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Assessee-an individual, along with other groups of persons, formed a company in UAE. Due to certain circumstances, the business became unprofitable and started investing its funds in some investment products.
A search operation was conducted on the premises of the assessee, whereby certain documents concerning the transactions of a non-resident foreign company were found. Based on such documents, additions to the assessee's income were made, contending that the assessee had undisclosed foreign assets and a signatory authority of a foreign bank.
The aggrieved assessee filed an appeal to the CIT(A). The CIT(A) upheld the additions, and the matter reached the Jaipur Tribunal.
The Tribunal held assessee had made due disclosure of all his financial interest in a fiduciary capacity and as a signatory authority of a foreign bank account for and on behalf of the company while filing returns of income for the assessment years wherein in scheduled FA, due disclosure has been made by the assessee in his return.
Further, it was not disputed that the investment or the assets found during the course of the search belonged to the foreign company and not to the assessee. The foreign entity has undeniably a separate legal entity, having an independent identity, capable of holding assets in its own name for the furtherance of its own objectives and purposes.
Further,t the term "beneficial owner" is not defined in the Black Money Act but is defined in Explanation 4 to Section 139(1) of the Income-tax Act, 1961. On perusal of the definition of the term "Beneficial owner", it is evident that a beneficial owner in respect of an asset would be a person who provides consideration for the asset for the immediate or future benefit of himself or any other person.
In the instant case, foreign investments were the foreign company's assets and consideration for the same assets flew from the bank account of the Foreign Company itself. Thus, the assessee does not fall in the ambit of the term "beneficial owner" as he was not the provider of the consideration of the asset.
Accordingly, the order of the CIT(AO) confirming that the assessee was the "beneficial owner" of the assets of the Foreign Company was misconceived, against the law and deserved to be annulled.
Section 194A of the Income-tax Act provides for deduction of tax at source (TDS) at the rate of 10% from interest, other than interest on securities, paid or payable to a resident person. The tax shall be deducted at the time of payment or credit, whichever is earlier.
Further, tax is required to be deducted only if the aggregate amount of interest credited or paid to the payee in respect of time deposit during the financial year exceeds the threshold limit prescribed under section 194A(3).
Sub-clause (c) of clause (i) of Section 194A(3) provides the threshold of Rs. 40,000 in case any deposit is made with the post office under any scheme framed by the Central Government and notified by it on this behalf.
Exercising such power, the Central Board of Direct Tax (CBDT) has notified the Mahila Samman Savings Certificate, 2023, for section 194(3)(c)(i). Thus, the threshold of Rs. 40,000 shall be applicable for deduction of tax at source under section 194A in respect of interest paid/credited to an assessee who deposited the amount under the Mahila Samman Savings Certificate, 2023.
That’s it from us for today! Stay Tuned for more updates from?Taxmann.com.
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