TMI Blog2013 (9) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... was available to VIH BV even in that case. It was agreed by both the learned counsel that even in that case, VIH BV had an alternate remedy of challenging the notices before the CIT (Appeals). The Revenue, however, invited the Supreme Court to proceed on the basis of the record available in the Writ Petition. It is not open to this Court to speculate or even try and speculate the decision, had the defence of an alternate remedy been taken. However, in the case before us, the defence of an alternate remedy has not only been taken, but has been taken in a very substantial manner and we have found the same to be well founded. In other words, the Revenue in the case before us has not invited a decision on the merits of the matter alone. That they defended the contentions on the merits is irrelevant. In the earlier round in the Vodafone case, the Supreme Court had [2009 (1) TMI 778 - SUPREME COURT OF INDIA] permitted VIH BV to question the decision of the authority on the preliminary issue before this Court in the event of the same being decided against it. The defence, therefore, of an alternate remedy may not have been available before the High Court. Nothing, however, prevented t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act, 1961 (hereinafter referred to as "the Act"). The petitioner has challenged the jurisdiction of the TPO to determine the arm's length price of these transactions on various grounds. The respondents, apart from denying this case, have contended that the Writ Petition is not maintainable on the ground that the petitioner has an alternate remedy under the provisions of the Income Tax Act, 1961, and on certain other grounds. FACTS : General : 3. The petitioner was incorporated in March, 1999, in the name of 3 Global Services Private Limited (3GSPL). It was a wholly owned subsidiary of Hutchison Tele-services (India) Holdings Limited, a company incorporated in Mauritius which, in turn, was a wholly owned subsidiary of CGP Investments (Holdings) Limited, a company incorporated in the Caymen Islands (hereinafter referred to as CGP). The shares of CGP were held by HTI (BVI) Holdings Limited, a company incorporated in British Virgin Islands which, in turn, was ultimately controlled by Hutchison Telecommunications International Limited (hereinafter referred to as "HTIL"), a company incorporated in Caymen Islands. It would be convenient here to reproduce an ownership struc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HTIL and Vodafone International Holdings BV (hereinafter referred to as "VIH BV") under which HTIL agreed to procure the sale of the entire share capital of CGP. Under the agreement HTIL also agreed to procure the assignment of loans owed by CGP and another of its group companies - Array Holdings Limited. HTIL further undertook to procure that each of its wider group companies would not terminate or modify any rights under any of its framework agreements or exercise any of their options under such agreements. 7. The petitioner alleges that it entered into a Memorandum of Understanding (hereinafter referred to as "MOU") dated 25th April, 2007 with Hutchison Whampoa Properties (India) Private Limited [hereinafter referred to as "HWP (India) ] relating to the sale of its call centre business. HWP (India) is a wholly owned subsidiary of HWP Investment Holdings (India) Limited, a company incorporated in Mauritius, also engaged in the business of call centre operations. The respondents contend that the same is ante-dated, the actual date being after 25th October, 2011. 8. On 8th May, 2007, a Business Transfer Agreement (hereinafter referred to as the "BTA") was executed between the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo international transactions viz. the BTA - the transaction relating to the sale of the call centre business by the petitioner to HWP (India) and the assignment of the call options under the new Framework agreements dated 5th July, 2007. It is these two unreported transactions that are the subject matter of this Writ Petition. The TPO stated that both the transactions were international transactions. He also disputed the valuation reports submitted by the petitioner. The petitioner, after some initial hesitation, furnished the documents, including the SPA, the BTA and the Framework agreements at different stages. The petitioner contended that the same did not constitute international transactions. (D) The Advocate General emphasised that while it denied that the unreported transactions were international transactions, the petitioner did not at any stage - and there were several - raise any objection to the jurisdiction of the TPO to hold the hearings or to make the enquiries in relation to the unreported international transactions. In other words, the petitioner did not object to the TPO considering whether or not the unreported transactions were international transactions. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the 1st March, 2006 and the 5th July, 2007 Framework agreements. The petitioner also dealt with the show cause notice insofar as it related to the BTA. It answered the allegations in the show cause notice on merits, without contending that respondent No.2 did not have jurisdiction to consider the said transaction on the ground that it was not an international transaction. The petitioner, for instance, contended that the MOU got automatically terminated on the signing of the BTA, inter-alia, in view of clause 17.2 of the BTA. 11. We will deal with the judgment of the Supreme Court in Vodafone International Holdings B.V. v. Union of India Anr., (2012) 341 ITR 1, later. Suffice it to note at this stage that on 30th October, 2011, the Supreme Court reserved the judgment in that case. It was delivered ultimately on 20th January, 2012. The impugned orders were passed during this period before the judgment. 12. The TPO passed the impugned transfer pricing order dated 31st October, 2011. In view of the Advocate General's preliminary objection to the maintainability of this writ petition, it may be noted at this stage that the order was passed after affording the petitioner, fifteen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, as we have upheld Mr. Salve's submission that the AO is bound by the order of the TPO on both issues viz. whether the transaction is an international transaction or not and the computation of the ALP in respect thereof it is unnecessary to analyze the draft order in this regard. 16. On 20th January, 2012, the Supreme Court delivered the judgment in Vodafone International Holdings B.V. v. Union of India Anr., (2012) 341 ITR 1. The Supreme Court reversed the judgment of this Court. We will refer to this judgment in detail later. 17. On 30th January, 2012, the petitioner filed objections before the Dispute Resolution Panel (DRP) against the draft assessment order. The petitioner expressly stated that it was filing the objections without prejudice as it intended filing a Writ Petition before this Court since the period of limitation of thirty days prescribed under section 144C(2) for filing the objections was due to expire on 30th February, 2012, by which date the Writ Petition would not come for hearing. The petitioner also contended that the order of the TPO and the AO were passed without jurisdiction. Interim orders passed in this Writ Petition; the DRPs directions/o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctober, 2012, the respondent's counsel raised a preliminary objection on the ground that the DRP had already passed an order upholding the decision of the TPO and that the impugned order of the TPO had, therefore, merged in the order of the DRP and that on 5th October, 2012, the jurisdictional issue was heard at length by that Division Bench. The order further records that one of the learned Judges recused himself from the matter and directed the Registry to place the Writ petition before the appropriate bench. Having said that, however, the Division Bench directed the respondents not to serve the order of the DRP upon the petitioner for a period of eight weeks and that if the assessment order was passed by the AO pursuant to the directions of the DRP, the same should also not be communicated to the petitioner for a period of eight weeks. The Division Bench recorded the statement on behalf of the petitioner that it would not raise the plea of limitation and/or non service of the order of the DRP or the assessment order on the petitioner. 19 (A). The learned Chief Justice thereafter assigned the matter to our Bench. By an order dated 20th November, 2012, the interim order dated 8t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l proceedings viz. this Writ Petition and the proceedings before the authorities under the Act and (iii) the impugned order of the TPO and the draft order of the AO had merged in the order of the DRP and the final assessment order of the AO. (B) Incongruous though it may sound, we will consider the preliminary objections after we consider Mr. Salve's first submission. This is because a consideration of the preliminary objections require, in turn, a consideration of the entire scheme under Chapter X and section 144C for it must be first determined whether the petitioner is entitled to the alternate remedies as contended by the Advocate General. Re: (A) The TPO could not have taken suo moto cognizance of any transaction without it being expressly referred to him by the AO for the assessment year 2008-09 since there was a return filed which disclosed some international transactions. 22. The submissions were wider than was formulated as above. Mr. Salve submitted that the order of the TPO insofar as it dealt with the unreported and unreferred international transactions is a nullity, as he lacked inherent jurisdiction to consider the same. This submission is advanced irrespective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is enhanced after computation of income under this sub-section: Provided further that where the total income of an associated enterprise is computed under this sub-section on determination of the arm's length price paid to another associated enterprise from which tax has been deducted [or was deductible] under the provisions of Chapter XVII-B, the income of the other associated enterprise shall not be recomputed by reason of such determination of arm's length price in the case of the first mentioned enterprise. 92-CA. Reference to Transfer Pricing Officer.-(1) Where any person, being the assessee, has entered into an [international transaction or specified domestic transaction] in any previous year, and the Assessing Officer considers it necessary or expedient so to do, he may, with the previous approval of the Commissioner, refer the computation of the arm's length price in relation to the said [international transaction or specified domestic transaction] under Section 92-C to the Transfer Pricing Officer. (2) Where a reference is made under sub-section (1), the Transfer Pricing Officer shall serve a notice on the assessee requiring him to produce or cause to be produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order under sub-section (3) may be made at any time before sixty days prior to the date on which the period of limitation referred to in Section 153, or as the case may be, in Section 153-B for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires. (4) On receipt of the order under sub-section (3), the Assessing Officer shall proceed to compute the total income of the assessee under sub-section (4) of Section 92-C in conformity with the arm's length price as so determined by the Transfer Pricing Officer. (5) With a view to rectifying any mistake apparent from the record, the Transfer Pricing Officer may amend any order passed by him under sub-section (3), and the provisions of Section 154 shall, so far as may be, apply accordingly. (6) Where any amendment is made by the Transfer Pricing Officer under sub-section (5), he shall send a copy of his order to the Assessing Officer who shall thereafter proceed to amend the order of assessment in conformity with such order of the Transfer Pricing Officer. (7) The Transfer Pricing Officer may, for the purposes of determining the arm's length price under this section, exer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. (2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order, - (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with,- (i) the Dispute Resolution Panel; and (ii) the Assessing Officer (3) The Assessing Officer shall complete the assessment on the basis of the draft order, if- (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub-section (2). (4) The Assessing Officer shall, notwithstanding anything contained in section 153 [or section 153B], pass the assessment order under sub-section (3) within one month from the end of the month in which,- (a) the accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end of the month in which the draft order is forwarded to the eligible assessee. (13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 [or section 153B], the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. (14) The Board may make rules for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub-section (2) by the eligible assessee." 