Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act, 1961 challenging the order dated 13.06.2022 passed by the Income Tax Appellate Tribunal, whereby the Tribunal had quashed the revision order dated 31.03.2021 passed under Section 263.

The respondent-assessee, Genpact Consulting Singapore Pte. Ltd. (formerly Headstrong Consulting Singapore Pte. Ltd.), a tax resident of Singapore holding a valid Tax Residency Certificate, transferred 14,86,025 equity shares of Genpact India to its wholly owned Indian subsidiary, Empower Research Knowledge Services Pvt. Ltd. (now Genpact India Pvt. Ltd.), during Financial Year 2014–15. The total consideration of USD 1,397,263,241/- was paid in two tranches on 28.01.2015 and 25.03.2015.

The assessee treated the transaction as exempt under Section 47(iv) of the Act, and the Assessing Officer accepted the returned income. The Commissioner invoked Section 263 alleging lack of inquiry and characterised the transaction as a sham and a colourable device aimed at avoiding Dividend Distribution Tax.

Issues Involved

Whether the Commissioner was justified in invoking revisional jurisdiction under Section 263 by holding the assessment order to be erroneous and prejudicial to the interests of the Revenue on allegations of tax avoidance, despite the Assessing Officer having accepted a plausible view in law.

Petitioner’s Arguments (Revenue)

The Revenue contended that the Assessing Officer failed to conduct adequate inquiries into the share transfer transaction and the group structure. It was argued that the transaction was a colourable device designed to avoid Dividend Distribution Tax and that lack of inquiry rendered the assessment order erroneous and prejudicial to the interests of the Revenue, warranting revision under Section 263.

Respondent’s Arguments (Assessee)

The assessee submitted that the Assessing Officer had examined the transaction and accepted the claim of exemption under Section 47(iv), which was a plausible view in law. It was argued that Section 263 could not be invoked merely because the Commissioner held a different opinion or alleged tax avoidance, particularly where no additional tax liability could be shown to arise in the hands of the assessee.

Court Order / Findings

The Delhi High Court upheld the order of the Tribunal and held that the twin conditions for invocation of Section 263, namely that the assessment order must be erroneous and prejudicial to the interests of the Revenue, were not satisfied.

The Court observed that the principal allegation of the Commissioner pertained to avoidance of Dividend Distribution Tax, which, if at all applicable, would arise in the hands of Genpact India and not the respondent-assessee. The Court found it unsustainable to revise the assessment of Genpact Consulting Singapore on the basis of a perceived liability in the hands of another entity.

Relying on settled law including Gabriel India Ltd. and the principles laid down in Vodafone International Holdings BV, the Court held that where the Assessing Officer adopts a legally tenable view after examination, Section 263 cannot be invoked to substitute the Commissioner’s opinion or to direct roving and fishing inquiries.

Important Clarification

The Court clarified that allegations of tax avoidance or colourable devices, without demonstrating how the assessment order is erroneous in law or causes prejudice to the Revenue in the assessee’s hands, cannot justify invocation of revisional jurisdiction under Section 263. The provision does not permit revision merely to conduct further inquiries or because a different view is possible.

Final Outcome

The appeal filed by the Revenue was dismissed. The Delhi High Court held that no substantial question of law arose for consideration and upheld the order of the Income Tax Appellate Tribunal quashing the revision proceedings initiated under Section 263 of the Income-tax Act, 1961.

 

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769840753_COMMISSIONEROFINCOMETAXINTERNATIONALTAXATION2VsGENPACTCONSULTINGSINGAPOREPTELTD.pdf

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