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2014 (11) TMI 881 - HC - Income TaxApplication of Chapter X - Transfer pricing adjustments - International Transaction or not - Validity of SCN without jurisdiction – Additions towards shortfall in value of equity shares - TPO further held that this difference between the ALP and the issue price (including premium) was required to be treated as deemed loan given by the Petitioner to its holding company and deemed interest on such deemed loan at ₹ 88.35 Crores was also treated as interest income. - Held that:- Issue of shares at premium by the Petitioner to its non-resident holding company does not give rise to income in an International Transaction. The application of Chapter X of the Act to such transaction is without jurisdiction - the sine qua non to apply Chapter X of the Act would be arising of Income under the Act out of an International Transaction - This income should be chargeable under the Act, before Chapter X can be applied - The definition of income does not include within its scope capital receipts arising out of capital account transaction unless so specified in Section 2(24) of the Act as income - There is no charge in the Act to tax amounts received and/or arising on account of issue of shares by an Indian entity to a nonresident entity in Sections 4,5,15,22,28,45 and 56 of the Act. This is as it arises out of Capital Accounts transaction and, therefore, is not income - Chapter X of the Act does not contain any charging provision but is a machinery provision to arrive at ALP of a transaction between Associated Enterprises – and Chapter X of the Act does not change the character of the receipts but only permits re-quantification of income uninfluenced by the relationship between the Associated Enterprises - The order of reference made by AO to TPO is set aside to the Show Cause Notice dated 17 January 2014 issued by the TPO - and the order dated 29 January 2014 passed by the TPO under Section 92CA(3) of the Act – Decided in favour of assessee.
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