TMI Blog2013 (7) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... his regard are allowed. - ITA No. 842/HYD/2012 - - - Dated:- 31-5-2013 - Shri Chandra Poojari And Smt. Asha Vijayaraghavan,JJ. For the Appellant : Shri S. Rama Rao For the Respondent : Shri M. Bhupal Reddy ORDER Per Asha Vijayaraghavan, J. M. This appeal preferred by the assessee is directed against the order of CIT-III, Hyderabad dated 26/03/2012 passed u/s 263 of the Act, for the assessment year 2007-08. 2. The assessee company M/s Vijay Electricals Ltd. is engaged in the business of manufacture and sale of distribution and power transformers and rural electrification projects on turn key basis. The assessee filed its return of income for the assessment year 2007-08 on 30/10/2007, declaring a total income of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the assessee filed its written submissions dated 03/10/2011 wherein it was submitted that the company was of the opinion that these transactions are not in the nature of transactions referred in section 92B. It was contended that Arm's length price cannot also be determined in this case as per section 92-C of the IT Act, 1961. However, the CIT after perusing the explanation filed by the assessee held that the same was not acceptable and verification is needed as to whether the transaction done is at arm's length price. Therefore, the CIT set aside the assessment made on 17/12/2009 and directed the AO to do the assessment afresh after referring these transactions to the TPO as per the provisions of section 92C for determining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the order passed by the AO is correct and justified. 8. The learned CIT erred in setting aside the order when there being no prejudice caused to the department. 5. Before us, the learned counsel for the assessee submitted that the only transaction were capital investments made by the company and the transactions are not international transactions within the meaning of provisions of section 94B of the IT Act and hence, there was no requirement of filing any audit report in Form No. 3CEB. The learned counsel further contended that the CIT erred in directing the AO to refer the transactions to the TPO as per the provisions of section 92-C of the IT Act and that the investment is merely investment of capital and not a sale transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings initiated u/s 263 of the IT Act, 1961 and oblige. 7. The learned counsel referred to the Circular No. 14, dated 22/11/2011, and submitted that section 92B(1) is applicable only when income is chargeable and not for capital investment. The relevant portion of the Circular is extracted below: 55.6 The substituted new sections 92A and 92B provide meanings of the expressions 'associated enterprise' and 'international transaction' with reference to which the income is to be computed under the new section 92. While subsection (1) of section 92A gives a general definition of associated enterprises, based on the concept of participation in management, control or capital, sub-section (2) specifies the circumstances und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also be subject to transfer pricing regulations . 8. The learned counsel relied upon the decision in the case of Dana Corporation RE, 321 ITR 178 (AAR) wherein it has been held as follows: Section 92 is not an independent charging provision. The expression 'income arising' in the opening words of section 92 postulates that income has arisen under the substantive charging provisions of the Act. If by application of the provisions of section 45 read with section 48, which are integrally connected one with the other, income cannot be said to arise, section 92 does not come to the aid of the Revenue even though it is an international transaction. Section 92 obviously is not intended to bring in a new head of income or to charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided other conditions of section 263 were also fulfilled.' The learned DR also relied upon in the case of CIT Vs. Sri Mahasastha Pictures, [2003] 263 ITR 304 (Mad.). 10. We have considered the rival submissions, perused the record and have gone through the orders of the authorities below as well as decisions cited. In our opinion, the amount representing 2118.84 is towards investment in share capital of the subsidiaries outside India as the transactions are not in the nature of transactions referred to section 92-B of the IT Act and the transfer pricing provisions are not applicable as there is no income. Accordingly, we set aside the order passed by the CIT u/s 263 and that of the AO is restored and the grounds raised by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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