23. Chapter X contains special provisions relating to avoidance of tax. Sections 92 to 92F were substituted for section 92 by the Finance Act of 2011 with effect from 1st April, 2002. Section 92 deals with the computation of income from international transactions having regard to the arm's length price. For the purpose of this judgment, it is not necessary to refer to the other provisions in section 92 which also provide for the determination of various other components having regard to the arm's length pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the TPO had jurisdiction to deal with the said unreported and unreferred transactions viz. the sale of the call centre business under the BTA by the petitioner to HWP (India) and the alleged assignment of the call options by the petitioner by the two Framework agreements dated 5th July, 2007. If the TPO did not have the jurisdiction to do so, if he lacked inherent jurisdiction to do so, his order would indeed be a nullity. The matter, however, even then would not end there as we will demonstrate later. 26 (A). The petitioner's case as regards sub-section (2A) of section 92CA is this. Sub-section (2A) was introduced by Finance Act 2011 with effect from 1st June, 2011. Sub-section (2A) conferred jurisdiction on the TPO which was otherwise not available. It, in fact, expanded the jurisdiction of the TPO. Being a provision conferring jurisdiction, it must be construed to be a substantive provision of law and not a procedural provision. It operated, therefore, only prospectively and not retrospectively. In other words, section 92CA(2A) can operate only in respect of matters pertaining to assessment years after and not before 1st June, 2011. The present case pertains to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t entitled to deal with or consider international transactions which came to his notice without the same being referred to him by the AO. Prior to sub-section (2A) being introduced with effect from 1st June, 2011, the TPO was entitled to determine the arm's length price in relation to an international transaction only upon the same being referred to him for computation by the AO with the previous approval of the Commissioner. 29. That the intention of the Parliament was to extend the jurisdiction is clear from the following extract from the Memorandum to the Finance Bill 2011 under the caption "Rationalization of provisions relating to Transfer Pricing." "B. Section 92CA of the Act provides that the Transfer Pricing Officer (TPO) can determine the ALP in relation to an international transaction, which has been referred to the TPO by the Assessing Officer. It is proposed to amend section 92CA so as to specifically provide that the jurisdiction of the Transfer Pricing Officer shall extend to the determination of the ALP in respect of other international transactions, which are noticed by him subsequently, in the course of proceedings before him. These international transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price determined by him. This is clear from section 92C(4) which provides that where an arm's length price is determined by an AO under sub-section (3), the AO may compute the total income of the assessee having regard to the arm's length price so determined. In the event of this procedure being followed, the remedy of an assessee aggrieved by the assessment order in normal course is to file an appeal before the CIT (Appeals) under section 246-D. (B) The other course is where the TPO computes the arm's length price either on a reference to him by the AO under section 92CA(1) or suo moto under section 92CA(2A) and/or (2B). Sub-section (1) provides that if the AO considers it necessary or expedient so to do he may with the previous permission of the Commissioner refer the computation of the arm's length price in relation to an international transaction under section 92C to the TPO. Sub-section (2) requires the TPO to serve a notice on the assessee requiring him to produce or cause to be produced any evidence on which the assessee may rely in support of the computation made by him of the arm's length price in relation to the international transaction in accordance with section 92C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete the assessment in conformity with the directions received by him under sub-section (5) from the DRP without providing any further opportunity of being heard to the assessee. 33. It is clear, therefore, that the entire procedure is different where on the one hand, the assessment is completed by the AO without an order of the TPO and on the other hand, where the assessment is completed where there is an order of the TPO. Further, and more important is the fact that the rights of the assessee and of the revenue are entirely different depending upon the course that is adopted. For instance, in the former case, the remedy of an aggrieved assessee is to file an appeal before the CIT against the assessment order whereas in the latter, the assessee has the option of challenging the valuation either before the DRP or before the CIT (Appeals) as we will indicate later. Further still, an assessee aggrieved by the directions of the DRP is entitled to file an appeal directly to the ITAT under section 253(1)(d). 34. Whether it is the revenue or the assessee that derives a benefit by virtue of the introduction of sub-section (2A) matters not for the determination of the question w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve appropriate relief in case of discharge of dismissal of workmen. - Where an industrial dispute relating to the discharge or dismissal of a workman has been referred to a Labour Court, Tribunal or National Tribunal for adjudication and, in the course of the adjudication proceedings, the Labour Court, Tribunal or National Tribunal, as the case may be, is satisfied that the order of discharge or dismissal was not justified, it may, by its award, set aside the order or discharge or dismissal and direct reinstatement of the workmen on such terms and conditions, if any, as it thinks fit, or give such other relief to the workman including the award of any lesser punishment in lieu of discharge or dismissal as the circumstances of the case may require: Provided that in any proceeding under this section the Labour Court, Tribunal or National Tribunal, as the case may be, shall rely only on the materials on record and shall not take any fresh evidence in relation to the matter." The appellant contended that the words "has been referred" indicated that the section applied even to references made before 15th December, 1971. The Supreme Court held that these words cannot be isolated from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e powers of the Tribunals were recognised by this Court mainly on the basis that the power to take disciplinary action and impose punishment was part of the managerial functions. That means that the law, as laid down by this Court over a period of years, had recognised certain managerial rights in an employer. We have pointed out that this position has now been changed by Section 11-A. The section has the effect of altering the law by abridging the rights of the employer inasmuch as it gives power to the Tribunal for the first time to differ both on a finding of misconduct arrived at by an employer as well as the punishment imposed by him. Hence in order to make the section applicable even to disputes which had been referred prior to the coming into force of the section, there should be such a clear, express and manifest indication in the section. There is no such express indication. An inference that the section applies to proceedings, which are already pending, can also be gathered by necessary intendment. In the case on hand, no such inference can be drawn as the indications are to the contrary. We have already referred to the Proviso to Section 11-A, which states "in any procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal or National Tribunal by its award directs reinstatement of any workman and the employer prefers any proceedings against such award in a High Court or the Supreme Court, the employer shall be liable to pay such workman, during the period of pendency of such proceedings in the High Court or the Supreme Court, full wages last drawn by him, inclusive of any maintenance allowance admissible to him under any rule if the workman had not been employed in any establishment during such period and an affidavit by such workman had been filed to that effect in such Court: Provided that where it is proved to the satisfaction of the High Court or the Supreme Court that such workman had been employed and had been receiving adequate remuneration during any such period or part thereof, the Court shall order that no wages shall be payable under this section for such period or part, as the case may be." The Supreme Court held that where the award had become final prior to 21st August, 1984, section 17-B cannot be pressed into service to reopen the same. Mr. Salve relied upon paragraph 15 of the judgment which essentially dealt with the judgment of the Supreme Court in The Workmen of M/s. Fires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s be considered prospective. In our view, if this submission is accepted, we will be defeating the very purpose for which this section has been enacted. It is here that the court has to evolve the concept of purposive interpretation which has found acceptance whenever a progressive social beneficial legislation is under review. We share the view that where the words of a statute are plain and unambiguous effect must be given to them. Plain words have to be accepted as such but where the intention of the legislature is not clear from the words or where two constructions are possible, it is the court's duty to discern the intention in the context of the background in which a particular section is enacted. Once such an intention is ascertained the courts have necessarily to give the statute a purposeful or a functional interpretation. Now, it is trite to say that acts aimed at social amelioration giving benefits for the have-nots should receive liberal construction. It is always the duty of the court to give such a construction to a statute as would promote the purpose or object of the Act. A construction that promotes the purpose of the legislation should be preferred to a literal co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take effect only prospectively. Further, although it is not conclusive, it is permissible to look at the objects and reasons to find out the purpose of the amendment. The Supreme Court also held that where the intention of the Legislature is not clear from the words or where two constructions are possible, it is the Court's duty to discern its intention in the context of the background in which a particular section is enacted and once such an intention is ascertained, the Courts have necessarily to give the statute a purposeful or functional interpretation. 42. Firstly, as rightly pointed out by the learned Advocate General a plain reading of section 92CA(2A) indicates that it applies to proceedings that were pending on 1st June, 2011. This is clear from the words "during the course of proceedings before him". These words are not qualified by or limited in time. There is nothing in the plain language of sub-section (2A) that indicates that it applies only in respect of proceedings pending before the TPO with reference to assessment years after 1st April, 2012. A view to the contrary would require the section to be rewritten by adding after the words "during the course of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "during" and not the word "from". The words used in sub-section (2A) are not "from the proceedings before him". 45. If we are right in our interpretation, the TPO certainly had jurisdiction to consider the said unreported and unreferred international transactions as the proceedings were pending before him on 1st June, 2011. This is evident from only a few facts. 46. On 25th January, 2010, the AO referred to the TPO the transactions reported by the petitioner in Form 3CEB for the determination of the arm's length price. The time for the TPO to make the order determining the arm's length price under section 92CA(3) read with (3A) was sixty days prior to the date on which the period of limitation for making the order of assessment under section 153 of the Act was to expire. On 9th September, 2011, the TPO served a notice upon the petitioner in respect of the said unreported and unreferred transactions and the TPO made the impugned order on 31st October, 2011. Thus, on 1st June, 2011, the proceedings with respect to the reported transactions were pending before the TPO. 47. In the circumstances, the question whether sub-section (2A) is prospective or retrospective does not reall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 92E. 51. Where an assessee furnishes a report under section 92E in respect of some international transactions but not in respect of others, then if the unreported international transaction comes to the notice of the TPO during the course of the proceedings before him, the provisions of Chapter X of the Act will apply to those unreported transactions as if "they had been reported to the TPO by the AO". There is no cogent reason why the Legislature would have conferred jurisdiction upon a TPO to consider an unreported international transaction in cases where a report has not been furnished at all but not in cases where a report has been furnished under section 92E, but the report does not include a particular international transaction. There was no reason suggested by Mr. Salve for such a distinction either. No purpose whatsoever could be served by such a distinction. 52. Clause 38 of the Finance Bill 2012, while not conclusive of the determination of the ambit of sub-section (2B), supports our view. The relevant portion thereof reads as under :- "Examination by the Transfer Pricing Officer of International transactions reported by the Assessee .. It is proposed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that sub-section (2A) cannot be given retrospective effect. 55. We, however, do find a material difference between the two sub-sections. A TPO exercises suo moto power under sub-sections (2A) or (2B). The plain language of the two sub-sections require proceedings to be pending before the TPO. This is clear from the words "during the course of proceedings pending before him" in both sub-sections. The exercise of power under sub-sections (2A) and (2B) could arise in two situations. The first is where an assessee has reported more than one international transaction and the AO chooses to refer to the TPO under section 92CA(1) only some of and not all the international transactions. The second is where the assessee has not reported the transaction or transactions in Form 3CEB and the same comes to his notice during the course of proceedings before him. In either case, the TPO is entitled suo moto to consider transactions other than those reported to him. He is entitled to do so under sub-section (2A) and/or (2B) as the case may be. 56. The scope of sub-section (2A) is wider than the scope of sub-section (2B). Sub-section (2A) of section 92CA entitles the TPO to consider inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of limitation for making an order of assessment etc. The AO must make the assessment in conformity with the TPO's order. 59. This brings us to the judgment of the Delhi High Court in CIT v. Amedeus (India) Pvt. Ltd. (2011) 203 Taxman 602 on which considerable reliance was placed by Mr. Salve. (A) We are in respectful agreement with the judgment in CIT v. Amedeus (supra) insofar as it holds that if sub-section (2A) is not to be considered, the TPO would not have jurisdiction to take any transaction suo moto for verification and determine the arm's length price thereof and suggest necessary adjustments. Absent sub-sections (2A) and (2B), the TPO could not have determined the arm's length price of an international transaction which had not been referred to him by the AO. (B) It is important, however, to note that in that case the proceedings were not pending before the TPO on 1st June, 2011 i.e. the date on which sub-section (2A) came into force. By 1st June, 2011, the TPO had passed his order, the AO had made the adjustment accordingly and the respondents had filed an appeal before the ITAT. In fact, even the petitioner's appeal before the ITAT had been disposed off by an orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that it is necessary or expedient so to do, he may seek the approval of the Commissioner and then refer the computation of the arm's length price in relation to the said international transaction to the Transfer Pricing Officer. The role of the Transfer Pricing Officer, as indicated in section 92CA, is restricted to determining the arm's length price in relation to the international transaction which has been referred to him by the Assessing Officer and such computation of the arm's length price in relation to the said international transaction has to be done in terms of section 92C of the said Act. On a plain reading, we are of the view that it is not within the domain of the Transfer Pricing Officer to determine whether a particular transaction, which has come to his notice, but which has not been referred to him, is or is not an international transaction and then to go on and determine the arm's length price thereof. That, we feel, is in the exclusive jurisdiction of the Assessing Officer. It ought to be pointed out that these views are on the basis of the provisions of section 92CA, as applicable to the assessment year 2006-07, that is, prior to the introduction of sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as introduced in a manner so as to operate with retrospective effect. Sub-section (2A) expands the jurisdiction of the Transfer Pricing Officer by empowering him to determine the arm's length price of any international transaction other than an international transaction referred to him by the Assessing Officer under sub-section (1) of section 92CA. This is clearly an expansion of the jurisdiction of the Transfer Pricing Officer and, therefore, sub-section (2A) can only have prospective effect from June 1, 2011, and would have no application to the present appeal which is in respect of the assessment year 2006-07." As we noted earlier, there is a crucial difference between the facts of this case and the facts in CIT v. Amedeus. In CIT v. Amedeus, the proceedings before the TPO had concluded prior to 1st June, 2011. Indeed, even the appeal before the ITAT had concluded by then. There were, therefore, no proceedings pending before the TPO. In the case before us, the proceedings were pending before the TPO on 1st June, 2011. A contention in this regard was not even raised before the Delhi High Court obviously as it did not arise in that case. (D) It was suggested, however, that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of the TPO and the draft order have merged in the order of the DRP and the final assessment order of the AO. Alternate Remedy : 63. The Advocate General submitted that against the order of a TPO, the assessee's first alternate remedy is before the AO. Thereafter, the assessee is entitled to challenge the draft order before the DRP or to allow the AO to complete the assessment in confirmity with the order of the TPO and to challenge the same before the CIT (Appeals). The assessee is then entitled to challenge these orders before the ITAT. We have come to the conclusion that the assessee is not entitled to challenge the order of the TPO before the AO, but is entitled to the other alternate remedies as contended by the Advocate General. 64. The objection to the maintainability of a Writ Petition on the ground of availability of an alternate remedy is not merely a formal one. In transfer pricing matters, it is one of considerable importance and substance. Even if a TPO lacks inherent jurisdiction, normally and absent any other circumstances, a Writ Petition under Article 226 of the Constitution of India ought not to be entertained once the TPO makes his order or the proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92CA and with the previous approval of the Commissioner, refer the computation of the arm's length price in relation to an international transaction under section 92C to the TPO. In such a case, the TPO would be bound to determine the arm's length price in respect of the said transaction. In doing so, the TPO would not be entitled to reconsider the question as to whether the transaction is an international transaction or not. In a reference under section 92CA(1), this question is determined by the AO as well as the Commissioner. That under section 92CA(1) the Commissioner must accord his approval to the AO's decision to refer the computation of the arm's length price to the TPO posits the Commissioner having satisfied himself that the transaction is an international transaction. The remedy of the assessee to question the TPO's decision would be before the Commissioner of Income-tax or the Dispute Resolution Panel as we will shortly indicate and thereafter before the ITAT. The provisions of the Act do not indicate that the Legislature intended conferring upon the TPO the jurisdiction to effectively sit in appeal over the decision not merely of the AO, but of the Commissioner as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income in conformity with the TPO's order in all respects, including accepting the transaction to be an international transaction as determined by the TPO and the computation of the arm's length price thereof. In this regard we are, with respect, unable to agree with the judgment of the Gujarat High Court in Veer Gems (supra), including that the order of reference under section 92CA(1) is only ad-hoc. 70. We are unable to agree with the learned Advocate General's submission that the order of the TPO merely facilitates the AO in the computation of the arm's length price. The TPO is not merely a valuer whose valuation is of no legal effect unless adopted by a Court or Tribunal or any other authority of competent jurisdiction. Indeed, if the assessee does not challenge the order of the TPO, the AO is bound to pass the assessment order in conformity with the arm's length price determined by the TPO. The TPO's task is not merely a clerical one. 71. Though improbable, there may arise a situation where both, the AO and the TPO consider an international transaction. It may be a reported transaction not referred by the AO to the TPO or an unreported transaction. The question would ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or (3A). Even in such cases, the TPO's order must prevail in view of the clear, mandatory terms of section 92CA(4) requiring the AO to make the assessment in conformity with the TPO's order. (B) This may sound contradictory to or inconsistent with what we said earlier viz. that where a reference under section 92CA(1) is made by the AO after obtaining the Commissioner's approval, the TPO cannot consider whether the transaction is an international transaction or not. We said that the Commissioner's approval posits a decision by him that the transaction is an international transaction and the provisions do not indicate a legislative intent entitling the TPO to question the decision of the Commissioner who is his superior. The finding in sub-paragraph (A), however, would appear to be inconsistent with this for the view therein gives primacy to the TPO's order and not the Commissioner's. There is, however, no inconsistency for in the case in sub-paragraph (A), the legislative intent is clearly to accord primacy to the TPO's order. This is clear from section 92CA(4) which requires the AO mandatorily to make the assessment "in conformity with" the TPO's order. 