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TA B LE OF CO NT ENT S
TABLE OF CONTENTS ............................................................................................. I
INDEX OF AUTHORITIES ....................................................................................... II
LIST OF ABBREVIATIONS .................................................................................... VII
STATEMENT OF JURISDICTION ........................................................................... IX
SYNOPSIS OF FACTS .............................................................................................. X
STATEMENT OF ISSUES ........................................................................................ XI
SUMMARY OF ARGUMENTS ..............................................................................XIII
ARGUMENTS ADVANCED ..................................................................................... 1
MAINTAINABILITY ...................................................................................................................... 1
A.

Whether the writ petition was maintainable before the High Court? .........................1

B. Whether the alternate remedies were exhausted before approaching the High Court?2
C.

Whether the DDIT had powers to issue SCN to the assessee? .......................................2

CONSTITUTIONALITY AND INCOME TAX......................................................................................... 3

A.

Whether the GAAR provision and income deemed to accrue in India provision of

the Code have violated the Constitution, settled tax treaties and territorial limits of India ..3
B. Whether international treaty obligations under the constitution have been flouted
merely on the fact that India is not a signatory to the Vienna convention? ...........................6
C.

Whether the Code being a law later in time would prevail over DTAA. Scope of

such doctrine? ..............................................................................................................................8

D.

Can legislation unilaterally tax a transaction happening exclusively out of India

between two nonresidents? ...................................................................................................... 10

OTHER ISSUES ......................................................................................................................... 12

A.

Whether SPA-II was a sham and purely to treaty shop .............................................. 12

B. Who is the beneficial owner in the transaction? ............................................................ 13

C.

Did the DDIT commit per incuriam by not following the settled judgments of this

Court?......................................................................................................................................... 14

PRAYER .............................................................................................................. XVI

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INDEX OF AUTHO RITIES

A. TABLE OF CASES
1. A.K. Gopalan v. State of Madras, AIR 1950 SC 27................................................................4
2. A.V. Venkateswaran Collector of Customs v. Ramchand Sobhraj Wadhwani AIR 1961 SC
1506 ......................................................................................................................................2
3. Additional District Magistrate, Jabalpur v. Shivakant Shukla, AIR 1976 SC 1207 ................7
4. Ajoy Kumar Banerjee and Ors.v. Union of India (UOI) and Ors, AIR1984SC127 .................8
5. Atiabari Tea Co. Ltd. v. State of Assam AIR 1961 SC 232.....................................................4
6. Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan AIR 1962 SC 1406 ..................4
7. Baburam Prakash Chandra Maheshwari v Antarim Zila Parishad AIR 1969 SC 556 ...........2
8. Breard v. Greene, 523 U.S. 371, 376 (1998) ..........................................................................7
9. British Columbia Railway Company Limited v. King (1946) A.C. 527. ..................................5
10. Collector of Central Excise v. Dunlop India Ltd (1 SCC 260)................................................1
11. Electronics Corporation of India Ltd. v. Commissioner of Income Tax and Anr, (1989) (2)
SCC 642 .............................................................................................................................. 10
12. Electronics Corporation of India v. Commissioner of Income Tax [1990] 183 ITR 43 (SC). ..5
13. Executive Engineer, Bihar State Housing Board v. Ramdesh Kumar Singh and Ors. AIR
1996 SC 691;.........................................................................................................................1
14. Federation of Hotel Restaurant Association of India v Union of India and Ors (1989) 3 SCC
634 ........................................................................................................................................3
15. Gadadhar v. State of West Bengal AIR 1963 Cal 565 ............................................................6
16. Government of Andhra Pradesh and Ors. v. Smt. P. Laxmi Devi AIR 2008 SC 1640 .............6
17. Govt. of A.P. v. B. Satyanarayana Rao, (2000)IILLJ545SC ................................................. 14

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18. Gramophone Co. of India Ltd v Birendra Bahadur Pandey AIR 1984 SC 667 .......................7
19. GVK Inds. Ltd. and Anr. v. The Income Tax Officer and Anr., (2011)4SCC36 ..................... 10
20. HB Gandhi v Gopi Nath and Sons (1990) 77 STC 1 ..............................................................2
21. Head Money Cases, 112 U.S. 580, 599 (1884) .......................................................................7
22. J.K Cotton Spinning & Weaving Mills Co. Ltd. v. Slate of U.P. and Ors, (1961)ILLJ540SC ..8
23. Jolly George Varghese and Anr. v..The Bank of Cochin. 1980 2 SCC 360 .............................7
24. K. Rajendran v. State of Tamil Nadu AIR 1982 SC 1107 .......................................................6
25. Kesavananda Bharthi v State of Kerala AIR 1973 SC 1461...................................................6
26. Kishwar and others v. State of Bihar and others AIR 1996 SC 1864 .....................................6
27. Life Insurance Corporation of India v. D.J. Bahadur and Ors. AIR 1980 SC 2181 ................8
28. Lily Thomas v. Union of India AIR 2000 SC 1650.................................................................6
29. Madhu Limaye v. S.D.M.Monghyr, (1970) 3 SCC 746 ...........................................................3
30. Narayanan Damodaran And Ors. v. Narayana Panicker Parameswara AIR 1971 Ker 314 ...3
31. Nooruddin v. Dr K. L. Anand [1995] 1 SCC 242 ...................................................................1
32. People's Union of Civil Liberties (PUCL) v. Union of India (UOI) and Anr., (1997) 1 SCC
301. .......................................................................................................................................7
33. Prag Rice & Oil Mills v. UOI AIR 1978 SC 1296 .................................................................4
34. R.M.D.C. v. UOI AIR 1957 SC 628.......................................................................................3
35. Special Director and another v. Mohd. Ghulam Ghouse and another AIR 2004 SC 1467......1
36. State of Goa v. Leukoplast (India) Ltd. 1997(2) ELT 19 ........................................................1
37. T.P. Kunhiraman v. Official Assignee Madras AIR 1983 Mad 145 ........................................6
38. The Cherokee Tobacco, 78 U.S. (11 Wall.) 616, 621 (1870). .................................................7
39. The Chinese Exclusion Cases, 130 U.S. 581, 600 (1889) .......................................................7

