR 387 (SC)). But this procedure can be permitted only at the stage of the assessment as, at higher levels, it is possible for the appellate or revisional authority to give a clear finding as to the assessee who is liable to be so assessed leaving the one who is aggrieved to get redress by appropriate proceedings. (See Dayabai v. CIT [1985] 154 ITR 248 (MP)). In any event, if, at the stage of the Tribunal or High Court it is found that the same income is assessed in both places, the Department should provide relief suo motu to one of them. (ITO v. Bachu Lal Kapoor [1966] 60 ITR 74 (SC)). There can be precautionary assessments but not protective recovery. (CIT v. Cochin Co. Pvt. Ltd. [1976] 104 ITR 655 (Ker.)). But where an assessment is intended to be protective, it should be so expressed. (CIT v. Khalid Mehdi [1987] 165 ITR 685 (AP)). 18. A protective assessment as the learned author indicates (Vol. 1 page 272) is regarded as being protective because it is an assessment which is made ex abundanti cautela where the department has a "doubt as to the person who is or will be deemed to be in receipt of the income". A departmental practice, which has gained judicial recognition, has emerged where it appears to the Assessing Officer that income has been received during the relevant Assessment Year, but where it is not clear or unambiguous as to who has received the income. Such a protective assessment is carried out in order to ensure that income may not escape taxation altogether particularly in cases where the Revenue has to be protected against the bar of limitation. But equally while a protective assessment is permissible a protective recovery is not allowed. However, such an exercise which is permissible in the case of a regular assessment must necessarily yield to the discipline of the statute where recourse is sought to be taken to the provisions of Section 148. Protective assessments have emerged as a matter of departmental practice which has found judicial recognition. Any practice has to necessarily yield to the rigour of a statutory provision. Hence, when recourse is sought to be taken to the provisions of Section 148, there has necessarily to be the fulfillment of the jurisdictional requirement that the Assessing Officer must have reason to believe that income has escaped assessment. To accept the contention of the Revenue in the present case would be to allow a reopening of an assessment under Section 148 on the ground that the Assessing Officer is of the opinion that a contingency may arise in future resulting an escapement of income. That would, in our view, be wholly impermissible and would amount to a rewriting of the statutory provision. Moreover, the reliance which is sought to be placed on the provisions of Explanation 2(a) to Section 147 is misconceived. Explanation 2 provides a deeming definition of cases where income chargeable to tax has escaped assessment and clause (a) includes a case where no return of income has been furnished by the assessee although his income or the income of any other person in respect of which he is assessable exceeds the maximum amount which is not chargeable to tax. As the reasons which have been disclosed to the assessee would indicate, this is not a case where an assessee has not filed a return of income simplicitor. The whole basis of the reopening is on the hypothesis that if the provisions of Sections 61 to 63 are attracted as has been claimed by the assessee, and the income of Rs.32.83 Crores which has been claimed by the assessee to be exempt is treated as exempt, in that event an alternate basis for taxing the income in the hands of the AOP of the contributories is sought to be ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 27 set up. For the reasons already indicated, the entire exercise is only contingent on a future event and a consequence that may ensure upon the decision of the Tribunal, that again if the Tribunal were to hold against the Revenue. A reopening of an assessment under Section 148 cannot be justified on such a basis. There has to be a reason to believe that income has escaped assessment. 'Has escaped assessment' indicates an event which has taken place. Tax legislation cannot be rewritten by the Revenue or the Court by substituting the words 'may escape assessment' in future. Writing legislation is a constitutional function entrusted to the legislature. 19. In the view which we have taken it has not been necessary for the Court nor is it appropriate for this Court to enter upon the merits of the other issues raised by the learned senior counsel appearing on behalf of the assessee. The appeal before the Tribunal is still pending and hence, it would not be proper for this Court to express any opinion thereon. We clarify that we are allowing this petition on the ground that the jurisdictional requirement for reopening an assessment under Section 147 for Assessment Year 2008-09 has not been fulfilled. (emphasis supplied by us) 3.8. The ld. AR before us also placed reliance on yet another decision of the Hon‟ble Jurisdictional High Court in the case of Bang Securities Pvt. Ltd. vs. ACIT in Writ Petition No.2685 of 2007 dated 10/12/2021. The facts before the Hon‟ble Bombay High Court are as under:- 4. The point that emerges from the reasons recorded for re-opening petitioner's assessment concerns transactions of two clients of petitioner namely: Parth Investment Consultants Pvt Ltd. (Parth) and Devki Finance & Trading Pvt Ltd. (Devki). Both these had effected share transactions through petitioner and these transactions were also recorded in the books of account of Parth and Devki, which were found during search related proceedings. Ofcourse, both Parth and Devki have subsequently denied these transactions as theirs and contended that these were petitioner's transactions. In the reasons recorded, the Assessing Officer has cited more particularly from the assessments of Parth and Devki and has made it the basis for re-opening. Therefore, as respondents have not crossed the threshold for re-opening after a period of 4 years, Le., discharge the onus of proving failure to disclose fully and truly all material facts for petitioner's assessment, the notice dated 30 March 2007 issued under Section 148 of the Act, has to be set aside on this ground alone." 