Delhi High Court
The Commissioner Of Income Tax - ... vs Zaheer Mauritious on 18 July, 2022
$~S-22
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 201/2022
THE COMMISSIONER OF INCOME TAX - INTERNATIONAL
TAXATION 3 ..... Appellant
Through: Mr.Ruchir Bhatia, Sr.Standing
Counsel.
versus
ZAHEER MAURITIOUS ..... Respondent
Through: Ms.Ananya Kapoor, Advocate.
% Date of Decision: 18th July, 2022
CORAM:
HON'BLE MR. JUSTICE MANMOHAN
HON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA
JUDGMENT
MANMOHAN, J (Oral):
1. At the outset, learned counsel for the appellant prays that paragraph
2.3 of the present appeal be deleted. Accordingly, the said paragraph 2.3 is
deleted.
2. It is pertinent to mention that the present appeal has been filed
challenging the Order dated 1st November, 2019 passed by the Income Tax
Appellate Tribunal ('ITAT') in ITA No.2561/Del/2016 for the Assessment
Year 2011-12.
3. Learned Counsel for the Appellant states that the ITAT has erred in
holding that the gains arising to the Assessee on the transfer of
Compulsorily Convertible Debentures ('CCDs') to M/s Vatika Ltd. is in the
Signature Not Verified
Digitally Signed By:JASWANT
SINGH RAWAT
Signing Date:19.07.2022
nature of capital gain and not in the nature of interest income. He further
states that the ITAT has erred in holding that the gains arising to the
Assessee on the transfer of CCDs to M/s Vatika Ltd. is in the nature of
capital gains and shall not be taxable in India under Article 11 of DTAA
between India and Mauritius.
4. Both the CIT(A) and the ITAT have held in favour of the assessee
holding that that the present case is covered by the decision of this Court
dated 30th July, 2014 in assessee's own case. The assessment order in the
present case was passed on 9th April, 2014 in pursuance of the decision
dated 21st March, 2012 of the Authority of Advance Ruling ('AAR').
Assessee preferred a writ petition against the said order of the AAR, which
was disposed of by this Court in favour of the assessee vide order dated 30th
July, 2014 in WP(C) 1648/2013 with the following observations:
"15. Under normal circumstances, it is undeniable that gains
arising from transfer of a debenture, which is a capital asset
in the hands of the transferor, in favour of a third party, would
be capital gains and not interest. In other words, if a
debenture (which is a capital asset) is transferred by a holder
to a third party, the gains that arise i.e. difference between the
costs of purchase and the sale consideration would be capital
gains in the hands of a transferor. The dispute in the present
case arises only because it has been held that the transaction
between the petitioner and the Vatika is a sham transaction
and is essentially a transaction of loan to Vatika which has
been camouflaged as an investment in shares and CCDs of the
JV company.
xxx xxx xxx xxx
31. Thus, in terms of the policy of the Government, the
petitioner could invest in a project of the requisite size/nature
and an investment into CCDs would be reckoned as equity.
The policy with regard to external commercial borrowings
had other conditions and it is apparent that the petitioner
Signature Not Verified
Digitally Signed By:JASWANT
SINGH RAWAT
Signing Date:19.07.2022
found the investment in CCDs as the most appropriate route
for making its investment in real estate, in accordance with the
policy of the Government of India. In these circumstances, it
ought not to be readily inferred that the entire structure of the
transaction was designed solely for the purposes of avoiding
tax."
5. Though the said judgment has been challenged before the Supreme
Court by way of a Civil Appeal No.10299/2016, yet there is no stay of the
said judgment. Accordingly, the present appeal is dismissed. However, it is
clarified that the order passed in the present appeal shall abide by the final
decision of the Supreme Court in Civil Appeal No.10299/2016.
MANMOHAN, J
MANMEET PRITAM SINGH ARORA, J
JULY 18, 2022
TS
Signature Not Verified
Digitally Signed By:JASWANT
SINGH RAWAT
Signing Date:19.07.2022
