Non application of mind by AO: Delhi HC directs Income Tax Dept. to Reconsider Taxability of Blackstone’s Investment

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Non application of mind by AO: Delhi HC directs Income Tax Dept. to Reconsider Taxability of Blackstone’s Investment


Delhi HC has asked the department to Reconsider Taxability of Blackstone’s Investment in the write petition filed by Blackstone Capital Partners (W.P.(C) 572/2023).

Let us have a short overview of the case:


  1. The writ petition was filed against the order dated 28.07.2022 passed under Section 148A(d) of the Income Tax Act, 1961.
  1. The petitioner had purchased shares of an Indian company going by the name Agile Electric Sub-Assembly. The shares were purchased from various sellers including, one, Mr Jose Kattadyil Joseph. Rs.40,16,40,093/- was paid to the aforementioned seller, albeit, after deducting tax at source amounting to Rs.2,67,80,000/-.
  1. The revenue contended that this is a case where the petitioner chose not to file a return, and therefore in terms of Explanation 2 to Section 147 of the Act, the factum of non-filing of return would by force of law result in deeming escapement of income.
  1. Petitioner has contended that no income has accrued or arisen in India as the subject transaction is a capital account transaction and that the remittance was made to the seller after adjusting the withholding tax, as ascertained by the respondent/revenue. Also Sec 139(1) has to be read in the case of the petitioner along with Section 115A, being a non-resident company.

Hon Delhi HC held as below:

  1. The AO should have applied his mind is, as to whether the investment in shares of Agile by the petitioner was a capital account transaction, given the fact that there is no allegation of round-tripping.
  1. There is no reference to Section 115A of the Act, for whatever its worth, either in the show-cause notice dated 31.05.2022 or in the impugned order passed by the AO. 13.1 As to whether the said provisions are, at all, applicable to a non-resident company is a moot point which the AO will have to decide.
  1. AO will have to carry out a de novo exercise. The AO will accord personal hearing to the authorised representative of the petitioner. For this purpose, the AO will issue a notice fixing the date and time of hearing.

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