3.8.1. The Hon‟ble Jurisdictional High Court disposed of this writ by observing as under:- “5. The reasons, it is recorded that in the case of Parth it is noted that an addition of Rs.50,31,450/- has been made by Assessing Officer on account of speculation profit earned for A.Y 2000-2001. In the reasons, it is also mentioned that in the ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 28 case of Devki the Assessing Officer has added a sum of Rs.17,77,500/- on account of profit from share trading for A.Y 2000-2001 and added Rs.3,37,17,358/- for A.Y- 2001-2002 in the case of Devki on account of credit entry treated as income under Section 68 of the Act. Once these amounts have been added as income of Parth and Devki, certainly that cannot be a reason to conclude that any income chargeable to tax has escaped the assessment for the same assessment years in the hands of another party, ie, petitioner. 6 It appears from the reasons that the Assessing Officer has decided to reopen petitioner's case for A.Y-2000-2001 under Section 148 of the Act because of retraction by Parth and Devki and before passing a block assessment order in the case of petitioner for the period 1 April 1991 to 23rd March 2001 on 26th September 2003. In the case of assessment of Parth and Devki, the Assessing Officer has recorded their retraction and dismissed those retractions as after thought because the transactions were recorded by Parth and Devki in their own books of account but they did not book the same into account while computing the profit. Where on consideration of material on record, one view conclusively is taken by the Assessing Officer, it would not be open to re-open the assessment based on very same material with a view to take another view. In our view, this is a case where the assessment is sought to be re-opened on account of change of opinion of the Assessing Officer. There is no new material to which reference is to be account of speculation profit earned for A.Y 2000-2001. In the reasons, it is also mentioned that in the case of Devki the Assessing Officer has added a sum of Rs.17,77,500/- on account of profit from share trading for A.Y 2000-2001 and added Rs.3,37,17,358/- for A.Y-2001-2002 in the case of Devki on account of credit entry treated as income under Section 68 of the Act. Once these amounts have been added as income of Parth and Devki, certainly that cannot be a reason to conclude that any income chargeable to tax has escaped the assessment for the same assessment years in the hands of another party, ie, petitioner. 6 It appears from the reasons that the Assessing Officer has decided to reopen petitioner's case for A.Y-2000-2001 under Section 148 of the Act because of retraction by Parth and Devki and before passing a block assessment order in the case of petitioner for the period 1 April 1991 to 23rd March 2001 on 26th September 2003. In the case of assessment of Parth and Devki, the Assessing Officer has recorded their retraction and dismissed those retractions as after thought because the transactions were recorded by Parth and Devki in their own books of account but they did not book the same into account while computing the profit. Where on consideration of material on record, one view conclusively is taken by the Assessing Officer, it would not be open to re-open the assessment based on very same material with a view to take another view. In our view, this is a case where the assessment is sought to be re-opened on account of change of opinion of the Assessing Officer. There is no new material to which reference is to be found and the entire basis for re-opening the assessment is the material which was available before the Assessing Officer in the course of assessment proceedings of petitioner, Parth and Devki and respondent no.1 is the common Assessing Officer. In this case, it cannot be postulated that the condition precedent to the re- opening of the assessment beyond a period of 4 years has been fulfilled. 7 In the circumstances, petition is allowed in terms of prayer clause (a) which reads as under: ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 29 "(a) This Hon'ble Court may be pleased to issue a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India calling for the records of the Petitioner's case and after examining the legality and validity thereof quash and set aside the notice dated 30 March 2007 issued by Respondent no. 1 under Section 148 of the Act seeking to reopen the assessment for the assessment year 2000-01 and the two notices, dated 20 November 2007 and 13 December 2007, issued by Respondent no.1 under Sections 142(1) and 143(2) respectively and the order dated 12" December 2007." 3.9. In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove we have no hesitation in quashing the reopening made by the ld. AO. We hold that there was invalid assumption of jurisdiction for reopening the assessment by the ld. AO in the eyes of law. Accordingly, the ground No.2 raised by the assessee is allowed. 4. Since the entire re-assessment proceedings are quashed, the other grounds raised by the assessee on merits and the additional grounds raised by the assessee on the chargeability of interest u/s.234B and 234C of the Act need not be adjudicated and they are left open. 5. In the result, appeal of the assessee is allowed. Order pronounced on 24/03/2023 by way of proper mentioning in the notice board. Sd/- (SANDEEP SINGH KARHAIL) Sd/- (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 24/03/2023 KARUNA, sr.ps ITA No.1891/Mum/2017 M/s. World Sport Group (Mauritius) Ltd. 30 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai Date Initial 1. Draft dictated on 20/03/2023 Sr.PS 2. Draft placed before author 23/03/2023 Sr.PS 3. Draft proposed & placed before the second member JM/AM 4. Draft discussed/approved by Second Member. JM/AM 5. Approved Draft comes to the Sr.PS/PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. File sent to the Bench Clerk Sr.PS 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order. 11. Dictation Pad is enclosed 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy//