The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the application of General Anti-Avoidance Rule (GAAR) provisions could not take away the tax benefit under Double Taxation Avoidance Agreement (DTAA).
The return of the assessee, Reverse Age Health Services Pte Ltd was selected for complete scrutiny because of the high ratio of refund of TDS. The tax deducted at source by VIC Enterprises Private Limited was on account of sale consideration of the sale of shares of Fresh Healthcare Private Limited by the assessee. These shares were acquired by the assessee on 22.08.2016 and were sold on 02.01.2018 giving rise to short term capital gains.
The assessee claimed that the short term capital gain which has arisen due to sale of shares of Fresh Healthcare Private Limited are not taxable as per Article 13 of India – Singapore DTAA, therefore, the entire TDS had been claimed as refund. The AO denied the assessee the benefit under Article 13 (4A) of the India – Singapore DTAA on the ground that the assessee had no economic substance or commercial substance and that it was a “shell” or a “conduit” company.
For this purpose, Article 3 (1) of the 2005 protocol to the India- Singapore DTAA was invoked (which is now incorporated as Article 24A (1) of the India- Singapore DTAA) and, therefore, short term capital gain was held to be taxable in India in the hands of the assessee.
Deepak Chopra appeared on behalf of the assessee and Sanjay Kumar appeared on behalf of the revenue.
The Division Bench of N. K. Billaiya, (Accountant Member) And S.H. Anubhav Sharma, (Judicial Member) directed the AO to delete the impugned disallowance and allow the treaty benefit to the assessee as per the relevant provisions of the treaty.
“The AO has also invoked the doctrine “substance over form” to deny the benefit of Article 13 (4A). In our considered opinion the said doctrine is prior to the codification of domestic GAAR” the Bench further observed.
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