75. The Advocate Gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile objections under sub-section (2) and waits for the final assessment order, it will not be contended that he accepts the draft assessment order, depriving him of the right to file an appeal under section 253 before the CIT (Appeals) and thereafter, if necessary, before the ITAT. We intend recording the statement of the Advocate General tendered by him in a tabular form as well as the further statement made by him explaining the same as it is a matter of considerable importance not merely to the petitioner, but to assessees in general. This, the Advocate General clarified was the stand of the Revenue itself and not merely his submission. (B). The statement firstly states that where no reference is made by the AO to the TPO and the arm's length price is determined by the AO himself under section 92C(3), an appeal would lie to the CIT (Appeals). The statement in the tabular form then refers to the following situations / cases : "(a) AO makes a reference under section 92CA(1) and TPO passes order under section 92CA(3). Further, AO passes the draft assessment order based upon the ALP determined by the TPO and making other additions not related to the Transfer Pricing issues. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ole as well as to read it with sections 92C(4) and 92CA(4). 84. Under section 92CA(4), where an arm's length price is determined by the TPO under section 92C(3), the AO must compute the total income of the assessee in conformity with the arm's length price so determined. It is important to note that what the AO computes is the "total income of the assessee", albeit in conformity with the arm's length price determined by the TPO. In other words, the computation is not limited to the international transactions alone. The computation is of the total income which would include income arising other than on account of the international transactions. In other words, the total income so assessed would include income other than on account of international transactions. Under section 144C(1), the AO is required to forward a draft of the proposed order of assessment (draft order) to the eligible assessee if he proposes to make "any variation in the income or loss return" which is prejudicial to the interest of such an assessee. The variations in the draft order are not limited to the international transactions. The variation is in respect of "the income or loss return". There is no warran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) of sub-section (6) does not restrict the DRP's consideration to any particular aspect or aspects of the draft order. Clause (b) of sub-section (2) of section 144-C does not restrict the nature of the objections that can be filed before the DRP. Similarly, clause (b) of sub-section (6) of section 144-C does not restrict the DRP's consideration to any particular type of the objections. It merely refers to "objections filed by the assessee". Sub-section (6)(c) does not limit the DRPs consideration of the evidence to any particular aspect or issue. It refers in general to the "evidence furnished by the assessee". Clause (d) also does not limit the consideration by the DRP to any particular aspect of the report of the AO or the TPO. Nor does it limit the consideration by the DRP to the nature of the report relating to the draft assessment order. Sub-section (6) and especially clauses (a) and (b) thereof illustrate that the DRP would also be entitled to consider whether or not the TPO was entitled to exercise jurisdiction. 88. This view is not repugnant to the words "confirm, reduce or enhance" in section 144C(8). The suggestion that these three words refer only to the valuation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m's length price of which the TPO computed, was not an international transaction, the proceedings before it would not stand terminated or be rendered void or non est for the DRP's jurisdiction arises not on account of the transaction being an international transaction but on account of the intervention of the TPO - the TPO having determined the arm's length price of a transaction on the basis that it was an international transaction. 92. A view to the contrary would be fraught with difficulties, and would render the entire machinery unworkable. Take a simple illustration. Where the TPO intervenes suo moto, the AO is, as we have held, bound by his decision including on the question that there is an international transaction. The AO can therefore, make only a draft order under section 144C(1). If the assessee files objections, the AO must await the DRP's directions under section 144C(5). By the time the DRP holds that the transaction was not an international transaction, the period for the AO to make an assessment order could well have passed. For under section 92CA(3) the TPO is entitled to file his report sixty days prior to the date on which the period of limitation for making t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garding the jurisdiction of the TPO. It is, therefore, not necessary to refer to the judgment of the Supreme Court in Chandra Kumar v. Union of India Ors. AIR 1997 SC 1125, paragraphs 90 and 93 whereof were relied upon by the learned Advocate General. 96. The question then is whether the petitioner ought to be relegated to the alternate remedies or whether despite the availability of alternate remedies, this Writ Petition ought to be entertained. The petitioner, in our opinion, must avail of the alternate remedies. This view is supported by the judgments relied upon by the Advocate General which we will now refer to. 97. The Advocate General relied upon the judgment of the Supreme Court in Special Director Anr. v. Mohd. Ghulam Ghouse Anr. (2004) 3 SCC 440 = AIR 2004 SC 1467 where it was held :- "5. This Court in a large number of cases has deprecated the practice of the High Courts entertaining writ petitions questioning legality of the show cause notices stalling enquiries as proposed and retarding investigative process to find actual facts with the participation and in the presence of the parties. Unless, the High Court is satisfied that the above show cause notice wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying approval of the Commissioner dated 30 September 2009, both of which have been issued over two years ago. The Petitioner, in any case had notice before the Transfer Pricing Officer as far back as on 3 March 2010 and participated in those proceedings. Under the statutory provisions, to which a reference is made earlier, a comprehensive remedy is available to the Petitioner before the Assessing Officer frames an order of Assessment. A draft order has to be prepared to which the Petitioner is entitled to submit its objections. Even against the draft order, the Petitioner has a remedy of moving the Dispute Resolution Panel. Though the Assessing Officer is bound by the determination of the Arm's Length Price by the Transfer Pricing Officer, it is evident from the statutory scheme that the Appellate Tribunal before which remedy of an Appeal is available would be entitled to consider every aspect of the matter when it renders its decision in the exercise of its appellate powers." The facts of the case before us in this regard are similar. We see no reason to adopt a different course in the facts of this case. 99. The Advocate General placed considerable reliance upon the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticular remedy for enforcing it . . . the remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class. The form given by the statute must be adopted and adhered to. The rule laid down in this passage was approved by the House of Lords in Neville v. London Express Newspapers Ltd. And has been reaffirmed by the Privy Council in Attorney-General of Trinidad and Tobago v. Gordon Grant Co. Ltd. and Secretary of State v. Mask Co. It has also been held to be equally applicable to enforcement of rights, and has been followed by this Court throughout. The High Court was therefore justified in dismissing the writ petition in limine." The judgment, therefore, is of little assistance to the respondent so far as Mr. Salve's first contention is concerned viz. that the TPO lacked inherent jurisdiction to consider the arm's length price of an international transaction suo moto under sub-sections (2A) and (2B) of section 92CA. However, the judgment fully supports the Advocate General's contention in this case as the TPO has already passed his order. The judgment, moreover, is also relevant as regards Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at subject to the provision of sub-s. (1A), any person objecting to any order of the Valuation Officer under s. 35 having the effect of enhancing the valuation of any asset or refusing to allow the claim made by the assessee under s. 35 may appeal to the Dy. CIT(A) against the assessment or order, as the case may be, in the prescribed form and verified in the prescribed manner. 10. From the above, it is evident that no provision has been made under the Act to file an appeal against the order of valuation made by the Valuation Officer. It is also true that the WTO in dealing with the valuation of a particular premises made by the Valuation Officer has no alternative but to pass an assessment order in conformity with the valuation report or order passed by the Valuation Officer. But, in my view, the report of the Valuation Officer in respect of any premises would be a piece of evidence on the basis of which the WTO shall pass the order of assessment. I do not think that before any order of assessment is passed on the basis of such valuation report or valuation order of the Valuation Officer under sub-s. (5) of s. 16A, it would be proper to entertain a writ application only in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r words, the DRP cannot set aside a variation and remand the matter for the passing of a fresh draft assessment order. Under the Wealth-tax Act the appellate authority has the power to do so. That, however, makes no difference. We are in respectful agreement with the judgment and would adopt it in cases relating to transfer pricing. 101. Before dealing with the authorities relied upon by Mr. Salve, it is necessary to distinguish his three main contentions. We will refer to the petitioner's case regarding the assignment of the call options under the 2007 framework agreements and the sale of the call centre business/BTA later. They stand on a different footing from the contention that the TPO lacked inherent jurisdiction to proceed under sub-sections (2A) and/or (2B) of section 92CA on the grounds urged in support of the first submission which would be irrespective of whether or not the transactions are international transactions. This contention does not involve disputed questions of fact. It is a pure question of law. If the petitioner's submission is well founded, the TPO would lack inherent jurisdiction to consider the transaction in exercise of powers under sub-sections (2A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recourse was had to it, it confirmed what ex facie was a nullity for reasons aforementioned. This would be so all the more if the tribunals holding the original trial and the tribunals hearing the appeal or revision were merely departmental tribunals composed of persons belonging to the departmental hierarchy without adequate legal training and background and whole glaring lapses occasionally come to our notice. The superior Court will ordinarily decline to interfere by issuing certiorari and all we say is that in a proper case of the kind mentioned above, it has the power to do so and may and should exercise it. We say no more than that. " The observations in the latter part of paragraph 11 would not apply to cases under the Income-tax Act for the Members of the Tribunal constituted thereunder have adequate legal training and background. The judgment, however, supports Mr. Salve's contention that if the exercise of powers is wholly without jurisdiction or patently in excess of jurisdiction, this Court may exercise its power to issue the prerogative writ of certiorari. Thus, had we come to the conclusion that the TPO lacked inherent jurisdiction to proceed to consider a transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the other hand, the petitioner in the case before us had, in fact, participated before the TPO without raising any objection as to his jurisdiction. That is correct. The petitioner had, in fact, supplied the material and participated in every respect before the TPO. The TPO has even passed the order. 