The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) directed the Non-Resident Company to pay 20% of Outstanding Demand of Income Tax and stayed 80% of outstanding demand for 180 days.
The assessee, Blackstone FP Capital Partners Mauritius V Limited seeking a stay of realization of outstanding demand amounting to Rs. 1,57,57,67,597/-, including interest charged under section 234B and 234C of Income Tax Act, 1961 for the assessment year 2016-17.
Mr. Porus Kaka, Counsel for the assessee submitted, the assessee is a non-resident company and is a tax resident of Mauritius. He submitted the dispute in the appeal relates to addition on account of long-term capital gains arising out of the sale of shares of an Indian Company viz. CMS Info. Systems Ltd. being a tax resident of Mauritius, a valid Tax Resident Certificate (TRC) has been issued by the Mauritius Revenue Authority on yearly basis. Therefore, the assessee is entitled to avail of the benefits granted under the India-Mauritius Double Taxation Avoidance Agreement as well as CBDT Circular No. 789/2000 and Circular No. 682/1999, which are binding on the departmental authorities.
Mr. Kaka submitted, once TRC has been issued, the assessee’s income from long term capital gain would not be taxable as per the treaty provisions, as held by the Hon’ble Supreme Court in the case of Union of India and Anr. vs. Azadi Bachao Andolan and Anr [2003] 263 ITR 706 (SC). He submitted, in the assessment year 2014-15, though, the assessee had incurred long-term capital loss, however, in terms of the treaty provisions, the assessee neither sought set off nor carry forward of such loss, which was accepted by the department. He submitted, applying this same principle of the rule of consistency, the long-term capital gain cannot be made taxable in India. Thus, he submitted, the assessee has a strong case on merits. Further, he submitted, the assessee had moved an application for stay of recovery of the outstanding demand before the Assessing Officer. He submitted, in course of discussion/hearing, though, the AO had agreed to stay the recovery of the outstanding demand, subject to, assessee paying 20% of the outstanding demand, however, subsequently, the Assessing Officer has reversed his position and declined to pass any order granting stay of recovery of the outstanding demand. Though no formal order has been passed and technically the stay application is still pending.
The coram headed by the Vice President, Pramod Kumar, and Judicial Member, Saktijit Dey held that the assessee must pay 20% of the outstanding demand as agreed, within a period of two weeks from the date of this order and furnish the proof of such payment before the Tribunal as well as the AO Further, to safeguard the interest of revenue, for the balance 80% of the outstanding demand the assessee is directed to furnish a corporate guarantee from one of its associate enterprise in India, having assets exceeding the outstanding tax liability. The corporate guarantee shall be furnished by the assessee before the AO within a period of six weeks from the date of this order. Subject to fulfillment of the aforesaid conditions, recovery of the balance 80% of the outstanding demand shall remain for a period of 180 days from the date of this order or till disposal of the appeal, whichever is earlier.
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