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40. Titaghur Paper Mills Co. Ltd. v State of Orissa (142 ITR 663) .............................................2
41. U P Jal Nigam v Nareshwar Sahai Mathur (1 SCC 21) .........................................................2
42. Union of India v. Bajaj Tempo Ltd. 1997 (94) ELT 285.........................................................1
43. Union of India v. Polar Marmo Aglomerates Ltd. 1997 (96) E.L.T. 21 ..................................1
44. Unni Krishnan, J.P. and others v. State of Andhra Pradesh 1993 AIR 217 ............................6
45. Vishaka &Ors. v. State of Rajasthan & Ors (1997) 6 SCC 241 ..............................................7
46. Vodafone International Holdings B.V. v. Union of India & Anr. 2010 (6) SCALE 442 ..........5
47. Vodafone International Holdings B.V. v. Union of India (UOI), Ministry of Finance and
Asstt. Director of Income Tax (International Taxation) 2009(4)BomCR258 ..........................1
48. Vodafone International Holdings B.V. v. Union of India and Anr., CIVIL APPEAL NO.733
OF 2012 (arising out of S.L.P. (C) No. 26529 of 2010) ....................................................... 11
49. Whitney v. Robertson, 124 U.S. 190, 194 (1888)....................................................................7
B. BOOKS
1. SRINIVASAN, K, GUIDE

TO

DOUBLE TAXATION AVOIDANCE AGREEMENTS, (VIDHI

FOUNDATION, 2ND EDITION, NEW DELHI) (1992)

2. GUPTA, SS SERVICE TAX, HOW

TO MEET YOUR OBLIGATIONS

(TAXMANNS, 27TH EDITION

VOL.1 & 2)
3. BASU, DD, CONSTITUTIONAL LAW OF INDIA (WADHWA AND COMPANY, 7TH EDITION,
NAGPUR) (REP. 2003)
4. RAO, M.B. TAXATION

OF

FOREIGN INCOME (VIKAS PUBLISHING HOUSE PVT. LTD, 2ND

EDITION, INDIA) (2006)

5. JAIN, M.P., INDIAN CONSTITUTIONAL LAW (WADHWA AND COMPANY, 5TH EDITION,
NAGPUR) (REP. 2005)

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6. KAGZI, CONSTITUTION OF INDIA (INDIA LAW HOUSE, 6TH EDITION) (2001)

7. MALIK, SURENDRA SUPREME COURT ON WORDS AND PHRASES, (EASTERN BOOK COMPANY,
1ST EDITION, LUCKNOW) (1993)
8. SEERVAI, H.M., CONSTITUTIONAL LAW

OF INDIA:

A CRITICAL COMMENTARY (UNIVERSAL

BOOK TRADERS, 4TH EDITION) (1997)

C. DICTIONARIES
1. AIYAR, RAMANATHA P.: THE LAW LEXICON, WADHWA & COMPANY, 2ND EDN. NAGPUR
(2002).
2. BLACK, HENRY CAMPBELL: BLACKS LAW DICTIONARY, 6TH ED., CENTENNIAL ED. (18911991).
3. CURZON. L. B: DICTIONARY OF LAW, PITMAN PUBLISHING, 4TH EDN. NEW DELHI (1994).
4. GARNER, BRYAN A.: A DICTIONARY OF MODERN LEGAL USAGE, OXFORD
UNIVERSITY PRESS 2ND EDN. OXFORD (1995).
5. GREENBERG, DANIEL AND ALEXANDRA, MILLBROOK: STROUDS JUDICIAL DICTIONARY
OF WORDS & PHRASES, VOL. 2, 6TH ED., LONDON: SWEET & MAXWELL (2000).
6. JUSTICE DESAI, M.C.

AND

AIYAR, SUBRAMANYAM: LAW LEXICON & LEGAL MAXIMS,

2ND ED., DELHI: DELHI LAW HOUSE (1980).

7. MITRA, B.C. & MOITRA, A.C., LEGAL THESARUS, UNIVERSITY BOOK, ALLAHABAD
(1997).
8. MOYS, ELIZABETH M., CLASSIFICATION & THESAURUS FOR LEGAL MATERIAL, 3RD
ED., LONDON: BOWKER SAUR (1992).

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9. OPPE., A.S., WHARTONS LAW LEXICON, 14TH ED., NEW DELHI: SWEET & MAXWELL
(1997).
10. PREM, DAULATRAM, JUDICIAL DICTIONARY, 1ST ED., JAIPUR: BHARAT LAW
PUBLICATION (1992).
D. STATUTORY COMPILATIONS
1. THE DIRECT TAXES CODE, 2010
2. INCOME TAX RULES, 1962
3. THE CONSTITUTION OF INDIA, 1950
E. INTERNET SITES
1. www.incometaxindia.gov.in
2. http://www.findlaw.com
3. http://www.indiankanoon.com
4. http://www.indlawinfo.org/
5. http://www.jstor.org.
6. http://www.judis.nic.in
7. http://www.lawsofindia.org
8. http://www.manupatra.com
9. http://www.scconline.com
10. http://www.supremecourtcaselaw.com

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L I S T O F A B B R E V I AT I O N S
A.I.R.

ALL INDIA REPORTER

All

ALLAHABAD

AP

ANDHRA PRADESH

Art.

ARTICLE

Bom

BOMBAY

Cal

CALCUTTA

Co.

COMPANY

Comm.

COMMISSIONER

CrLJ

CRMINAL LAW JOURNAL

DDIT

DEPUTY DIRECTOR OF INTERNATIONAL TAX

Del

DELHI

DIT

DIRECTOR OF INTERNATIONAL TAX

DTAA
DTC

DOUBLE TAX AVOIDANCE AGREEMENT

DIRECT TAX CODE

e.g.