104. Although the TPO has made his order without any objection by the petitioner as to his jurisdiction, we would have entertained this petition, had we come to the conclusion that the TPO lacked inherent jurisdiction under section 92CA(2A) and (2B) and that this inherent lack of jurisdiction affected the further proceedings as well. We have, however, held that even if the TPO lacked inherent jurisdiction under section 92CA(2A) and (2B) on the grounds urged under the first submission, it would not affect the further assessment proceedings. Thus, even if we had come to the conclusion that the TPO lacked inherent jurisdiction on this ground, we would not have entertained this Writ Petition for the further proceedings before the DRP or the CIT (Appeals), as the case may be, and thereafter before the ITAT, would remain unaffected by the same. These authorities would be entitled to set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings before the TPO have concluded, absent anything else warranting the invocation of the writ jurisdiction, a Writ Petition ought not to be entertained and the parties must be relegated to their remedies under the Act. 107. In the present case, therefore, absent anything else, there is no warrant for exercise of writ jurisdiction for the petitioner has not only an equally but a more efficacious remedy by filing the objections before the DRP. The DRP would be entitled to go into all aspects of the matter factual and legal whereas in a Writ Petition a Court may well decline interference where there are disputed questions of fact. 108. In Carl Still G.m.b.H. v. State of Bihar, 1962 (2) SCR 81, the Supreme Court held at page 93 that it is well settled that when proceedings are taken before a tribunal under a provision of law which is ultra vires, it is open to a party aggrieved thereby to move a Court under Article 226 for issuing appropriate writs for quashing them on the ground that they are inconsistent without his being obliged to wait until those proceedings run their full course. The judgment is of no assistance to the petitioner. In the case before us, the relevant prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving liberty to the petitioner to pursue the alternative remedies. And with this we proceed to consider the other preliminary objections raised by the Advocate General. Effect on maintainability of the Writ Petition on account of the petitioner having filed objections and having appeared before the DRP. 113. The Advocate General also contended that in the present case, a draft assessment order had been made by the AO, the petitioner had filed objections to the same before the DRP, the petitioner even appeared before the DRP, the DRP had passed its order and finally the AO has made the final assessment order. This Court, therefore, ought to dismiss the Writ Petition. 114. In the facts of this case, we would not decline to exercise jurisdiction for any of the reasons. It would be unfair to dismiss the petition on the ground that the petitioner filed the objections before the DRP for it did so without prejudice to its rights and contentions in this Writ Petition. The TPO passed his order on 31st October, 2011. Before the AO, the petitioner objected to the exercise of jurisdiction by the TPO. The AO, however, rejected the contention and passed the draft assessment order on 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Court ought not to entertain the Writ Petition as the petitioner had preferred a statutory appeal before the Tribunal after filing the petition. Reliance was placed on behalf of the respondent on the judgment of the Supreme Court in Titaghur Paper Mills Co. Ltd. Anr. v. State of Orissa Anr. [1983] 2 SCC 433. The learned Judge rejected the contention holding that in the appeal, the petitioner had expressly stated that it had lodged the same without prejudice to the Writ Petition. The learned Judge also observed that the appeal had been preferred by the petitioner out of abundant caution and, therefore, the mere fact that the petitioner had filed the appeal would not oust the jurisdiction of the Court especially in a case where it was established that there was a gross miscarriage of justice. We are in respectful agreement with the judgment in this regard. 117. Nor would we be justified in refusing to entertain this Writ Petition merely on the ground that the petitioner appeared before the DRP and participated in the proceedings before it. It did so under the orders of this Court. The writ petition was filed on 18th February, 2012. Thereafter, directions were passed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation Commission Ors., [1954] SCR 738 - AIR 1954 SC 207, the High Court relied upon the ordinary rule of construction that where a Legislature has passed a new statute giving a new remedy, that remedy is the only one that could be pursued. That was a case under the Taxation of Income (Investigation Commission) Act, 1947. That Act provided an alternate remedy against an order of the Investigating Commission by applying to the Commissioner of Income-tax to refer to the High Court any question of law arising out of the order. The Supreme Court, however, did not express any opinion on this aspect, but held as under : "(4). .. For purposes of this case, it is enough to state that the remedy provided for in Article 226 of the Constitution is a discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere. So far as the present case is concerned, it has been brought to our notice that the appellants before us have already availed themselves of the remedy provided for in section 8(5) of the Investigation Commission Act and that a reference has been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pressly permitted by the Court to avail of the alternate remedy without prejudice to the Writ Petition. The judgment merely indicates an exercise of discretion by the Supreme Court in the facts of that case. It does not bar a Writ Petition merely on the ground that the petitioner has availed of an alternate remedy. Moreover, the petitioner in that case was not compelled to avail of the alternate remedy on account of the bar of limitation. There is nothing in the judgment that indicates the same. We hasten to add that even in such circumstances, it is always open to the High Court not to entertain the Writ Petition. That, however, is an exercise of discretion. Such circumstances do not as an absolute rule, bar the High Court from entertaining a Writ Petition. 123. In Bombay Metropolitan Regional Development Authority v. Gokak Patel Volkart [1995] 1 SCC 642, the Supreme Court held :- "12. The contention of the appellant in this appeal is that in the first place the writ petition should not have been entertained. The writ petitioner had an adequate alternative statutory remedy. The writ petitioner had in fact already taken advantage of alternative remedy provided by the statute an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of the merger of the impugned orders of the DRP and the final assessment order of the AO. 126. The Advocate General submitted that the TPOs order stands merged in the draft assessment order and/or the order of the DRP and/or the the final assessment order. Similarly, the draft assessment order stands merged in the DRPs order and in the final assessment order. By challenging the TPOs order and the AOs draft assessment order, the petitioner is in effect challenging the DRPs order and the final assessment order which is impermissible. The petitioner's remedy is only to challenge the final assessment order. Once an order stands merged in another order, the remedy of a party is to challenge the final order and the order which stands merged therein. 127. The Advocate General relied upon the judgment of the Supreme Court in Somnath Sahu v. State of Orissa and Ors. [1969] 3 SCC 384. The appellant had preferred an appeal to the State Government under Rule 6(2) of the Orissa Welfare Officers (Recruitment Conditions of Service) Rules, 1961. The State Government dismissed the appeal. The Supreme Court held that the appellant is not entitled to the grant of a Writ under Article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even if the appellate decision merely confirms the decision of the Tribunal. As a result of the confirmation or affirmance of the decision of the Tribunal by the Appellate Authority the original decision merges in the appellate decision and it is the appellate decision alone which is subsisting and is operative and capable of enforcement. (See the . decisions of this Court in CIT v. Amritlal Bhagilal Co., and Madan Gopal Rungta v. Secretary to the Government of Orissa)." 128. The Advocate General also relied upon the judgment in Union of India Ors. v. Mafatlal Fine Spinning Manufacturing Company Limited and Anr. [1998] 8 SCC 462 where the assessee approached the High Court when a demand was raised for payment of duty. The High Court granted interim relief to the effect that the assessee shall keep the bank guarantee alive for six months after the disposal of the petition and would be required to pay interest at 18% per annum if he failed in the petition. During the pendency of the proceedings, a final assessment order had been passed. The Supreme Court held that on account thereof the provisional assessment must be deemed to have become unnecessary and the demand raised pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re null and void ab initio and throughout. The appellate authority would also lack inherent jurisdiction over the subject matter of the proceedings. The appellate forum can in such cases only declare the entire proceedings to be non-est for want of subject matter jurisdiction and, therefore, bring them to an end. The appellate authority would have jurisdiction to decide the issue of jurisdiction alone. The findings of the appellate forum on merits would be non-est in such cases. In such cases, compelling a party to challenge or further challenge the order before the authorities under the Act by way of appeal, revision or review would be futile and an unnecessary waste of time, money and resources. There is, however, a fundamental difference between such proceedings and proceedings relating to transfer pricing under Chapter X and section 144-C of the Income-tax Act. This distinction establishes the parameters for determining whether an assessee ought to be left to avail the alternate remedy under the Act or whether he ought to be permitted to invoke the extra-ordinary jurisdiction of this Court under Article 226 in transfer pricing cases. We have already indicated the difference t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Raza Textiles Limited v. Income Tax Officer, [1973] 87 ITR 539 = [1973] 1 SCC 633, "The Appellate Bench appears to have been under the impression that the Income Tax Officer was the sole Judge of the fact whether the firm in question was resident or non-resident. This conclusion in, our opinion, is wholly wrong. No authority, much less a quasi-judicial authority, can confer jurisdiction on itself by deciding a jurisdictional fact wrongly. The question whether the Jurisdictional fact has been rightly decided or not is a question that is open for examination by the High Court in an application for a writ of certiorari. If the High Court comes to the conclusion, as the learned Single Judge has done in this case, that the Income Tax Officer had clutched at the Jurisdiction by deciding a jurisdictional fact erroneously, then the assessee was entitled for the writ of certiorari prayed for by him. It is incomprehensible to think that a quasi-judicial authority like the Income Tax Officer can erroneously decide a jurisdictional fact and thereafter proceed to impose a levy on a citizen. In our opinion, the Appellate Bench is wholly wrong in opining that the Income Tax Officer can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set out in this Agreement. The Vendor has further agreed to procure the assignment of, and the Purchaser has agreed to accept an assignment of, the Loans on the terms and conditions set out in this Agreement and the Loan Assignments. 