Genpact Consulting (Singapore) Pte. Ltd. (earlier known as 'Headstrong Consulting Pte. Ltd.'), Gurgaon V. ACIT, Circle-2(1)(1) Int. Tax., New Delhi

ITA 501/DEL/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 7961 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 06-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Gift; Revision of order; Transfer pricing; Double taxation relief; International transaction; Permanent establishment; Advance ruling; Cost of acquisition; Wholly owned subsidiary; Valuation report; Accommodation entries; Revenue expenditure; Capital expenditure; Capital Gains
• Section: 263; 143(3); 142(1); 44AB; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘D’ BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No. 501/DEL/2021 [A.Y 2015-16] Genpact Consulting [Singapore] Pte Ltd Vs. The C.I.T [Earlier known as “Headstrong Consulting Inttl. Taxation-2 Pte Ltd., 600, North Bridge Road, 23 01 New Delhi Parkview Square, Singapore 188778 PAN: AADCH 4943 D (Applicant) (Respondent) Assessee By : Shri Percy Pardiwalla, Sr. Adv Shri Sachit Jolly, Adv Shri Rohit Garg, Adv Shri Sohum Dua, Adv Department By : Shri Gangadhar Panda, CIT-DR Shri Sanjay Kumar, Sr. DR Shri Vinod Sharma, Addl. CIT Shri Mandeep Singh, DCIT Date of Hearing : 08.06.2022 Date of Pronouncement : 13.06.2022 2 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER:- This appeal by the assessee is preferred against the order dated 30.03.2021 framed u/s 263 of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] pertaining to Assessment Year 2015-16. 2. The assessee has raised as many as 4 grounds of appeal, but the sum and substance of the grievance of the assessee is that the order passed by the CIT [International Taxation], New Delhi u/s 263 of the Act is without jurisdiction, bad in law and void ab initio. 3. The representatives of both the sides were heard at length, the case records carefully perused and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules. Judicial decisions relied upon by both the sides were duly considered. 4. Briefly stated, the facts of the case are that the assessee company e-filed its return of income on 30.11.2015 declaring NIL income. Return was selected for scrutiny under CASS and, accordingly, 3 statutory notices were issued and served upon the assessee. A detailed questionnaire alongwith notice u/s 142(1) of the Act was issued and, thereafter, the case was referred to the Transfer Pricing Officer. 5. A perusal of the assessment order shows that simultaneous proceedings were undertaken, one by the Assessing Officer and the other by the TPO. Notes to Indian Income tax return for Assessment Year 2015-16 reads as under: “1. Headstrong Consulting (Singapore) Pte. Limited {'HCS' or 'the Company') is a company incorporated under the laws of Singapore arid has its effective place of management in Singapore. 2. During the Year 2015, it was a tax resident of Singapore and held a valid Tax Residency Certificate ('TRC') issued by Inland Revenue Authority of Singapore. HCS, therefore, was governed by the provisions of India-Singapore Agreement for the Avoidance of-Double Taxation and Prevention of Fiscal Evasion with respect to taxes on Income {DTAA')' {'DTAA') or the provisions of the Indian Income-tax Act, 1961 ('the Act'), whichever were more beneficial to HCS. 4 The principal activity of the Company is that of Software, Computer Consultants and Advisors and Investment holding. 1. During the Financial Year 2014-15, the Company transferred 1,486,025 equity shares held in Genpact India {an Indian company) to its wholly owned Indian subsidiary, Empower Research- Knowledge Services Private Limited {'Empower India'; now known as Genpact India Private Limited), for a total consideration of USD 1,397,263,241. The shares were transferred in two tranches viz., 701,675 shares on January 28, 2015 and 784,350 shares on March 25, 2015. 3. Taxability of gains arising from, the above transfer of shares: Transfer by HCS of the shares held in Genpact India to Empower India would tantamount to transfer of capital asset as per Section 2(47) of the Act. However, in view of the specific exemption provided in Section 47{iv) of the Act, the aforesaid transfer would not be considered as a "transfer" for the purpose of computing capital gains under Section 45 of the Act and hence will not result into taxable capital gains in the hands of HCS, since Empower India was a wholly owned Indian subsidiary of HCS at the time of above transfer. Without prejudice to above, the gains arising to HCS from the above transfer of shares would also be exempt in India in view of the provisions of Article 13 of the DTAA. 5 4. Filing of Return of Income Although the gains arising to HCS on transfer of shares held in Genpact India to Empower India would not result In any taxable capital gains in the hands of HCS in India (in view of the provisions of Section 45 read with Section 47{iv) of the Act as well as provisions of Article 13 of DTAA), the Company is filing its return of income under the provisions of the Act declaring Nil taxable income in India. 