EXEMPLUM GRATIA (FOR EXAMPLE)

Ed.

EDITION

GAAR

GENERAL ANTI AVOIDANCE RULE

HTA

HELP TAX AVOIDANCE

ITA

INCOME TAX ACT

Lah

LAHORE

LR

LAW REPORTER

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MADRAS

MANU

MANUPATRA

NNPT

NEED NOT PAY TAX

p.

PAGE

Para.

PARAGRAPH

Pun

PUNJAB AND HARYANA

PNT

PAID NO TAX

SC

SUPREME COURT

SCC

SUPREME COURT CASES

SCN

SHOW CAUSE NOTICE

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S T AT E M E N T O F J U R I S D I C T I O N

THE PETITIONERS HAVE APPROACHED THE HONBLE SUPREME COURT OF INDIA UNDER ARTICLE
136 OF THE CONSTITUTION OF INDIA, WHICH READS AS HEREUNDER:

__________________________________________
136. SPECIAL LEAVE TO APPEAL BY THE SUPREME COURT.
(1) NOTWITHSTANDING

ANYTHING IN THIS

CHAPTER,

THE

SUPREME COURT

MAY, IN ITS DISCRETION,

GRANT SPECIAL LEAVE TO APPEAL FROM ANY JUDGMENT, DECREE, DETERMINATION, SENTENCE OR
ORDER IN ANY CAUSE OR MATTER PASSED OR MADE BY ANY COURT OR TRIBUNAL IN THE TERRITORY OF

INDIA.
(2) NOTHING IN CLAUSE (1) SHALL APPLY TO

ANY JUDGMENT, DETERMINATION, SENTENCE OR ORDER

PASSED OR MADE BY ANY COURT OR TRIBUNAL CONSTITUTED BY OR UNDER ANY LAW RELATING TO THE

ARMED FORCES.
__________________________________________

THE RESPONDENT SUBMITS TO THE JURISDICTION OF THIS HONBLE COURT

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SYNOPSIS OF FACTS

YPT is a company incorporated in U.S.A. that wanted to acquire PNT incorporated in India
whose shares lye in the various companies in the following order: HTA, Hong Kong > TFT,
Cayman Islands > NNPT, Mauritius.

It therefore entered into SPA-I with its ultimate parent company HTA that would sell all its
shares that it held in TFT to the assessee, YPT.

In view of the Indian Court judgments similar to the transaction against such nonresident
purchasers the assessee entered into SPA-II, according to which it would purchase all the shares
which NNPT holds in PNT and HTA (parent company) would grant necessary authorization
permitting TFT to authorize NNPT to sell the shares to YPT at agreed rates.

JCIT issued a notice to PNT and YPT for getting details of their transaction. The whole
transaction was believed to evade the tax liability in India on sale of shares by NNPT. The DDIT
issued a show cause notice SCN where it was required to show as to why YPT should not be
deemed to be assessee in default AID.

After hearing YPTs submissions DDIT passed an order levying tax at 20% being long term
capital asset along with applicable surcharge and cess amounting to INR 2,060 Crores. Further
penalty and interest charges were also levied. The assessee filed writ petition against the
impugned order in the Bangalore High Court praying that the order passed by DDIT was
quashed since it was non est in law and violated the Constitution, settled tax treaties, income tax
law principles and also territorial limits of India.

The Honble High Court dismissed the writ petition.

On filing the Special Leave Petition, leave was granted and the matter was directed to be heard
on SLP paper books. The matter was then placed before the Constitutional Bench.

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S T AT E M E N T O F I S S U E S
THE RESPONDENT RESPECTFULLY ASKS THE HONBLE SUPREME COURT OF INDIA, THE FOLLOWING
QUESTIONS:
I.

MAINTAINABILITY:

A. WHETHER THE WRIT PETITION BEFORE THE HIGH COURT WAS MAINTAINABLE?
B. WHETHER

ALTERNATIVE REMEDIES WERE EXHAUSTED BEFORE APPROACHING THE

HIGH

COURT?
C. WHETHER THE DDIT HAD POWERS TO ISSUE SCN TO THE ASSESSEE?

II.

CONSTITUTIONALITY AND INCOME TAX:

A. WHETHER
THE

CODE

THE

GAAR

PROVISION AND INCOME DEEMED TO ACCRUE IN INDIA PROVISION OF

HAVE VIOLATED THE

CONSTITUTION,

SETTLED TAX TREATIES AND TERRITORIAL

LIMITS OF INDIA?

B. WHETHER

INTERNATIONAL TREATY OBLIGATIONS UNDER THE

FLOUTED MERELY ON THE FACT THAT

INDIA

CONSTITUTION

HAVE BEEN

IS NOT A SIGNATORY TO THE

VIENNA

CONVENTION?

C. WHETHER

THE

CODE BEING A

LAW LATER IN TIME WOULD PREVAIL OVER

DTAA. SCOPE OF

SUCH DOCTRINE

D. CAN

LEGISLATION UNILATERALLY TAX A TRANSACTION HAPPENING EXCLUSIVELY OUT OF

INDIA BETWEEN TWO NONRESIDENTS?

III.

OTHER ISSUES:

A. WHETHER SPA-II WAS SHAM AND WAS PURELY TO TREATY SHOP?

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B. WHO IS THE BENEFICIAL OWNER IN THE TRANSACTION?

C. DID THE DDIT COMMIT PER INCURIAM BY NOT FOLLOWING THE SETTLED JUDGMENTS OF THIS
COURT?
D. SUCH OTHER ISSUES AS MAY BE RAISED BY THE COUNSELS WITH THE LEAVE OF THE COURT.

