Delhi High Court Directs Assessing Officer to Confront Vodafone Mauritius with Material to Invalidate the Validity of TRC

Delhi High Court Directs Assessing Officer to Confront Vodafone Mauritius with Material to Invalidate the Validity of TRC

The Delhi High Court by its division judges’ bench comprising of Justices Rajiv Shakdher and Girish Kathpalia has directed the Assessing Officer to provide information to Vodafone Mauritius to determine the validity of the Tax Residency Certificate (TRC).

The Court observed that nothing in the form of information or material has been put to the petitioner, which would conclude that the TRC issued to the petitioner was not a viable document in law.

In the present case, the petitioner had challenged the order and notice passed by the Assessing Officer (AO) without considering the Tax Residency Certificate (TRC) issued in its favor.

The transaction that the AO had sought to bring under the purview of the Income Tax Act, 1961, was apropos to the sale of shares by the petitioner of an Indian namely, Bharti Infotel Pvt. Ltd. The petitioner had sold the shares to the entity- Bharti Enterprises (Holding) Pvt. Ltd. Concededly, the transaction took place in Financial Year (FY) 2015-16.

The petitioner sold the shares for Rs. 1,295 crores. The consideration was paid to the petitioner without deduction of tax at source.

The petitioner argued that since it has been issued a TRC under the laws of Mauritius, it is entitled to take advantage of the India-Mauritius Double Taxation Avoidance Agreement (DTAA) obtained between India and Mauritius.

The AO ruled that the TRC issued to the petitioner was not conclusive evidence, which would establish its residential status, resultantly making the petitioner eligible for treaty benefits.

Moreover, the Court noted that the AO had attributed an intent to the assessee, alleging that it might indulge in tax evasion, inter alia, by treaty shopping, without any material or information of such kind being put to it.

However, the Court observed, “We are of the view, that unless relevant information, if any, which is available with the AO, is put to the petitioner, which leads to a conclusion that the TRC obtained by the petitioner is not legally valid and/or viable, the impugned order passed by the AO cannot be sustained.”

Therefore, the Court while quashing the notices and orders, directed the AO to confront the petitioner with material or information that would have her arrive at the conclusion that the TRC on which the petitioner sought to place reliance deserved to be rejected.