DCIT CORPORATE CIRCLE 1(1), CHENNAI V. ARUN EXCELLO HOMES PRIVATE LIMITED, CHENNAI

ITA 2911/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1102 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 15-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR
• Assessee Lawyers: DINKLE KOTHARI ACA
• Keywords: Double taxation relief
• Section: 195

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . . . , . , # BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI S.JAYARAMAN, ACCOUNTANT MEMBER / I.T.A. NO.2911/CHNY/2018 '' /ASSESSMENT YEAR : 2014-15 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1(1), CHENNAI-600 034. VS M/S.ARUN EXCELLO HOMES PVT.LTD., 18, BHATTAD TOWERS, WEST COTT ROAD, ROYAPETTAH, CHENNAI-600 014. PAN: AAGCA6559H ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.R.CLEMENT RAMESH KUMAR, ADDL.CIT /RESPONDENT BY : MS.DINKLE KOTHARI, ACA /DATE OF HEARING : 28.02.2019 /DATE OF PRONOUNCEMENT : 18.03.2019 / O R D E R PER S.JAYARAMAN, AM: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI, IN ITA NO. 672/ CIT(A)-1/2016-17 DATED 30.07.2018 FOR ASSESSMENT YEAR 2014-15. 2. M/S. ARUN EXCELLO HOMES PVT.LTD., THE ASSESSEE, IS ENGAGED IN REAL ESTATE BUSINESS. THE ONLY ISSUE INVOLVED IN TH IS APPEAL IS THE DISALLOWANCE OF DISCOUNT ON ISSUE OF OPTIONALLY CON VERTIBLE DEBENTURES FOR A SUM OF 2,00,28,351/-. THIS REPRESENTS THE AMORTIZATION OF A SUM OF 200,283,510/- BEING THE INCREASED LIABILITY IN THE ACCOUNTS OF THE 3 ITANO.2911/CHNY/2018 5. THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THA T THIS TRANSACTION IMPUGNED IS A COLOURABLE TRANSACTION AND THE CORPOR ATE VEIL OF THE MAURITIUS NON-RESIDENT COMPANY NEEDS TO BE LIFTED T O LOOK THAT THE ENTIRE TRANSACTION IS A FOR ROUTING MONEY THROUGH LAND OWN ING AFFILIATES ESPECIALLY WHEN CAPITAL GAIN IS EXEMPT WHEREAS INTEREST IS TAX ABLE AS PER DTAA WITH MAURITIUS. 3. THE LD. D R ARGUED ON THE LINES OF THE GROUND S OF APPEAL. PER CONTRA, THE LD. A R RELIED ON THE ORDER OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO.937/MDS/2017 FOR THE EARLIER ASSESSMENT YEAR 2013-14 DATED 06.12.2017. 4. WE HEARD THE RIVAL SUBMISSIONS. THE RELEVANT PO RTION OF THE ORDER OF THIS TRIBUNAL, CITED SUPRA, IS EXTRACTED AS UND ER:- 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE ORDERS OF THE AUTHORITIES BELOW. WHAT WE FIND IS THAT THE INV ESTMENTS MADE BY THE MAURITIUS COMPANY, NAMED MIREFL WAS IN THE NATURE O F EQUITY SHARES AND CCDS IN THE ASSESSEE COMPANY. THE CCDS WERE LAT ER CONVERTED INTO EQUITY SHARES. EQUITY SHARES HELD BY THE MAURI TIUS COMPANY WERE TRANSFERRED TO FOUR OTHER COMPANIES. THESE FOUR COM PANIES WERE ASSOCIATES OF THE ASSESSEE, AND HOLDING THE LAND ON WHICH ASSESSEE WAS EXECUTING A PROJECT. THE EQUITY SHARES HELD BY THESE FOUR COMPANIES WERE LATER CONVERTED TO OCDS UNDER A SCHE ME SANCTIONED BY HONBLE JURISDICTIONAL HIGH COURT. IN OUR OPINIO N, LIFTING OF CORPORATE VEIL CAN BE DONE ONLY WHEN IT CAN BE SHOWN THAT THE ARTIFICIAL JURIDICAL PERSONALITY IS BEING USED WITH AN ULTERIOR MOTIVE. NONE OF THE STEPS THROUGH WHICH INVESTMENTS MADE BY MIREFL WERE SOLD TO AFFILIATED COMPANIES OF THE ASSESSEE AND LATER CONVERTED TO OC DS, CAN IN OUR OPINION BE TERMED AS DONE WITH ANY ULTERIOR MOTIVE. THE RESULT OF THE TRANSACTION MIGHT HAVE BEEN THAT OCDS WITH VALUE OF 70 CRORES WERE ALLOTTED AGAINST TOTAL ORIGINAL INVESTMENTS OF 50 C RORES OF THE MAURITIUS COMPANY. HOWEVER, THE DIFFERENCE IN NO CASE CAN BE TERMED AS INTEREST PAID BY THE ASSESSEE TO THE MAURITIUS COMPANY. SEC. 194LC OF THE ACT WHICH DEALS WITH A CASE WHERE INTEREST IS PAID TO A NON RESIDENT AND SEC 195 OF THE ACT WHICH DEALS WITH A CASE WHERE PA YMENT OF ANY NATURE IS MADE TO A NON RESIDENT CANNOT IN OUR OPIN ION BE ROPED IN TO SAY THAT ASSESSEE OUGHT HAVE DEDUCTED ANY TAX AT SO URCE. THIS IS FOR SIMPLE REASON THAT ASSESSEE HAD NOT PAID ANY INTERE ST TO MIREFL NOR WAS IT RESPONSIBLE FOR PAYING ANY INTEREST TO THEM. IN SUCH A SITUATION, WE ARE OF THE OPINION THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD RIGHTLY HELD ASSESSEE AS NOT LIABLE F OR DEDUCTION OF TAX AT