5. The Company craves leave to furnish further detailed notes/explanations and information, as necessary, to support its Income-tax return and the computations made therein,” 6. It can be seen from the above that in the notes to accounts, the assessee has explained the transactions relating to the transfer of shares and consideration received thereon. It can also be seen that the assessee has explained as to why the said transfer of shares does not result into any capital gains tax liability and why the income is exempt. 7. The first notice issued by the Assessing Officer during the course of scrutiny assessment proceedings is dated 16.08.2017 wherein the Assessing Officer had asked the assessee to submit copies of 6 acknowledgement of filing return of income alongwith Income tax return form and notes to return and also Form No. 3CEB for the year ending on 31.03.2015. 8. On 18.10.2018, the Assessing Officer again issued a notice which reads as under: NOTICE UNDER SECTION 142(1) OF THE INCOME - TAX ACT, 1961 OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION, CIRCLE 2(1 X ROOM NO. 310, 3 RD FLOOR, E-2 BLOCK, CIVIC CENTRE. MINTO ROAD, NEW DELHI - 1100T1 PAN : AADCH4943D Dated : 18/10/2018 To The Principal Officer M/s Headstronge Consulting (Singapore) Pte Ltd., 220 Orchard, 05-01, Singapore. Sir/Madam, In connection with the assessment for the A. Y. 2015-16 you are required to : a) Furnish or cause to be furnished on or before 25/10/2018 at 02:30 PM the accounts and documents specified overleaf. 7 b) Furnish and verified in the prescribed manner under rule 14 of I.T. rules 1962 the information called for as per annexure and on the points or matters specified therein on or before 25/10/2018 at 02:30 PM. c) The above mentioned evidence/information is to be furnished online electronically in ‘E-Proceeding’ facility through your account in ‘e-filing’ website of Income Tax Department. d) Para(s) (a) to (c) are applicable if you have an account in e- filing website of Income Tax Department. Till such an account is created by you, assessment proceedings shall be carried out either through your e-mail account or manually (if e-mail is not available). e) In cases where order has to be passed under section 153A/153C of the Income Tax Act, 1961 ready with section 143(3), assessment proceedings would be conducted manually. (Arindam Misra) Assistant Commissioner of Income Tax. International Taxation, Circle 2(1)(1) New Delhi, 8 9. Alongwith the following Annexure: ANNEXURE M/s HEADSTRONG Consulting {Singapore PTE Ltd. PAN : AADCH4943D - A.V. 2015-16 1. Please give detailed background of the company alongwith its activities and sources ofrevenue with particular reference to business model and activities carried out in India during the year under consideration. Give a detailed note regarding nature of your business activities and furnish details in respect of the works undertaken/executed in India during the year. 2. Please give assessment history in your case from beginning, file copy of last, assessment order and status of appellate proceeding, if any. 3. Please intimate as to whether you had a Permanent Establishment (in the form of Fixed place PE, Agency PE. Installation PE, Service PE...) or Business Connection m India during the year. If so, please furnish names and complete addresses of such concerns. Also furnish details of Branch Offices/Project offices/Liaison office/Godowns and Warehouses and construction or other business sites in India. 9 4. Please furnish copy of the tax residency certificate for the relevant Assessment year. 5. Please furnish copies of all contracts and agreements operative during the year in respect of your activities in India. Copy of agreement/Contracts entered into with Indian customers/clients or any other party in India from whom any payment is received during the year "or has accrued or arisen during the year may also be provided. 6. Please confirm whether you have maintained books of accounts for your Indian operation as required u/s44AA of the Act. If yes, please confirm whether they have been audited as required u/s 44AB of the Act, and furnish the same. If not, give your explanation for not complying with provisions u/s 44AA and u/s 44AB of the Act. 7. Please furnish computation of income. 8. Please furnish copy of order of Advance Ruling obtained in your case, if any. 9Please explain the Large international transaction(s). Please send your reply through email and also furnish the hard copy of your reply in this office by 25/10/2018,” 10 (Arindam Misra) Assistant Commissioner of Income Tax. International Taxation, Circle 2(1)(1) New Delhi, 10. It can be seen from Point No. 9 to the Annexure that the Assessing Officer had sought explanation from the assessee to explain the large international transactions. 11. The assessee filed reply dated 31.10.2018 which reads as under: October 31,2018 Assistant Commissioner of income Tax, Circle- 2(1)(1), (International Taxation) New Delhi. Respected Sir, Re; Headstrong Consulting (Singapore) Pte Limited (now known as 'Genpact Consulting (Singapore) Pte. Ltd.’] ('the Company' or 'the assessee'} PAN: AADCH4943D Assessment Year ('AY'): 2015-16 Sub: Notice dated October 18. 