While dismissing the appeal filed by the revenue, the Delhi bench of Income Tax Appellate Tribunal (ITAT) recently held that protective assessment against shareholder is not valid if overseas companies have already been assessed as residents in India.
Assessee, in the present case, is a shareholder of M/s Focus Energy Group has filed her return of income for the relevant assessment year. While completing the assessment the Assessing Officer (AO) has made additions on protective basis holding that profits of all the overseas companies as mentioned in the assessment order are to be taxed in India on the ground that these overseas company were treating as ‘resident’ in India in accordance with the provisions laid in Section 6(3) of the Income Tax Act 1961.
In order to protect the interest of revenue, protective addition in respect to the income of the overseas companies for the assessment year Rs.371,34,13,346 was made in the hands of the assessee and income of the assessee was accordingly assessed under section 153A/143(3) of the Act.
After considering the rival submissions of both the parties, the tribunal bench comprising of Judicial Member H.S.Sidhu and Accountant Member Prashant Maharishi observed that the AO in the assessment order admitted that the entire amount which was added to the income of the assessee on ‘protective basis’ was already assessed in the hands of the overseas companies on ‘substantive basis’. It was further noted that the AO did not consider the details filed by the assessee during the course of assessment proceedings.
The division bench also noticed that addition which was made on substantive basis in the hands of the overseas companies was also made in the hands of the assessee and the same was added to her income on protective basis, but they are of the view that the additions made in case of the overseas companies under section 6(3) of the act is not relevant to the case of the assessee as she is only a shareholder, and was not entitled to derive any benefit, the bench said.
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