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S U M M A RY O F A R G U M E N T S
MAINTAINABILITY
That the writ petition was not maintainable before the High Court as only where statutory
remedies are entirely ill-suited to meet the demands of extraordinary situations that recourse may
be had to Article 226 of the Constitution. The alternate remedies were also exhausted before
approaching the High Court. Further, the DDIT has the power to issue an SCN under Section 233
of the Code
CONSTITUTIONALITY AND INCOME TAX
(a) It has been most humbly submitted that the GAAR and income deemed to accrue in India
provisions are not in violation of Article 14 and 21 of the Constitution. Further, the Parliament
not only has the legislative power under Article 245, it also has power to impose such restrictions
under Article 302 and settled tax treaties.
(b) As to the question of India violating the Vienna Convention, it has been humbly submitted that
Vienna Convention will not have any binding effect over the municipal law of the country if the
two are in conflict, especially because India is not a signatory to it.
(c) & (d) As to the question of the priority of DTC over DTAA, the respondent submits that it falls
within the scope of Last-in-time doctrine. That a legislation unilaterally taxing a transaction
happening exclusively out of India between two nonresidents is within the scope of Article 245.
OTHER ISSUES
(a) That SPA-II was a sham and purely to treaty shop.
(b) That beneficial owner in the transaction is HTA.
(c) That DDIT did not commit per incuriam.

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- ARGUMENTS ADVANCED-

A R G U M E N T S A D VA N C E D
MAINTAINABILITY
A. WHETHER THE WRIT PETITION WAS MAINTAINABLE BEFORE THE HIGH COURT?
1. It is most humbly contended before the Honble Court that the writ petition was not maintainable
before the High Court. Article 2261 is not meant to circumvent statutory procedures and the
judicial process should never become an instrument of abuse 2. It is only where statutory
remedies are entirely ill-suited to meet the demands of extraordinary situations that recourse may
be had to Article 226 of the Constitution3. It is a well settled principle that ordinarily no writ lies
against a charge sheet or show-cause notice4. It has also been laid down in series of cases by the
Supreme Court that the High Court should not interfere at the stage of show cause notice to take
over the fact finding investigation which is to be resolved by fact finding authorities constituted
under the relevant statute5.
2. It is also submitted that the instant matter involves complex questions arising out of disputed
facts, lot of which are still undisclosed and the same cannot be made the subject matter of a Writ
Petition under Article 226 of the Constitution of India. 6

Article 226 of the Constitution of India: Power of High Courts to issue certain writs (1) Notwithstanding anything
in Article 32 every High Court shall have powers.shall not be in derogation of the power conferred on the
Supreme court by clause ( 2 ) of Article 32.
2

Nooruddin v. Dr K. L. Anand [1995] 1 SCC 242

Special Director and another v. Mohd. Ghulam Ghouse and another AIR 2004 SC 1467; Collector of Central
Excise v. Dunlop India Ltd (1 SCC 260).
4

Executive Engineer, Bihar State Housing Board v. Ramdesh Kumar Singh and Ors. AIR 1996 SC 691; Special
Director and Anr. v. Mohd. Ghulam Ghouse and Anr. 2004 (164) ELT 141 (SC).
5

State of Goa v. Leukoplast (India) Ltd. 1997(2) ELT 19; Union of India v. Polar Marmo Aglomerates Ltd. 1997
(96) E.L.T. 21; Union of India v. Bajaj Tempo Ltd. 1997 (94) ELT 285.
6 Vodafone International Holdings B.V. v. Union of India (UOI), Ministry of Finance and Asstt. Director of Income
Tax (International Taxation) 2009(4)BomCR258.

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-Page 2 of 15-

THE ALTERNATE REMEDIES WERE EXHAUSTED BEFORE APPROACHING THE

HIGH COURT?
3. It is humbly submitted before the Honble Court that where the petitioner fails to avail the use of
the effective statutory alternative remedies, he cannot be permitted to seek remedy under Article
226 of the Constitution of India 7. Further, where statutory remedies are available or a statutory
Tribunal has been set up, a petition under Article 226 should not be entertained, unless the
statutory remedies are inappropriate to meet the demands of any extraordinary situation8; which
clearly did not exist in the instant case.
C. WHETHER THE DDIT HAD POWERS TO ISSUE SCN TO THE ASSESSEE?
4. It is most respectfully submitted before the Honble court that Section 233 9 of the Code grants
power to the DDIT to issue the SCN. Section 233 (1) provides that The income-tax authority
shall, for the purposes of imposing any penalty under this Chapter, issue a notice to any assessee
requiring him to show cause why the penalty should not be imposed on him...
5. The transaction in question is prima-facie chargeable to tax in India since it amounts to transfer
of a Capital Asset in India. The transaction involved in the present case is prima facie liable to
Capital Gains Tax and YPT is prima facie liable for withholding Tax and that there was
sufficient justification founded upon facts and law for the issuance of the impugned show cause
notice.

A.V. Venkateswaran Collector of Customs v. Ramchand Sobhraj Wadhwani AIR 1961 SC 1506; Baburam Prakash
Chandra Maheshwari v Antarim Zila Parishad AIR 1969 SC 556.
8

U P Jal Nigam v Nareshwar Sahai Mathur (1 SCC 21); Titaghur Paper Mills Co. Ltd. v State of Orissa (142 ITR
663); HB Gandhi v Gopi Nath and Sons (1990) 77 STC 1
9

Section 233, The Direct Tax Code, 2010

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- ARGUMENTS ADVANCEDCONSTITUTIONALITY AND INCOME TAX

A. WHETHER THE GAAR PROVISION AND INCOME DEEMED TO ACCRUE IN INDIA PROVISION
OF THE

CODE

HAVE VIOLATED THE

CONSTITUTION,

SETTLED TAX TREATIES AND

TERRITORIAL LIMITS OF INDIA

6. It is humbly submitted before the Honble Court that the provisions under Section 123 10 and
Section 5(1)(d)11 of the Code are not unconstitutional. It is also to be noted that the GAAR
provisions cannot be severed as it is a part of the central theme of the Code and in order to prove
it unconstitutional the entire statute has to be declared so.12
The GAAR and income deemed to accrue in India provisions are not in violation of Article
14 and 21 of the Constitution
7. It is humbly submitted that the presumption is always in favor of constitutionality, and the
burden is upon him who attacks it to show that there has been a clear transgression of the
constitutional principles.13 It is humbly submitted that The Supreme Court in the celebrated
decision of Federation of Hotel Restaurant Association of India v Union of India and Ors14
observed that .. legislature enjoys a wide latitude in the matter of selection of persons,
subject matter, events etc of taxation.. The legislature can exercise an extremely wide discretion
in classifying items for tax purposes..

