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2023 (3) TMI 468 - AT - Income TaxTP Adjustment - related parties / associated enterprise or not - Re-computation of arm's length price of shares sold by the assessee - transaction at the time of entering into SPA were between two unrelated parties and thus transfer pricing provisions are inapplicable - HELD THAT:- Section 92A(2) of the Act states that two enterprises shall deemed to be an associated enterprises if, at any time during the previous year one enterprise holds, directly or indirectly, shares carrying not less than 26% of the voting power in the other enterprise. Admittedly, in the instant case Relay BV holds controlling stake in USL of more than 26% i.e. 26, 37% on 28.11.2013 i.e. during the relevant previous year. Therefore in light of the clear provisions of Section 92A(2) of the Act, which uses the expression "if at any time during the previous year" we find no merit in the contention of the learned Sr. Counsel. The literal reading of Section does not give rise to any absurdity or unjust result. Hence the contention that the literal interpretation should not adopted is rejected and we hold that the impugned transaction has been rightly put through the test of benchmarking. Therefore the contentions raised in ground Nos. 3 & 4 are rejected. Benchmarking of share transfer in the impugned transaction - There has to be a same or similar uncontrolled transaction with or between non associated enterprises under similar circumstances considering all the relevant facts. In the present case, the share purchase agreement was entered into for transfer of 25.1% of shares of USL. If non associated enterprises had entered into similar agreement, they would not have agreed for the transfer of shares at the stock exchange price as it involves transfer of control. Transfer of shares in stock exchange cannot be equated with transfer of shares involving transfer of control. Therefore, the price determined by the TPO is upheld for the above reasons and the grounds No. 5 to 10 raised by the Assessee are accordingly dismissed. Method and computation mechanism adopted by the learned TPO - DCF method is statutorily as well as internationally accepted method for valuation of shares. We therefore are of the opinion that the TPO has not erred in adopting such method. The data considered for computing the value using such method is also questioned particularly on the aspect of substantial variations in projected cash flows vis-a-vis the actual cash flows. In the context of section 56(2)(viib) read with rule 11UA, this Tribunal in Flutura Business Solutions (P) Ltd. [2020 (7) TMI 71 - ITAT BANGALORE] and other similar cases, has held that the valuation under DCF method can be based only on estimated future projections and actual figures available subsequently cannot be replaced. Applying the same, the estimated cash flows considered by the TPO using date available in Bloomberg database for the relevant period, is justified. Accordingly, these grounds raised by the Assessee are dismissed. Differential tax on account of rate of tax on capital gains - rate of tax applied by the AO in computing tax on long term capital gains offered - HELD THAT:- We direct the AO to apply the rate of 10% as provided under the proviso to section 112(1) of the Act and compute the tax on long term capital gains on sale of listed shares accordingly. Therefore, the grounds raised by the Assessee are allowed.
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