57. HSBC Bank (Mauritius) Ltd. vs. Dy. CIT;
[2019] 101 taxmann.com 206 (Bom) Date of order: 14th January, 2019 A. Y. 2011-12
Sections 9, 147 and 148 of ITA 1961 and
Article 11 of DTAA between India and Mauritius – Reassessment – Income – Deemed
to accrue or arise in India (Interest) – Where Assessing Officer, during
assessment had accepted claim of assessee that it was entitled to benefit of
India Mauritius DTAA, assessment could not have been reopened on ground that
assessee did not carry out bona fide banking activities in Mauritius
The assessee was a Banking Company
registered under the laws of Mauritius. For the A. Y. 2011-12, the assessee
filed its return of income declaring nil income. In the return, the assessee
had shown interest income of Rs. 238.01 crores and claimed the same to be
exempt from tax in India. This amount comprised of income on securities of Rs.
94.57 crore and interest income on External Commercial Borrowings (ECB) of Rs.
143.43 crore. According to the assessee, such income was not taxable in India
by virtue of DTAA between India and Mauritius. The Assessing Officer on
scrutiny, passed order u/s. 143(3) in which he added a sum of Rs.94.57 crore to
the total income of the assessee by rejecting the assessee’s claim of such
income on securities not being taxable in India. He however did not disturb the
assessee’s claim of interest income on ECB being not taxable. After four years,
the Assessing Officer issued notice to reopen assessment in case of assessee on
ground that banking activities carried out by assessee locally in Mauritius
were for namesake and assessee had failed to make true and full disclosure
regarding its beneficial ownership status. The assessee on being supplied
reasons for reopening assessment raised objections to the notice of reopening
of assessment. The Assessing Officer, however, rejected said objections.
The assessee filed writ petition and
challenged the validity of reopening. The Bombay High Court allowed the writ
petition filed by the assessee and held as under:
“i) The perusal of the reasons recorded by the
Assessing Officer would show that the only ground on which the notice of
reopening of assessment is issued was the assessee’s claim of exemption of
interest income which in turn was based on DTAA between India and Mauritius.
According to the Assessing Officer, the assessee had attempted to misuse the
DTAA since according to him, the assessee did not carry out banking business in
the said country.
ii) In this context, it is noted that the entire
claim had come up for consideration before the Assessing Officer during the
original scrutiny assessment. During such assessment, the Assessing Officer had
noted the assessee’s claim of exemption of interest on ECB made in the return
filed. In written query dated 21/10/2013, the Assessing Officer had asked the
assessee to explain several issues and called for documents.
iii) It was after detailed examination that the
Assessing Officer passed the order of assessment on 28/01/2016 in which he
disallowed the assessee’s claim of exempt interest of Rs. 94.57 crore which
related to interest on securities. He, however, did not tamper with the
assessee’s claim of exempt interest of Rs. 143.43 crore which was interest on ECB.
Thus, the entire issue was minutely examined by the Assessing Officer during
the original scrutiny assessment. To the extent, the Assessing Officer was not
satisfied with the assessee’s claim of exempt interest, the same was
disallowed. However, in the context of assessee’s claim of exempt interest of
Rs. 143.43 crore, by virtue of DTAA between India and Mauritius, the Assessing
Officer accepted the same.
iv) This very issue now the Assessing Officer
wants to re-examine during the process of reassessment. For multiple reasons,
same would be wholly impermissible. Firstly, as noted, the entire issue is a
scrutinised issue. This would be based on mere change of opinion and would be
impressible as held by series of judgments of the various Courts.
v) Quite apart, the impugned notice has been
issued beyond the period of four years from the end of relevant assessment
year. There is nothing in the reasons recorded to suggest that there was any
failure on the part of the assessee to disclose truly and fully all material
facts which led to the income chargeable to tax escaping assessment. In fact,
the perusal of the reasons would show that the Assessing Officer was merely
proceeding on the material already on record. Even on this ground, the impugned
notice should be set aside.
vi) In the result, the impugned notice is set
aside. Petition is allowed and disposed of accordingly.”