10

123. (1) Any arrangement entered into by a person may be declared as an impermissible avoidance arrangement
and the consequences, under this Code, of the arrangement may be determined by (a) disregarding, combining or
recharacterising any step in, or a part or whole of, the impermissible avoidance arrangement; (b) treating the
impermissible avoidance arrangement (i) as if it had not been entered into or carried out; or (ii) in such other
manner as in the circumstances of the case, the Commissioner deems appropriate for the prevention or diminution of
the relevant tax benefit;...
11

(1) The income shall be deemed to accrue in India, if it accrues, whether directly or indirectly, through or from:
(d) the transfer of a capital asset situated in India.
12

Narayanan Damodaran And Ors. v. Narayana Panicker Parameswara AIR 1971 Ker 314 ; R.M.D.C. v. UOI
AIR 1957 SC 628.
13

Madhu Limaye v. S.D.M.Monghyr, (1970) 3 SCC 746

14

Federation of Hotel Restaurant Association of India v Union of India and Ors (1989) 3 SCC 634.

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8. It is submitted that the proposed GAAR provisions do not envisage that every arrangement for
tax mitigation would be liable to be classified as an impermissible avoidance arrangement. 15 The
Assessing Officer in accordance with the directions of Commissioner of Income Tax may in such
cases determine the tax consequences for the assessee by disregarding the arrangement and thus
do not confer any arbitrary power on the tax authorities and it falls under procedure established
by law. 16 Therefore in the instant case the provisions under the Code are not arbitrary or
ambiguous and there are an effective procedure in place and are thus not invalid. 17
The Parliament has power to impose restriction the freedom of trade, commerce and
intercourse under Article 30218 of the Constitution
9. It is humbly submitted before this Honble Court that the freedom under Article 301 of the
Constitution is not absolute and is subject to the Parliament imposing restrictions on the same
under Article 302 in public interest. The Supreme Court interpreted Article 302 and held that:
"....It is evident that the restrictions contemplated by it must bear a reasonable nexus with the
need to serve public interest 19 It is thus stated that this provision is not being violated as
taxation is for collection of revenue and that is very much in the interest of the public. 20

15

Empowers the Commissioner of Income-tax (CIT) to declare an arrangement impermissible if it - has been
entered into with the objective of obtaining tax benefit And - creates rights or obligations, which would not
normally be created if the transaction was implemented at arms length; or - results in, directly or indirectly, misuse
or abuse of the provisions of the Code; or - lacks commercial substance in whole or in part; or - is not for bonafide
purpose.
16

A.K. Gopalan v. State of Madras, AIR 1950 SC 27.

17

Electronics Corporation Of India v. Commissioner Of Income Tax & Anr. 1989 AIR 1707.

18

301. Freedom of trade, commerce and intercourse Subject to the other provisions of this Part, trade, commerce
and intercourse throughout the territory of India shall be free.
19

Prag Rice & Oil Mills v. UOI AIR 1978 SC 1296.

20

Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan AIR 1962 SC 1406; Atiabari Tea Co. Ltd. v. State of
Assam AIR 1961 SC 232.

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Article 245 of the Constitution is not being violated as income deemed to accrue in India is
extra territorial in nature
10. It is humbly submitted that in British Columbia Railway Company Limited v. King21 and
ECIL 22 the principle that was enunciated in was that the problems of inability to enforce the laws
outside the territory of a nation state cannot be grounds to hold such laws invalid. Within
international law, the principles of strict territorial jurisdiction have been relaxed. Hence, even
those extra-territorial aspects or causes, provided they have a nexus with India, should be
deemed to be within the domain of legislative competence of the Parliament.
11. It is thus submitted that as far as the applicability of Section 5(I)(d) is concerned the taxation of
income accruing through or from a direct or direct transfer of capital which is situated in India is
not in violation of the territorial limits as it is very much in consonance with the nexus principle.
These provisions are not in violation settled tax treaties
12. It is humbly submitted before this Honble Court that Section 291 of the Code expressly provides
that Central Government can enter into tax treaties with other countries and there is no bar on
such agreements. However GAAR shall apply only with respect to cases where tax avoidance is
inequitable and undesirable. In the Vodafone case23 the Supreme Court opined that, Tax
avoidance is a problem faced by almost all countries following civil and common law systems
and all share the common broad aim that is to combat it.
13. It is further submitted this limited treaty override is in accordance with the internationally
accepted principles. Since anti-avoidance rules are part of the domestic legislation and they are
not addressed in tax treaties, such limited treaty override will not be in conflict with the DTAAs.

21

British Columbia Railway Company Limited v. King (1946) A.C. 527.

22

Electronics Corporation of India v. Commissioner of Income Tax [1990] 183 ITR 43 (SC).

23

Vodafone International Holdings B.V. v. Union of India & Anr. 2010 (6) SCALE 442.

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It is thus submitted that in the instant case the agreement entered into between YPT and NNPT
was to evade taxes and thus disregard of such an arrangement would not be a contravention of
the settled tax treaties.
B. WHETHER

INTERNATIONAL TREATY OBLIGATIONS UNDER THE CONSTITUTION HAVE

BEEN FLOUTED MERELY ON THE FACT THAT INDIA IS NOT A SIGNATORY TO THE VIENNA
CONVENTION?

