2016-VIL-02--DT
Equivalent Citation: [2016] 389 ITR 11
AUTHORITY FOR ADVANCE RULINGS NEW DELHI
A.A.R. NO. 1017 OF 2010
Date: 10.08.2016
IN RE : SHINSEI INVESTMENT I LTD.
Vs
For The Appellant : Kanchan Kaushal, Dhanesh Bafana, Arpit Bhatnagar and Ravi Sharma
For The respondent : Ms. Nausheen J. Ansari, S.S. Negi and Sabir Tekriwal
BENCH
V.S. SIRPURKAR, A.K. TEWARY AND R.S. SHUKLA, JJ.
JUDGMENT
6. In its rebuttal the applicant has distinguished the facts of this case with the facts in the case of Aditya Birla Nuvo as under:-
a. In the case of Aditya Birla, the founder (AT&T, USA) was vested with the control of the JV company, namely power to direct the management and policies. AT&T, USA had paid for and subscribed to the shares of the JV Company in India and obtained the shares in the name of AT&T Mauritius as a "permitted transferee". Accordingly, all rights in respect of the said equity shares absolutely vested in AT&T USA. In the present case, subscription to shares of Shinsei AMC and Shinsei Trustee Company has been made wholly by the applicant in its own name and account and not on behalf or for the benefit of Shinsei Bank. Accordingly, the applicant was not the permitted transferee of the shares.
b. In the case of Aditya Birla, as per the terms of the JVA the owner of the equity capital of the Indian entity would be the main parent company. In the present case, there is no such clause and in fact the applicant is accepted and approved by all the parties to be the real and beneficial owner of the shares as Clearly provided in the SPA and the JVA.
c. In the case of Aditya Birla, the JVA has a clause that the entire obligation rests on the parent company and the subsidiary was not more than a representative of the parent company.
d. In the case of Aditya Birla, the JVA had a clause that the arrangement between the parties and the JV would remain only until the telecom licenses remain. This shows that the investments were routed through the AT&T Mauritius to avail the benefit of the tax treaty.
7. We have considered the submissions of the applicant and the Revenue and have carefully gone through the case laws relied upon by them. The main allegation of the Department is that the applicant has been introduced in this case as a 'permitted transferee'. This is a matter of fact and can be examined from share purchase agreement and other documents filed by the applicant. Sinshei Bank is a party to, the share purchase agreement because it is the sponsor and settler of the mutual fund in India and as required under the mutual funds regulations, Sinshei Bank Ltd. executed a trust deed dated 16. 7.2008 with the trustee company whereby Sinshei Bank Ltd. had established .the mutual fund and contributed to the initial corpus. As Sinshej Bank was the existing sponsor it was required to be part of the SPA for transfer of the sponsorship to the new sponsor i.e. Daiwa Asset Management Company Ltd. It is also noticed that in terms of mutual fund regulation the trustee Sinshei Bank Ltd. is subject to certain requirements and responsibilities and on sale of shares it is required to be released from its obligation and responsibilities. This is the reason that the SPA contains such provisions. The applicant has given para wise reply to the Department's contentions and the essence of the reply is that Sinshei Bank Ltd. in its capacity as sponsor of the mutual fund is party to SPA and has borne certain responsibility to the regulations, investors of the individual sponsor. The matters regarding place of arbitration, sharing of responsibility to obtain the tax withholding order etc are not relevant particularly in view of the fact that shares have been subscribed by the applicant in its own name and the bank statements filed show that the applicant has paid for such subscription of shares. In these circumstances the applicant cannot be termed as a 'permitted transferee' as was the case in Aditya Birla Nuvo. The facts in Aditya Birla Nuvo were entirely different where AT&T had paid for and subscribed to the shares of JV Company in India and obtained the shares in the name of AT&T Mauritius as a 'permitted transferee'. Here the facts are very clear that the applicant had paid for shares. Once it is established that the applicant has made investment on its own and Sinshei Bank Ltd. was party to SPA only in its capacity as sponsor and in order to comply with mutual funds regulations, there is no bar on application of Article 13(4) of the India-Mauritius DTAA in this case. The applicant is a resident of Mauritius and a valid tax residency certificate has been produced before us. Therefore, the treaty will apply and the applicant is not liable to tax in India.
8. As regards Q.No.3 & Q.No.4 we may mention that we have already taken a view that wherever Article 13(4) of India-Mauritius DTAA applies and the applicant is not liable to capital gains tax in India, there is no need to file return of income in India. As regards application of provision of section 115JB of the Income-tax Act, the Government has also clarified before the Supreme Court that these provisions are not applicable in the case of foreign companies. We have accordingly taken this view in all similar cases. The same will apply in this case also.
9. In view of above the following rulings are pronounced:-
Q. 1 The applicant is not liable to tax in India under India-Mauritius DTAA.
Q.2 There is no liability to withhold tax.
Q.3 The applicant is not required to file Income-tax returns in India.
Q.4 The applicant is not liable to tax under the provisions of section 115 JB of the Income-tax Act.
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