Tax Authority Based In Delhi Lacks Jurisdiction On Withholding Tax Liability On Share Purchase Transaction: Delhi High Court Quashes Tax Demand Against Sumitomo

The Delhi High Court has deleted the tax demand against Sumitomo Mitsui Financial Group on the grounds of lack of jurisdiction.

The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia has observed that the jurisdiction on the withholding tax liability on the transaction of share purchase by the Assessee was already exercised by the tax authority based in Mumbai, thus the tax authority based in Delhi had no jurisdiction to pass the order.

The petitioner/assessee has challenged the order passed by the tax authority based in Delhi. The High Court stayed the subsequent demand notifications under Section 156 that exceeded the Rs. 3,000 Cr. tax demand.

The deal involved the Assessee purchasing a 74.9% ownership stake from two Singaporean businesses, Fullerton Financial Holdings Pte. Ltd. and Angelica Investment Pte. Ltd., in the Indian company Fullerton India Credit Company Ltd.

The assessee contended that the Deputy Commissioner of Income Tax, International Tax Circle 4(2)(2), Mumbai, had previously exercised jurisdiction over the share purchase transaction. Before and after the transaction was executed, RBI and CCI provided the necessary clearances for the transaction.

The court while setting aside the order passed by the authority based in Delhi noted that the New Delhi-based tax authorities do not have jurisdiction on the transaction and hence, set aside the order passed under Section 124 as well as the notices and order issued under Section 201(1)/201(1A) and the consequential proceedings.

Counsel For Petitioner: Porus Kaka

Counsel For Respondent: N. Venkataraman

Case Title: Sumitomo Mitsui Financial Group Inc. Versus CIT

Citation: 2023 LiveLaw (Del) 886

Case No.: W.P.(C) 17012/2022 & CM APPL. 7087/2023

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