14. It is most humbly submitted before this Honble Court that the Directive Principles of State
Policy are unenforceable in the court of law and municipal law shall prevail over international
law in cases of conflict between the two.
The international treaty obligations under the constitution are not enforceable under the law
15. It is humbly submitted before this Honble Court that the principles laid down under Article 37 24
of Part IV of the Constitution of India expressly state that it is mere directive and is not
enforceable by any Court25 especially when its compliance would jeopardize the sovereignty of
Indias power to legislate statutes to safeguard its revenue interests. Further, Article 5126 only
expects that the State shall endeavour to comply with any treaty obligation and does not compel
it to do so especially when Indias interests are at risk.
16. In Kesavananda Bharthi v State of Kerala 27 Chief Justice Sikri observed: In view of Article 51
of the constitution this court must interpret language of the Constitution. Directive Principles
of State Policy are non justiciable by virtue of Article 37.
24

Article 37, Constitution of India: Application of the principles contained in this Part, the provisions contained in
this Part shall not be enforceable by any court, but the principles therein laid down are nevertheless fundamental in
the governance of the country and it shall be the duty of the State to apply these principles in making laws.
25

Unni Krishnan, J.P. and others v. State of Andhra Pradesh 1993 AIR 217; Kishwar and others v. State of Bihar
and others AIR 1996 SC 1864; Gadadhar v. State of West Bengal AIR 1963 Cal 565; K. Rajendran v. State of Tamil
Nadu AIR 1982 SC 1107; T.P. Kunhiraman v. Official Assignee Madras AIR 1983 Mad 145; Lily Thomas v. Union
of India AIR 2000 SC 1650; Government of Andhra Pradesh and Ors. v. Smt. P. Laxmi Devi AIR 2008 SC 1640
26

Article 51, Constitution of India: Promotion of international peace and security.

27

Kesavananda Bharthi v State of Kerala AIR 1973 SC 1461

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17. For that reason, Article 51 c) 28 of the Constitution cannot be argued over in the instant case and
the directive principle will not be considered as a necessary commitment in the eyes of law.
These principles are unenforceable by any court and it is the prerogative of the State to decide as
to when the treaty obligations could be overstepped especially when the interest of the country is
at peril. And thus YPT cant claim that international treaty obligations under the constitution
have been violated.
The Vienna Convention will not have any binding effect over the municipal law of the
country if the two are in conflict
18. It is most humbly put forth this Honble Court that municipal law shall supersede over
international law when the conflict between the two is inevitable. In the landmark case of
Vishaka & Ors. v. State of Rajasthan & Ors29 Verma, C.J., said: The rules of international
law and municipal law should be construed harmoniously, and only when there is an
inevitable conflict between these two laws should municipal law prevail over international law.
The rule of construction should be such that if there be a conflict between the municipal law on
one side and the international law or the provisions of any treaty obligations 30on the other, the
courts would give effect to municipal law.31 Hence, the municipal laws shall supersede the
Vienna convention provisions in the instant case.

28

Article 51, Constitution of India: Promotion of international peace and security. The State shall endeavour to: c)
Foster respect for international law and treaty obligations in the dealings of organised peoples with one another; and
encourage settlement of international disputes by arbitration.
29

Vishaka &Ors. v. State of Rajasthan & Ors (1997) 6 SCC 241

30

Gramophone Co. of India Ltd v Birendra Bahadur Pandey AIR 1984 SC 667

31

Additional District Magistrate, Jabalpur v. Shivakant Shukla, AIR 1976 SC 1207; Jolly George Varghese and
Anr. v..The Bank of Cochin. 1980 2 SCC 360; People's Union of Civil Liberties (PUCL) v. Union of India (UOI) and
Anr., (1997) 1 SCC 301.

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C. WHETHER THE CODE BEING A LAW LATER IN TIME WOULD PREVAIL OVER DTAA. SCOPE
OF SUCH DOCTRINE?

19. It is most humbly submitted before this Honble Court that the Code being a statute later in time
than the DTAA entered into between India and Mauritius, the Code shall prevail over the DTAA.
The instant conflict between DTAA and DTC fall within the scope of Last-in-time doctrine.
20. It is humbly put forth that applicability of Last-in-time doctrine is a prevalent practice to resolve
the conflict between a treaty and statute.
21. It is submitted that according to US Supreme Court, statutes and treaties are created equal and, in
case of conflict, the one last in time controls the other 32. This so called last-in-time rule, set
forth in a trinity of cases33 in the late nineteenth century, is a restatement of the legal maxim lex
posterior derogat priori34.
22. Further, it has been opined by Reuven S. Avi-Yonah35: Tax treaties aim primarily at the
avoidance of double taxation and the prevention of fiscal evasion but also have the objective of
allocating tax revenues equitably between Contracting States. Thus, any interpretation achieving
these objectives would be preferable to one leading double taxation or to an inappropriate
double exemption.36

32

Breard v. Greene, 523 U.S. 371, 376 (1998) (per curiam); Reid, 354 U.S. at 18; The Chinese Exclusion Cases, 130
U.S. 581, 600 (1889); Whitney v. Robertson, 124 U.S. 190, 194 (1888); Head Money Cases, 112 U.S. 580, 599
(1884); The Cherokee Tobacco, 78 U.S. (11 Wall.) 616, 621 (1870).
33

Ibid.

34

See BLACKS LAW DICTIONARY 931 (8th ed. 2004) (defining the term as the principle that a later statute
negates the effect of a prior one if the later statute expressly repeals, or is obviously repugnant to, the earlier law).
35

Professor of Law, The University of Michigan.

36

Excerpted from Tax Treaties and Domestic Law which was based on the presentations made at the Tax Treaties
and
Domestic Law seminar held in Milan on November 21, 2005 and was edited by Professor Gulielmo
Maisto.

