Investment In Shares In Indian Subsidiary 'Capital Account Transaction', Not Income: Delhi High Court

The Delhi High Court has held that investment in shares by a company in its Indian subsidiary is a “capital account transaction” which does not give rise to any income. Placing reliance on the earlier decision of Delhi High Court in Nestle SA v. Assistant Commissioner of Income Tax, the bench comprising of Acting Chief Justice Manmohan and Justice Mini Pushkarna held “It is settled law that investment in shares in an Indian subsidiary cannot be treated as 'income' as the same is in the nature of “capital account transaction” not giving rise to any income.” Factual Background The petitioner in leading petition, M/s Angelantoni Test Technologies SRL, is a foreign company and is a resident of Italy. Further, reliance was placed on Divya Capital One Private Limited vs. Assistant Commissioner of Income Tax Circle 7 Delhi & Anr., wherein the Delhi High Court had held “'Whether it is “information to suggest” under amended law or “reason to believe” under erstwhile law the benchmark of “escapement of income chargeable to tax” still remains the primary condition to be satisfied before invoking powers under Section 147 of the Act'.” Accordingly, the Court set aside the notices issued under Section 148A of the Income Tax Act and all consequential proceedings. Case Title: M/S Angelantoni Test Technologies Srl V. Assistant Commissioner Of Income Tax, Circle Int Tax 1 & Ors Citation: 2024 LiveLaw 25 Counsel for Petitioners: Mr. Ved Jain, Ms. Nischay Kantoor, Ms. Soniya Dodeja, Mr. Salil Kapoor, Ms. Ananya Kapoor, Mr. Sumit Lalchandani, Mr. Vibhu Jain, Mr. Kamal Sawhney, Mr. Nikhil Agarwal, Mr. Nishank Vashishtha, Mr. Tarun Gulati, Sr. Advocate with Ms. Ishita Farsaiya, Mr. Apoorv Shukla, Mr. Pursoth Kannan, Mr. Kumar Visalaksh, Mr. Udit Jain, Mr. Arihant Tater, Mr. Ajitesh Dayal Singh.