Assessee Incorporated in Mauritius as Investment Company for Investment in particular sector in India. Acquiring Shares in Indian Company from two U. S. sellers under share purchase agreement . Assessee shown as party to agreement but consideration paid and all decisions taken by U. S. holding Company . Assessee is not operating as independent entity. Shares in Indian company to be treated as held benami. Actual owner of shares U. S. holding company. Sale of shares to another non-resident group company. Assessee is not entitled to benefit of double taxation avoidance agreement between India and Mauritius. Transaction was held to be liable to tax in India and tax to be with held .
By the Authority : (i) “The existence of a separate and independent status of a subsidiary in another territory is the core basis and foundation of the application of treaty law across the globe. Tax treaties throughout the world function on the premise that the subsidiary is an independent legal entity, different from its parent, even though controlled by it. However, in a case where the parent acts on behalf of its subsidiary and takes all its decisions, the corporate veil between the company’s subsidiary and its parent stands torn, not at the instance of the Revenue, but by the conduct of the group itself.”
Authority also held that A mere accounting entry without the actual flow of money or other consideration must be made subservient to the actual transaction.