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23. Thus, it is submitted that interpreting the treaty by applying Last-in-time doctrine achieves the
objectives of Indo-Mauritius DTAC37 of avoidance of double taxation and prevention of fiscal
evasion.
The principle "Generalia specialibus non derogant" is applicable.
24. It is most reverentially put forth that the rule Lex posterior generalis non derogart legi priori
speciali38 is not applicable in the instant matter. In the matter of Ajoy Kumar Banerjee and
Ors.v. Union of India (UOI) and Ors39, this Court analyzed the judicial pronouncements40
pertaining to principle "Generalia specialibus non derogant41 and observed that:In other
words, a prior special law would yield to a later general law, if either of the two following
conditions is satisfied: (i) The two are inconsistent with each other, (ii) There is some express
reference in the later to the earlier enactment.
25. Further, it is submitted that there is an express reference to the DTAC in Section 291(9)42 and it
provides that Notwithstanding anything in sub-section (8), the provisions of this Code relating
to (a) General Anti-Avoidance Rule under section 123; shall apply to the assessee referred
to in sub-section (8), whether or not such provisions are beneficial to him..
26. Therefore, in light of the above cited judicial pronouncements and Section 291(9), it can be
concluded that the DTC, even though a general law, will prevail over Indo-Mauritius DTAC.

37

Agreement for avoidance of double taxation and prevention of fiscal evasion with Mauritius dated 24-8-1982

38

Later general legislation does not overrule earlier special legislation

39

Ajoy Kumar Banerjee and Ors.v. Union of India (UOI) and Ors, AIR1984SC127;

40

J.K Cotton Spinning & Weaving Mills Co. Ltd. v. Slate of U.P. and Ors, (1961)ILLJ540SC; Life Insurance
Corporation of India v. D.J. Bahadur and Ors. AIR 1980 SC 2181
41

General things do not derogate from special things

42

Section 291(9) of the Direct Taxes Code, 2010

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The Last-in-time rule does not violate OECD Model Tax Convention
27. It is most reverentially put forth that the applicability of Last-in-time rule in the instant conflict
does not violate OECD Model Tax Convention. It is submitted that Commentary on OECD says
that :To the extent these anti-avoidance rules are part of the basic domestic rules set by
domestic tax laws for determining which facts give rise to a tax liability, they are not addressed
in tax treaties and are therefore not affected by them. Thus, as a general rule, there will be no
conflict between such rules and the provisions of tax conventions. 43
28. Further, as argued above, such override achieves the objective of tax treaties and OECD Model
Tax Convention44, of prevention of both double taxation and double non-taxation and fiscal
evasion.
29. Henceforth, it is submitted that the instant conflict lies within the scope of Last-in-time doctrine.
D. CAN LEGISLATION UNILATERALLY TAX A TRANSACTION HAPPENING EXCLUSIVELY OUT OF
INDIA BETWEEN TWO NONRESIDENTS?
30. It is most humbly submitted that though the transaction has occurred between two nonresidents,
the underlying capital assets (i.e. the assets of PNT and PNT as such) are situated and
incorporated in India and the powers of DTC to tax such a transaction are within the
Constitutional limits.
Parliament can enact such legislation under Article 245.
31. It is most humbly submitted that Parliament is not constitutionally restricted from enacting a
legislation which taxes a transaction, in which underlying capital assets are India. It is most
humbly submitted that the Parliament is empowered to make laws with respect to aspects or
causes that occur, arise or exist, or may be expected to do so, within the territory of India, and

43

See Commentary 9.2 on Article 1 of the OECD Model Tax Convention (2005).

44

See articles of the Model Convention with respect to taxes on income and on capital by OECD.

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also with respect to extra-territorial aspects or causes that have an impact on or nexus with
India.45 This Court has scrutinized the ratio of ECIL46 and widened the scope of Article 245 in
the matter of GVK Inds. Ltd. and Anr. v. The Income Tax Officer and Anr. 47, and held that:
the Parliament may exercise its legislative powers with respect to extra-territorial aspects or
causes, only when such extra-territorial aspects or causes have, or are expected to have, some
impact on, or effect in, or consequences for: (a) the territory of India, or any part of India; or (b)
the interests of, welfare of, wellbeing of, or security of inhabitants of India, and India.
32. Thus, it is put forth that legislation with respect to extra-territorial transaction happening entirely
out of India, between two non-residents can be enacted if such transaction has an impact or
nexus with India and the legislation in the interest of India.
33. It is therefore submitted finally that in the instant matter, the transaction has nexus with India as
underlying capital assets are situated in India and this legislation is in the interest of India, and
hence, legislation can tax this transaction.
The legislation can unilaterally tax this transaction
34. It is most humbly put forth that these anti-avoidance rules are part of the basic domestic rules set
by domestic tax laws for determining which facts give rise to a tax liability, they are not
addressed in Indo-Mauritius DTAC and are therefore not affected by them. It is also submitted
that this legislation is in furtherance of the objectives of Indo-Mauritius DTAC to avoid double
taxation and prevent fiscal evasion48.
35. It is put forth that incorporates the provision of Mutual Agreement Procedure, and provides that
the competent authorities of the Contracting States shall endeavour to resolve by mutual
45

GVK Inds. Ltd. and Anr. v. The Income Tax Officer and Anr., (2011)4SCC36.

46

Electronics Corporation of India Ltd. v. Commissioner of Income Tax and Anr, (1989) (2) SCC 642.

47

Supra note 43

48

Supra note 35

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agreement any difficulties or doubts arising as to the interpretation or application of the

Convention. They may also consult together for the elimination of double taxation in cases not
provided for in the Convention.49
36. Thus, it is submitted that India can unilaterally enact such a legislation pertaining to antiavoidance rules as they are not addressed in Indo-Mauritius DTAC and there is no requirement
renegotiate the DTAC with competent authority and enter into a further Mutual Agreement
Procedure according to Article 25 of Indo-Mauritius DTAC.
The need of such legislation has been observed by the Supreme Court
37. It is most humbly submitted that this Court in the matter of Vodafone International Holdings
B.V50, it was observed that: It is often said that insufficient legislation in the countries where
they operate gives opportunities for money laundering, tax evasion etc. and, hence, it is
imperative that that Indian Parliament would address all these issues with utmost urgency.
38. This Court also observed the existing Anti-Avoidance rules in various jurisdictions and made
observation regarding DTC as: Direct Tax Code Bill (DTC) 2010, proposed in India, envisages
creation of an economically efficient, effective direct tax system, proposing GAAR.
39. Thus, in light of above submissions, it can be concluded that legislation can unilaterally tax a
transaction happening exclusively out of India, between two non-residents.
OTHER ISSUES
A. WHETHER SPA-II WAS A SHAM AND PURELY TO TREATY SHOP
40. It is most humbly put forth that SPA-II entered between YPT and NNPT was a sham to abuse the
Indo-Mauritius treaty. In a very short span of time after the transaction, the entire consideration