1. DEFINITIONS AND INTERPRETATION 1.1 In this Agreement, the following words and expressions have the meanings set opposite them: Accounts Wider Group means the Wider Group (but excluding GSPL with respect to the Call Centre Business), HT India, Centrino, ND Callus and SMMS and Accounts Wider Group Company means any one of them; Affiliate means, in relation to any person, any subsidiary or holding company of such person and any subsidiary of any such holding company; Call Centre Business means the business of providing contact centre services from India including, without limitation, GSPL's business of establishing, maintaining and operating contact centres, hiring and training contact centre personnel, recruitment and supervision of such personnel, ensuring quality customer service and all assets and liabilities of GSPL excluding in relation to the Centrino Framework Agreement, the ND Callus Framework Agreement and the SMMS F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Agreement in accordance with its terms the Vendor shall procure that: (i) the Group Companies shall provide the Purchaser with monthly performance statements materially in the form in which they are currently prepared within 10 Business Days of the relevant month end, and shall inform the Purchaser if different accounting practices or policies have been applied in collating a monthly profit statement (as compared with the preceding monthly profit statement). The Parties agree that such statements are provided to the Purchaser for information only and the Purchaser shall have no right to make any claim or bring any action arising out of this sub-clause for the information provided in the monthly performance statements; (ii) if requested by the Purchaser, the Chief Financial Officer of the Company communicates (whether by telephone or otherwise) once a month, within a reasonably time following the delivery of the monthly profit statements, with the Purchaser's representatives regarding the Wider Group's performance, provided that the key member of management of the Wider Group shall not be obliged to divulge any confidential or commercially sensitive information; (iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the terminating party; (b) to effect Completion so far as practicable having regard to the defaults which have occurred; or (c) to fix a new date for Completion (not being more than 3 Business Days after the agreed date for Completion), in which case the foregoing provisions of this Clause 8 shall apply to Completion as so deferred provided that such deferral may only occur once. .. 10. POST-COMPLETION UNDERTAKING 10.1 Following Completion, the Purchaser will procure that GSPL complies with its obligations under the GSPL Transfer Agreement. 10.2 The Vendor agrees to indemnify and keep fully and effectively indemnified and to hold harmless the Purchaser (for itself and as agent for any other member of the Purchaser Group and their respective officers, directors, employees and agents) against (a) any Losses (other than in relation to Taxation) incurred, suffered or sustained by any of them, as a direct result of the Call Centre Disposal and/or GSPL having any assets or liabilities other than the Centrino Framework Agreement, the ND Callus Framework Agreement and the Omega Framework Agreement; and (b) any net liability (excluding any liabilities to Taxation) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conferred upon the requesting party in this Agreement and the Transaction Documents. 27.THIRD PARTY RIGHTS Pursuant to Section 1(2) of the Contracts (Rights of Third Parties) Act 1999 (the Contracts Act), the parties intend that a person who is not a party to this Agreement has no right under the Contracts Act to enforce any term of this Agreement but this does not affect any right or remedy of a third party which exists or is available apart from the Contracts Act." 136(A). The petitioner contends that the sale of the call centre was negotiated by an MOU dated 25th October, 2011. The respondents allege that the MOU was ante-dated. (B). The relevant provisions of the BTA dated 8th May, 2007, are as follows :- "4. Conduct before the Closing Date 4.3 Notwithstanding Clauses 4.1 and 4.2, the Vendor shall be entitled to 4.3.1 take any action to comply with its obligations under the IDFC Transaction Agreement including, for the avoidance of doubt, making the IDF Closing Payment and executing the Termination Agreement, the Framework Agreement and the Shareholder Agreement. 4.3.2 assign, transfer or novate any of the Excluded Contracts to any other entity. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een signed only by the two AEs. Based on these facts, it is clear that there is a prior agreement viz. the SPA, between the two AEs (VIH BV and HTIL) and other affiliates i.e. the petitioner/assessee and HWP (India). These four entities were parties to the SPA. The relevant transaction is the BTA for the sale of the call centre business by the petitioner to HWP (India) although there was no direct agreement between VIH BV and HWP (India). Applying the doctrine of lifting the corporate veil and the doctrine of substance over form, he came to the conclusion that the BTA was entered into to give effect to the SPA and that both the Indian parties viz. the petitioner and HWP (India) acted as dummies to go through the motion to give effect to the SPA. The BTA is solely dependent on the SPA and the real parties to the BTA are also the two AEs VIH BV and HTIL. The SPA also decided the assets to be transferred. Applying the doctrine of substance over form, the TPO held that the BTA although apparently between the assessee and HWP (India) in substance, was between VIH BV and HTIL. Though the money had been paid by HWP (India) to the petitioner, in fact, the total consideration was payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92-F, "associated enterprise" in relation to another enterprise, means an enterprise - (a) which participates, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise; or (b) in respect of which one or more persons who participate, directly or indirectly or through one or more intermediaries, in its management or control or capital, are the same persons who participate, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise. [(2) For the purposes of sub-section (1), two enterprises shall be deemed to be associated enterprises if, at any time during the previous year.-] (a) one enterprise holds, directly or indirectly, shares carrying not less than twenty-six per cent of the voting power in the other enterprise; or (b) any person or enterprise holds, directly or indirectly, shares carrying not less than twenty-six per cent of the voting power in each of such enterprises; or . 92-B. Meaning of International Transaction.- (1) For the purposes of this section and Sections 92, 92-C, 92-D and 92-E, "international transaction" m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... associated enterprise. Fourthly, the prior agreement should be between the other associated enterprise and the third party. Fifthly, one of the associated enterprises must be a non-resident. The fifth condition is apparent from the words in sub-section (2) "for the purposes of sub-section (1)". Sub-section (1) in turn operates in respect of international transactions between associated enterprises either or both of whom are non-residents. 140. The prior agreement must be "in relation to" the relevant transaction. The words "in relation to" are of wide import. There must be a link, an effective nexus between the prior agreement and the relevant transaction. It is not necessary that the prior agreement must stipulate all the terms and conditions of the relevant transaction. It is sufficient even if some of the terms and conditions of the relevant transactions are stipulated in the prior agreement. Sub-section (2) of section 92-B would not cease to apply even if there are some variations to the relevant transaction subsequently so long as it can be established that the prior agreement was in relation to the relevant transaction. The extent of the relationship of the relevant trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not interested in retaining the call centre business of the petitioner and had agreed therefore, to sell the same to HTIL or its affiliate/nominee, for which it had to receive the consideration. The sum of US$ 11.08 billion was presumably arrived at after reducing the value of the equity interest in the Hutchison Essar Limited by an amount payable by HTIL to VIH BV in respect of the call centre business. The TPO therefore, considered the seller to be VIH BV and the buyer to be HTIL. Under the SPA however, HTIL was the seller and VIH BV was the buyer. 143. It is difficult to comprehend the TPO's observations that in this case the consideration of Rs.64.00 crores moved from the seller to the buyer, even assuming the above inferences to be correct i.e. if in fact the amount payable under the SPA stood reduced to the extent of the value of the call centre business. That, however, would not indicate an inherent lack of jurisdiction on the part of the TPO in determining whether the transaction is an international transaction or not. Nor would it constitute the TPO clutching at jurisdiction although he has none. Assuming this rather involved reasoning to be an error, it can be rectified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so far as it is relevant to the BTA/sale of the call centre business was between VIH BV and HWP (India). That then would be the prior agreement in relation to the BTA and/ or MOU. And the associated enterprise - VIH BV - is a non resident. 147. The provisions of the SPA prima-facie foreshadowed the sale of the call centre business by the petitioner to an affiliate of the vendor i.e. HTIL. The SPA has several provisions relating to and in connection with the sale of the call centre business. Some of these provisions which have been set out earlier are the definitions of the terms "affiliate", "call centre business", "call centre disposal", "disclosure letter", "GSPL Transfer Agreement", "vendor group" in clause 1.1. The expression "call centre business" is defined to mean the petitioner's business of providing contact centre service from India. The expression "call centre disposal" is defined to mean the disposal of the petitioner's call centre business. The expression "GSPL Transfer Agreement" is defined to mean the BTA to be entered into by the petitioner and "an affiliate of HWL" relating to the call centre business "substantially in the form of Attached Disclosure Letter". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nteresting to note the observations to the effect that the transaction should be of a compoiste nature where the performance of the mother agreement may not be feasible without the aid, execution and pefroamance of the supplementary or ancilliary agreements for achieving the common object and collectively having a bearing on the dispute. The Supreme Court expressed a word of caution that pleas to this effect would be examined carefully and by definite reference to the language of the contract and the intention of the parties. Implied consent was held to be a basis to bind a non signatory to an arbitration agreement. 151. Firstly, it would require consideration whether this doctrine applies in matters relating to taxation. Assuming it does, it is apparent that several questions of fact would have to be considered especially as regards the intention of the parties. In the case before us, for instance, the question would be whether the parties, including HWP (India) intended that HWP (India) would be bound by the terms of the SPA relating to the sale of the call centre business. 152. As the Advocate General rightly pointed out this doctrine did not fall for the consideration of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned and the Vodafone group. 157. It is necessary, however, not for us but for the the authorities under the Act to consider finally, conclusively on merits whether HWP (India) can be said to be a party to the SPA in relation to the BTA and/or the MOU, which deal with the sale of the call centre business or that the terms of the relevant transaction i.e. BTA were in relation to the SPA or were determined in substance between such other person viz. HWP (India) and the petitioner's associated enterprise viz. VIH BV. 158. The next question is in relation to Mr. Salve's third contention -whether the relevant transaction i.e. the BTA/sale of the call centre business was in relation to the SPA and/or the terms thereof were determined by the SPA. 159. That the BTA was foreshadowed by and was a part of the SPA is evidenced from what we said above and also by clauses 8.8, (c), (f) and (j), 8.13, 10.1, 10.2, 13 and 27 of the SPA. Clause 1.1 defines terms specifically in connection with the BTA such as "Call Centre Business", "Call Centre Disposal", "GSPL Transfer Agreement" and "Transaction Documents". 