Prameria Aspf Ii Cyprus Holding Ltd , vs Assessee

M/s. Pramerica ASPF II Cyprus DCIT- 3(3)(2), Holding Limited, R.No.11, Scindia House, C/o Pricewaterhouse Coopers Gr. Floor, Pvt. Ltd., Ballard Estate, Vs. 18th Floor, Mumbai Building No.10, Tower C, DLF Cybercity, Gurgaon - 122 022 PAN: AAECP 5087H (Appellant) (Respondent)

Assessee by : Shri Kanchan Kaushal, A.R. & Shri Raja Vakkharia, A.R.

Revenue by : Shri M. Padmanabhan, D.R.

Date of Hearing : 27.03.2015 Date of Pronouncement : 27.03.2015

ORDER

Per Sanjay Garg, Judicial Member:

The present petition has been preferred by the assessee seeking stay of the recovery of demand of tax, consequential to the additions made by the lower authorities on account of transfer pricing adjustments.

2. It has been submitted on behalf of the applicant/assessee that the assessee is a non resident private company incorporated in Cyprus and is engaged in the business of making investments in real estate development companies in India. The assessee being a tax resident of Cyprus is entitled to SA No.123/M/2015 2 (Arising out of ITA No.1113/M/2015 M/s. Pramerica ASPF II Cyprus Holding Limited

benefits as per the provisions of India Cyprus Double Tax Avoidance Agreement (DTAA).

3. The income earned by the assessee is subject to tax at the rate of 10% as per Article 11(2) of the DTAA. In the draft assessment order, the Assessing Officer (hereinafter referred to as the AO) denied the applicability of the beneficial provisions of DTAA to the assessee due to the inadvertent error while filling the columns of the form for return of income, as the assessee inadvertently failed to fill the specific column of schedule-Special Income (SI) relating to income chargeable to tax as per DTAA. The AO therefore proposed to charge the tax at normal rate of 42.23% instead of 10% as per DTAA. The AO also proposed to tax the interest income received from investment in Compulsorily Convertible Debentures (CCDs) of Indian companies engaged in the real estate development on accrual basis whereas the assessee has been following the cash system of accounting.

4. The assessee filed petitions against the said proposed additions made in the draft assessment order before the Dispute Resolution Panel (DRP). However, the DRP, vide its directions dated 22.12.14, has confirmed the proposed additions, and thus the assessee has filed the above titled appeal against the said order.

5. The assessee, in the present stay petition, has sought the stay of recovery of the tax demand in question. It has been further submitted by the Ld. A.R. that the AO has also erred in not complying with the directions of the DRP with respect to grant of credit for TDS claimed, for which the assessee has moved an application under section 154 of the Act for rectification of mistake, which is pending before the AO. The Ld. A.R. has submitted that if the assessee is granted the relief relating to the issue of rate of interest at which the SA No.123/M/2015 3 (Arising out of ITA No.1113/M/2015 M/s. Pramerica ASPF II Cyprus Holding Limited

assessee is required to be charged as per DTAA and, further, the credit of the TDS is also given, then in relation to the issue of chargeability of the interest whether on cash basis or accrual basis, the outstanding demand along with interest will be at Rs.1,32,32,866/-.

6. After considering the submissions of the Ld. A.R., we find that the lower authorities have denied the benefit to the assessee relating to the issue of concessional rate of interest at the rate of 10% as per DTAA due to an inadvertent mistake in the return form of the income. The Ld. A.R., however, has brought into our notice that in the computation of the income attached with the return form, the assessee has duly claimed the benefits available to it under DTAA, and the income has also been returned offering tax at the rate of 10% as per DTAA. Only due to an inadvertent error that the assessee could not tick/fill the relevant column in the form, the assessee has been charged at normal rates. Further, it has been contended that it is likely that the TDS credit which could not be granted to the assessee inadvertently is likely to be granted. The Ld. A.R. has further contended that the tax demand in relation to the chargeability of income on accrual basis along with interest will be of Rs.1,32,32,866/-. He has further contended that the assessee has a fair case in relation to the said issue also.

7. After considering the overall facts and circumstances of the case, we are of the view that the interest of justice will be well served if the outstanding demand is stayed subject to payment of 50% of the demand in relation to the issue of chargeability of interest income whether on accrual basis or cash basis which the assessee has calculated at Rs.1,32,32,866/-.

8. In view of our above observations, the recovery of the outstanding total demand for the year under consideration is stayed subject to deposit of 50% of SA No.123/M/2015 4 (Arising out of ITA No.1113/M/2015 M/s. Pramerica ASPF II Cyprus Holding Limited

the above amount which comes out at Rs.66,16,433/- in two equal installments on or before 15th April 2015. The assessee's request for early hearing of the matter is also accepted. The Registry is directed to fix the matter/main appeal for 06.05.2015. The date of hearing has been informed to the parties in open court and no separate notice will be issued. It is made clear that the assessee will not seek unnecessary adjournment or contribute to any delay in the disposal of the appeal, failing which the stay granted will be automatically deemed to be vacated. Before parting with the order it is pertinent to mention here that our observations made above will not have any bearing at the final disposal of the appeal.

4. In the result, subject to above observations, the application of the appellant is hereby allowed.

Order pronounced in the open court on 27.03.2015.

Sd/- Sd/- (Sanjay Arora) (Sanjay Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 27.03.2015. * Kishore, Sr. P.S.

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [

By Order

Dy/Asstt. Registrar, ITAT, Mumbai.