49

Article 25 Indo-Mauritius DTAC

50

Vodafone International Holdings B.V. v. Union of India and Anr., CIVIL APPEAL NO.733 OF 2012 (arising out
of S.L.P. (C) No. 26529 of 2010)

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amount went to HTA through TFT. This left HTA happy as it achieved indirectly what it could
not achieve directly.51
41. This Court in recent judgment of Vodafone International Holdings B.V52, analyzed the concept
of sham, treaty shopping, colorable devices in light of various English and Indian judicial
pronouncements and observed that: we are of the view that every strategic foreign direct
investment coming to India, as an investment destination, should be seen in a holistic manner.
While doing so, the Revenue/Courts should keep in mind the following factors: the concept of
participation in investment, the duration of time during which the Holding Structure exists; the
period of business operations in India; the generation of taxable revenues in India; the timing of
the exit; the continuity of business on such exit. In short, the onus will be on the Revenue to
identify the scheme and its dominant purpose.
42. Thus, it is submitted that if the transaction is seen in a holistic manner and the above factors are
considered, it can be observed that it was a back-to-back arrangement by these group companies
and strong evidence to this arrangement is the transfer of amount to its Parent companies, in such
a short span of time. SPA-II was a colorable device which was intended merely to treaty shop
and to help HTA achieve what it could not achieve under SPA-I.
B. WHO IS THE BENEFICIAL OWNER IN THE TRANSACTION?
43. It is most humbly submitted that beneficial owner in the transaction is HTA. SPA-II was
executed as a colorable device apprehending the adverse judgments and to abuse Indo-Mauritius
DTAC. It is thus submitted that as a development after the transaction, NNPT transferred the
entire amount to TPT being its parent company and TPT in turn transferred the entire amount to
its parent company HTA. The transaction was like a back-to-back arrangement by these group
51

Factsheet 7

52

Supra note 48.

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companies. Also, the above cash movement occurred relatively in a shorter time after the sale
transaction took place. This left HTA happy as it achieved indirectly what it could not achieve
directly.53
44. Thus, in light of the above facts, it can be concluded that the beneficial owner in the transaction
is HTA as ultimately the entire consideration amount worth Rs. 10,000 crores went to HTA.
C. DID THE DDIT COMMIT PER INCURIAM BY NOT FOLLOWING THE SETTLED JUDGMENTS
OF THIS COURT?

45. It is most reverentially put forth that the DDIT passed an order section 194 read with section 214
of the Code54, levying tax at the rate of 20% being long term capital asset along with applicable
surcharge and cess amounting to INR 2,060 crores55. It is submitted that DDIT has not
committed per incuriam56.
46. It is submitted that Halsbury laws of England states that decision is given per incuriam when
the court has acted in ignorance of a previous decision of its own or of a court of coordinate
jurisdiction which covered the case before it, in which case it must decide which case to follow;
or when it has acted in ignorance of a House of Lords decision, in which case it must follow that
decision; or when the decision is given in ignorance of the terms of a statute or rule having
statutory force.
47. In Govt. of A.P. v. B. Satyanarayana Rao57 it has been held as follows: The rule of per
incuriam can be applied where a court omits to consider a binding precedent of the same court

53

Factsheet 7

54

Section 194 and 214 of The Direct Taxes Code, 2010

55

Factsheet 11

56

Halsbury's Laws of England, 4th Edn., Vol.26

57

Govt. of A.P. v. B. Satyanarayana Rao, (2000)IILLJ545SC

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or the superior court rendered on the same issue or where a court omits to consider any statute
while deciding that issue.
48. It is most reverentially put forth that DDIT has passed orders under powers conferred to it by the
Code and there is no binding Supreme Court judgment which prevents DDIT from passing such
an order.
49. Thus, in light of the above explained judicial concept of per incuriam, it can be concluded that
DDIT did not commit per incuriam.

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P R AY E R
HEREFORE IN THE LIGHT OF THE ISSUES RAISED, ARGUMENT ADVANCED, REASONS GIVEN AND

AUTHORITIES CITED, THIS HONBLE COURT MAY BE PLEASED TO:

TO HOLD

THAT THE WRIT PETITION WAS NOT MAINTAINABLE BEFORE THE HIGH COURT

THAT

THE

GAAR PROVISION

AND INCOME DEEMED TO ACCRUE IN INDIA PROVISIONS ARE

CONSTITUTIONAL

THAT

THE CODE DOES NOT DISREGARD INTERNATIONAL TREATY OBLIGATIONS ENSHRINED IN

THE INDIAN CONSTITUTION

THAT THE CODE BEING A LAW LATER IN TIME WILL PREVAIL OVER DTAA

THAT

THE LEGISLATION CAN UNILATERALLY TAX A TRANSACTION HAPPENING EXCLUSIVELY

OUT OF INDIA BETWEEN TWO NON-RESIDENTS

THAT THE SPA-II WAS SHAM AND PURELY TO TREATY SHOP

THAT HTA IS THE BENEFICIAL OWNER IN THE TRANSACTION

THAT THE DDIT DID NOT COMMIT PER INCURIAM

TO UPHOLD

THE ORDER OF THE HIGH COURT.

MISCELLANEOUS

AND ANY OTHER RELIEF THAT THIS HONBLE COURT MAY BE PLEASED TO GRANT IN THE INTERESTS
OF JUSTICE, EQUITY AND GOOD CONSCIENCE

ALL OF WHICH IS RESPECTFULLY SUBMITTED.

COUNSELS FOR THE RESPONDENTS

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