160. Clause 8.8 required the vendor i.e. HTIL on completion to deliver or pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest therein. Nor was there to be any creation, allotment, issue or grant of any option to subscribe for any share capital in the petitioner. 163. It is not possible to come to the conclusion in this petition that the BTA/sale of the call centre business was not in relation to the SPA insofar as it concerned the sale of the call centre business. 164. The fourth question is whether the SPA was prior in point of time to the BTA/the sale of the call centre business. 165. Mr. Salve submitted that the requirement of section 92-B(2) of a prior agreement being absent the provisions thereof are inapplicable to this transaction. Mr.Salve submitted that in any event section 92- B(2) would not apply, as the petitioner was an associated enterprise of HTIL up till the signing of the BTA. It is only after the BTA was entered into that the petitioner became an associated enterprise of VIH BV. In support of this contention, he relied upon the fact that the BTA was signed by the directors of the Hutchison group. Section 92-B(2) applies when a transaction is entered into by an enterprise with a person other than an associated enterprise. Mr. Salve submitted that VIH BV never agreed to pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the sale of the CGP share. 169. The fact that clause 8.8.(c ) required the delivery of the duly executed transfer in respect of the share in favour VIH BV or its nominee together with relative share certificate would not be conclusive of the matter. The physical delivery of the share is not necessary for the sale and purchase thereof to be completed. The physical delivery of a share can follow completion of a transaction of the sale and purchase thereof. Indeed the same could be said by the petitioner of the BTA/GSPL Transfer Agreement to wit that the physical delivery of the agreement, depending upon the circumstances, could follow the formation of the transaction pertaining to the sale of the call centre business. 170. The completion date under the SPA admittedly is 8th May, 2007. The BTA is also dated 8th May, 2007. The answer to the question whether the sale and purchase of the share preceded the sale of the call centre business or vice-versa or whether they were simultaneous requires a consideration of various facts, circumstances and factors. The answer to these questions certainly requires a construction of the clauses of the SPA, the MOU and the BTA. The interpretatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the BTA. 173. Whether the MOU was ante-dated or not is a question of fact which must be decided by the authorities/Tribunal under the Act. 174. Even assuming that the MOU was not ante dated and was executed prior to the SPA, the petitioner does not have an open and shut case. The matter wound not end there. The terms and conditions of the MOU require serious consideration. The most important question is whether the MOU constituted an agreement at all or whether it was only an agreement to enter into an agreement, which is not enforcible in law. Recital "C" of the MOU states that the petitioner "wishes" to sell and HWP (India) "wishes" to purchase the call centre business and that they had engaged in discussion on the terms on which such sale and purchase "may" take place. Recital "D" states that the parties agreed to enter into an MOU "to facilitate the discussions referred to in recital "C" above". The recitals therefore, do not indicate that there was a concluded contract. 175. The operative clauses of the MOU, prima-facie at least, do not indicate a binding agreement either. For instance clause 4 states that "The parties will agree the conditions upon the satisfaction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be decided by the fact finding authorities under the Act. 178. It was also contended by Mr. Salve that the BTA was independently negotiated by the petitioner and HWP (India). The same, he said, is substantiated by the fact that in the draft BTA, the consideration was of Rs.33.75 crores, whereas the consideration under the final BTA was Rs.64.00 crores. There were also other substantial differences which have been ignored by the TPO and the AO. 179. As we held earlier, section 92B(2) would apply even if there is a modification of the prior agreement. The test is whether the relevant agreement is in relation to the prior agreement. This relationship would not disappear or snap merely on account of a modification or alteration in the relevant transaction. A view to the contrary would enable an assessee to render the provisions of section 92B(2) nugatory by the simple expedient of altering the provisions of the relevant agreement. 180. The Advocate General also submitted that the petitioner is not entitled to contend that HWP (India) and the petitioner were associated enterprises, as the petitioner had admitted in ground XXX of the petition that they had operated as separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, these grounds were only in the alternative or on a demurer, the averments may not constitute an admission. Further, it would be open to the petitioner to explain the admissions. Having said that however, the fact remains that this is an issue which can and must be decided by the authorities under the Act. They are not purely jurisdictional issues. We see no reason to invoke our extra-ordinary writ jurisdiction and decide such involved issues. 184. From the record as it stands, it cannot be said with any degree of certainty either in favour of the petitioner or against the petitioner whether the BTA was entered into before or after the petitioner ceased to be a part of the Hutchison group. 185. This brings us to Mr. Salve's fifth contention on this point. Mr. Salve submitted that it would make no difference even if it is assumed that the BTA was executed after the petitioner became a part of the Vodafone group. 186. Mr. Salve submitted that it makes no difference whether the SPA was signed first or whether the BTA was signed first. The entire purpose of the SPA was not to sell the call centre business but to retain it. VIH BV was not interested in purchasing the call centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of the CGP share is not improbable even on the plain language of clause 13(c). The words "The Purchaser shall procure that until such time as the Call Centre Disposal" would indicate that the call centre had not been disposed of at least on the date of the SPA i.e. 11th February, 2007. 190. Even assuming that the directors of the Hutchison group continued on the Board of Directors of the petitioner, it is a moot point whether after the sale of the CGP share to VIH BV, the petitioner could be said to be an associate enterprise of any member of Hutchison group. Clause 13(3) provides that there should be no change in the member of Board of Directors of the petitioner till the call centre disposal and completion of all the matters contemplated under the BTA. This arrangement could well have been only for the purpose of implementation of the completed transfer. 191. To say the least, it requires consideration whether such an arrangement can fall within section 92-A(2) (e) and (f). It is not inarguable that the clauses (e) and (f) of sub-section (2) contemplated appointments regarding the actual working/management of the enterprises and not merely an interim arrangement for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner at some stage was an associated enterprise of HWP (India). Thus, it would make no difference whether or not the sale of the CGP share preceded the sale of the call centre business. The petitioner would for the purpose of sections 92-A and 92-B be an associated enterprise of Hutchison group including HTIL and HWP (India). 193. This submission is however, of no assistance to the petitioner's case. Section 92-B(2) merely requires the existence of an enterprise referred to therein to have an associated enterprises. Thus if during a particular previous year, the enterprise is an associated enterprise of more than one company, it would make no difference for the purpose of section 92-B(2). Section 92-B(2) does not exclude from its ambit a case where the enterprise was during the previous year an associated enterprise of more than one entity. 194. We must keep in mind that it is not for us in this writ petition to consider the merits of the rival contentions in detail with a view to deciding the same. It is necessary for us only to examine whether the petitioner has clearly established that there is a patent or inherent lack of jurisdiction in the TPO on account of the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.1 Definitions "Affiliate" when used with reference to any corporate entity shall mean another company controlled by, controlling or under common control with that entity, where "control" means either (i) the ownership, either directly or indirectly, of more than fifty percent (50%) of the voting shares or comparable interests in such entity or other company, as the case may be, or (ii) the right to elect the majority of the directors of such entity or other company, as the case may be, where such rights may be exercised without the consent of any third party; 4.4 Call Option GSPL shall, subject to the conditions set out below, have the right at any time to purchase all, but not part only, of the Plustech Shares (the "Call Shares") held by Goldspot (the "Call Option") in accordance with the procedure laid down in clause 4.5 below and at a fair market value determined in accordance with clause 4.6 below. GSPL may exercise the Call Option at any time after: (a) GSPL or its nominee exercises the Subscription Option for subscribing such number of Subscription Shares which would result in GSPL and/or nominee, in aggregate, holding more than 50% of the issued share capital of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. . 4.4 Call Option (a) GSPL shall have the right (the "Call Option") at any time to : (i) purchase or require that any wholly owned subsidiary of Vodafone Group Plc purchase, at its sole discretion, any or all of the AG Mercantile Shares held by AG at any time, and from time to time; and (ii) require that any other Nominated Person not referred to in Clause 4.4(a)(i) above purchase all, but not part only, of the AG Mercantile Share held by AG at any time, and from time to time, such AG Mercantile Shares being referred to as the "Call Shares", in accordance with the procedure laid down in Clause 4.5 below and at fair market value determined in accordance with Clause 4.6 below. (b) Each of AG and AG Mercantile hereby agree to abide by the directions of GSPL in connection with the Transfer of the Call Shares to GSPL or its Nominated Person and undertake to do or procure all necessary things and execute all necessary forms, documents and agreements to implement such directions. . (d) In consideration of the grant of the Call Option by AG to GSPL, GSPL or an Affiliate shall pay to AG an aggregate amount of US$6.3 million per annum accruing on a daily basis (th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingh, Asim Ghosh and another entity. The TPO rejected the petitioner's contention that all the FW Agreements gave call options only to the petitioner and that there were no assignments and there were accordingly no international transactions in respect thereof. The TPO held that the petitioner was a 100% subsidiary of VIH BV and that the FW Agreements were international transactions between the petitioner and VIH BV. As per clause 4.2(a) of the 2006 FW Agreements, the options to subscribe to the shares were with the petitioner or its nominee and that HTIL, which was at that time its associated enterprise did not have the option. On the other hand, under clause 4.2 (a), the petitioner's AE i.e. VIH BV became a party to the FW Agreements and clause 4.4 which conferred the call options had undergone a change in that as it added any wholly owned subsidiary of Vodafone Group Plc which showed that the call options rights have been assigned to VIH BV or its subsidiaries. There was no other need to add VIH BV to the 2007 agreements. Nor was there any need to include the subsidiaries or Vodafone Group Plc in call options clause if no benefit was sought from the petitioner. The clauses in so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 201. It would be convenient to refer to Mr. Salve's analysis of the judgment of the Supreme Court in Vodafone International B.V. v. UOI, [2012] 341 ITR, 1, after noting the observations in the judgment itself. As the judgment of the Supreme Court was the main plank on which the challenge is based, we will refer to it in considerable detail. (A) It is necessary first to note the dispute and the proceedings in the Vodafone case. The Assistant Director of Income Tax (International Taxation) had issued a notice dated 19th September, 2007 to VIH BV under section 201(1) and 201(1A), calling upon it to show case why it should not be treated as an assessee in default for failure to withhold the tax. A Division Bench of this Court dismissed VIH BV's writ petition. VIH BV challenged the order by filing a petition for special leave to the Supreme Court. The Supreme Court by an order dated 23rd January, 2009 (2009) 179 Taxman 129 (SC) directed the authorities to determine the jurisdictional issue raised by VIH BV as a preliminary issue and clarified that the VIH BV would be entitled to challenge the decision on the preliminary issue, if decided against it, before this Court. Paragraph 4 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company indirectly owned by CGP. It held call options and subscription options to be exercised in future under circumstances spelt out in TII and IDFC framework agreements (keeping in mind the sectoral cap of 74 per cent.). 