2018under Section 142(1) of the Income-tax Act. 1961 - Response thereto 11 The Company is in receipt of the captioned notice dated October 18, 2018 issued by your goodself's office (copy of the notice enclosed herewith as Annexure 1). As per the aforesaid, the Company is required to furnish its response electronically through 'E-Proceeding' facility through the Company's account. However, we would like to bring to your goodselfs kind attention that the option of uploading the documents/response to the enclosed notice is not available, on the E-filing portal for the AY 2015-16. Screenshot of the E-filihg portal is enclosed herewith as Annexure 2. Accordingly, for the purpose of compliance to the aforesaid notice, the Company will be filing the requisite information/documents manually with your goodselfs office and also to all future notices that may be issued during the course of captioned assessment proceedings until the facility of uploading the documents for AY 2015-16 is made available on the e-filing portal of the income Tax department. We trust that filing the required information/documents manually with your office would be treated as a sufficient compliance of the aforesaid notice and subsequent notices that may be issued if: the course of captioned assessment proceedings. We request your office to take the above information on record. Further, the Company is in process of collating/compiling the information sought for by your goodself as per the captioned notice which would be furnished in due course. We request your office to provide us with an opportunity to personally represent 12 this case before finally concluding the present proceedings. Thank you Yours faithfully, Authorised Signatory End; As Above 12. And then on 06.11.2018, the following reply was filed: “November 6, 2018 Assistant Commissioner of Income Tax, Circle- 2(1){1), (International Taxation) New Delhi. Respected Sir Re: Headstrong Consulting (Singapore) Pte. ltd. [now known as 'Genpact Consulting (Singapore) Pte. Ltd.'] ['the Company' or 'the assessee'] PAN: AADCH4943D A.Y. 2015-16 Sub : Notice dated October 13. 2018 under Section 142(1) of the-income-tax Act. 1961 - Response, thereto In response to the captioned notice dated October 18, 2018 issued by your goodself's office (copy of the notices are collectively enclosed herewith as Annexure I) and in continuation to our earlier submission dated August 16, 2017, we respectfully 13 submit the following information: 1. Note on the Business of the Company The Company was incorporated as a private limited company in Singapore. The principal activity of the Company was that of Software, Computer Consultants and Advisors and Investment holding. 2. Assessment order for the last year No assessment under section 143(3) of the Act has taken place in the Company's case for any of the earlier assessment years. 3. Permanent Establishment in India The Company has not carried out any activity which could lead to constitution of its Permanent Establishment in India, in terms of Article 5 of the 'Agreement for avoidance of double taxation and prevention of fiscal evasion with foreign countries Singapore' entered into between the Government of the Republic of India and the Government of the Republic of Singapore DTAA The Company would, however, be pleased to furnish further detailed submissions and/or clarifications in this respect so as to substantiate its claim, on hearing from your goodself. 4. Tax residency certificate A copy of tax residency certificate of the Company is enclosed herewith as Annexure 2. 14 5. Contracts/ Agreements with Indian parties The Company has not entered into any contracts/ agreements with Indian parties in the financial year 2014/15. 6. Books of Accounts required under section 44AA of the Act The Company was not required to maintain any books of accounts under section 44AA of the Act in the financial year 2014-15 7. Computation of Income The Company has already filed a copy-of the acknowledgement of filing of Return of income for the Assessment Year 2015-16 along with the copy of Income tax Return Form and notes to return of income with your goodself's office vide submission dated August 16, 2017. 8. Order of Advance Ruling Authority It is submitted that the Company has not sought any advance ruling from the Authority for Advance Rulings in India 9. Large International Transactions Detail of the international transactions as per the form 3CEB for the captioned year, already filed before your gcodself' submissions dated August 16, 2017 Copy of the Form 3CEB is 15 enclosed herewith for your good self's ready reference as Annexure We request your office to take the above information on record. In addition to above, the Company would be obliged to furnish further information / documentation on hearing from yaur gondself’s office We request your office u> provide us with an opportunity to personally represent this case before finally concluding the present proceedings, Thank you Yours faithfully, Authorized Signatory Encl: : As Above.” 13. It can be seen from the above at Point No. 9 that the assessee has given details of International Taxation as per Form No. 3CEB. On 27.11.2018, the Assessing Officer again issued a notice u/s 142(1) of the Act to which the assessee replied on 03.12.2018 explaining the transaction relating to transfer of shares as under: 16 December 3, 2018 Assistant Commissioner of Income Tax, Circle- 2