The Delhi High Court recently handed down a significant decision regarding the Tax Residency Certificate (TRC) of a Singaporean company belonging to the Blackstone Group. The Revenue had initiated reassessment proceedings on the basis that the company was not the beneficial owner of its share transactions, as the source of funds and management was located in the United States.
The court, however, ruled in favor of the company and quashed the reassessment proceedings. The court held that the TRC issued by the Singaporean authorities was sufficient evidence for claiming eligibility for the benefits under the India-Singapore Double Taxation Avoidance Agreement (DTAA) and residence status, and that the Revenue could not question or go behind the TRC.
The court relied on past rulings and government assurances, stating that the TRC was statutorily the only evidence required for DTAA benefits and disregarding it would be contrary to international law. The court also emphasized the binding nature of the Central Board of Direct Taxes (CBDT) circulars and relied on previous rulings to support the validity and efficacy of the TRC.
This decision represents a significant win for foreign investors and reinforces the importance of a reliable and respected tax residency certification process. The court's ruling serves as a clear reminder of the Indian government's commitment to providing a fair and transparent investment environment for foreign investors.