Stating that the income tax department’s appeal is “devoid of any merits and involves no questions of law”, Mauritius-based Copal Research has said no interference by the Supreme Court is called for as its transactions with Cyprus-based Moody’s group are “purely commercial” and “no tax is leviable in India” under the India-Mauritius Double Tax Avoidance Agreement (DTAA).
Seeking dismissal of the appeal, Copal said that the issues raised in the appeal have been answered by both the AAR and the Delhi High Court, which held that the transactions for the sale of shares undertaken by the Copal Group of Companies to Moody’s group were for commercial reasons and not to avoid any tax in India.
Copal, in its reply to the apex court, submitted that the initiation of the transactions took place as “commercial transaction as Moody’s group, which is engaged in the business of financial research, were looking for information technology/information technology-enabled services (IT/ITES) in the field of financial research… Therefore in order to have its footprint in India, Moody’s approached Copal group for acquiring and getting into financial research business by purchasing 100% shares of Copal Research India Pvt Ltd (CRIPL).”
“Moody’s group was interested in buying 100% stake in the marketing research business of Copal Group which comprised of both operations team in Exevo India and business development team in Exevo Inc. These were for pure commercial development of business by Moody’s for extending the financial research arm in India.
Further, the Copal group has developed their operations over a period of time from 2000 to 2008 much prior to these abovementioned transactions with Moody’s in November 2011,” the firm said.
The SC’s decision in the case could impact the taxability of indirect transfer cases, where an overseas entity, the shares of which are changing hands, has assets in India less than half of its global valuation.