76. Under the Hutchison structure, the business was carried on by the Indian companies under the control of their board of directors, though HTIL, as the group holding company of a set of companies, which controlled 42 per cent. plus 10 per cent. (pro rata) shares, did influence or was in a position to persuade the working of such board of directors of the Indian companies. In this connection, we need to have a relook at the ownership structure. It is not in dispute that 15 per cent. out of 67 per cent. stakes in HEL was held by AS, AG and IDFC companies. That was one of the main reasons for entering into separate shareholders and framework agreements in 2006, when Hutchison structure existed, with AS, AG and IDFC. HTIL was not a party to the agreements with AS and AG, though it was a party to the agreement with IDFC. That, the ownership structure of Hutchison clearly shows that AS, AG and SMMS (IDFC) group of companies, being Indian companies, possess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of HEL (minority). A minority investor has what is called as a "participative" right, which is a subset of "protective rights". These participative rights, given to a minority shareholder, enable the minority to overcome the presumption of consolidation of operations or assets by the controlling shareholder. These participative rights in certain instances restrict the powers of the shareholder with majority voting interest to control the operations or assets of the investee. At the same time, even the minority is entitled to exit. This "exit right" comes under "protective rights". On examination of the Hutchison structure in its entirety, we find that both, participative and protective rights, were provided for in the shareholders/framework agreements of 2006 in favour of Centrino, NDC and SMMS which enabled them to participate, directly or indirectly, in the operations of HEL. Even without the execution of SPA, such rights existed in the above agreements. Therefore, it would not be correct to say that such rights flowed from the SPA. One more aspect needs to be mentioned. The framework agreements define "change of control with respect to a shareholder", inter alia, as substitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nges also took place on June 5, 2007, within the group of original investors with the exit of IDFC and SSKI. In view of the said changes in the parties, a revised framework agreement was executed on June 6, 2007, which again had call and put option. Under the said agreement dated June 6, 2007, the investors once again agreed to grant call option to GSPL to buy the shares of SMMS and to enter into a shareholders agreement to regulate the affairs of Omega. It is important to note that even in the fresh agreement the call option remained with GSPL and that the said agreement did not confer any rights on VIH. One more aspect needs to be mentioned. The conferment of call options on GSPL under the framework agreements of 2006 also had a linkage with intra-group loans. CGP was an investment vehicle. It is through the acquisition of CGP that VIH had indirectly acquired the rights and obligations of GSPL in the Centrino and NDC framework agreements of 2006 (see the report of KPMG dated October 18, 2010) and not through execution of the SPA. Lastly, as stated above, apart from providing for "standstill", an SPA has to provide for transition and all possible future eventualities. In the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test, the High Court came to the conclusion that the transfer of the CGP share was not adequate in itself to achieve the object of consummating the transaction between HTIL and VIH. That, intrinsic to the transaction was a transfer of other "rights and entitlements" which rights and entitlements constituted in themselves "capital assets" within the meaning of section 2(14) of the Income-tax Act, 1961. According to the High Court, VIH acquired the CGP share with other rights and entitlements whereas, according to the appellant, whatever VIH obtained was through the CGP share (for short "High Court approach"). . 88. We have to view the subject-matter of the transaction, in this case, from a commercial and realistic perspective. The present case concerns an offshore transaction involving a structured investment. This case concerns "a share sale" and not an asset sale. It concerns sale of an entire investment. A "sale" may take various forms. Accordingly, tax consequences will vary. The tax consequences of a share sale would be different from the tax consequences of an asset sale.... ..Applying the above principles governing shares and the rights of the shareholders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re sale" (investment) a sham or a tax avoidant. The High Court has failed to appreciate that the payment of US$ 11.08 bn was for purchase of the entire investment made by HTIL in India. The payment was for the entire package. The parties to the transaction have not agreed upon a separate price for the CGP share and for what the High Court calls as "other rights and entitlements" (including options, right to non-compete, control premium, customer base, etc.). Thus, it was not open to the Revenue to split the payment and consider a part of such payments for each of the above items. The essential character of the transaction as an alienation cannot be altered by the form of the consideration, the payment of the consideration in instalments or on the basis that the payment is related to a contingency ("options", in this case), particularly when the transaction does not contemplate such a split up. Where the parties have agreed for a lump sum consideration without placing separate values for each of the above items which go to make up the entire investment in participation, merely because certain values are indicated in the correspondence with the FIPB which had raised the query, would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) and other shareholders in some of the other operating companies in India held shares in HEL related to the management of the subsidiaries of AS, AG and IDFC and did not relate to the management of the affairs of HEL and HTIL was not a party to those agreements, and hence there was no question of assigning or relinquishing any right to Vodafone. 237. IDFC FWA of August, 2006, also conferred upon 3 GSPL only call option rights and a right to nominate a buyer if investors decided to exit as long as the buyer paid a fair market value. June 2007 agreement became necessary because the composition of Indian investors changed with some Indian investors going out and other Indian investors coming in. On June 2007, changes took place within the group of Indian investors, in that SSKI and IDFC went out leaving IDF alone as the Indian investor. The parties decided to keep June 2007 transaction to effectuate their intention within the broad contours of June 2006 FWA. On June 6, 2007, FWA has also retained the rights and options in favour of 3GSPL but conferred no rights on Vodafone and Vodafone was only a confirming party to that Agreement. Call and put options, we have already mentioned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re also on similar lines. Further, the High Court has ignored the fact that the term sheet agreement with Essar had nothing to do with the transfer of CGP, which was a separate transaction which came about on account of independent settlement between Essar and Hutch group, for a separate consideration, unrelated to the consideration of CGP share. The High Court committed an error in holding that there were some rights vested in HTIL under SHA dated July 5, 2003, which is also an agreement, conferring no right to any party and accordingly none could have been transferred. The High Court has also committed an error in holding that some rights vested with HTIL under the agreement dated August 1, 2006, in fact, that agreement conferred right on Hutchison Telecommunication (India) Ltd., which is a Mauritian company and not HTIL, the vendor of SPA. The High court has also ignored the vital fact that FIPB had elaborately examined the nature of call and put option agreement rights and found no right in presenti has been transferred to Vodafone and that as and when rights are to be transferred by AG and AS group companies, it would specifically require Government permission since such a sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s patently incorrect. VIH BV was only a confirming party to the agreement and, accordingly, neither assumed any liability nor was conferred any rights thereunder. The finding of the TPO that the petitioner is not the owner of the options; that its associated enterprise viz. VIH BV became the owner of the options amounted to holding that the options vested initially in HTIL under the 2006 FW Agreements and then in favour of VIH BV under the 2007 FW Agreements. This argument was rejected by the Supreme Court in the Vodafone case. Thus no international transaction had taken place in respect of the options. The Supreme Court was invited to hold that 15% of the rights were transferred by Hutchison to Vodafone on account of recasting of the FW Agreements and therefore, there was a transfer of capital assets viz. call options in India. However, the majority judgment and the minority concurring judgment categorically held that there was no transfer of the call options. The Supreme Court however, held that the options are purely contractual rights; call options in any event always vested in the petitioner and that the same position continued even under the new 2007 FW Agreements and that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011 and 29th December, 2011, respectively. When the impugned orders were passed, the judgment of the Division Bench of this Court held the field. It would undoubtedly now be necessary for any Court or Tribunal to construe the Framework agreements in the light of the judgment of the Supreme Court as it over-ruled the judgment of this Court. There can be no doubt about that. The judgment of the Supreme Court would have to be construed in several respects, including the effect and applicability thereof upon the petitioner who was not a party to those proceedings. The question of issue estoppel, therefore, would not operate against the respondents qua the assessment proceedings in respect of the petitioner. Any decision on a question of law would undoubtedly be binding as a precedent even on third parties. 206. The Advocate General submitted that there was no issue before the Supreme Court as to whether apart from the SPA and the transfer of CGP share, the 2007 Framework agreements conferred any rights upon VIH BV. This, he submitted, was not relevant to the issue before the Supreme Court. He emphasized the fact that the 2007 Framework agreements were entered into after the SPA and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quent proceedings even between the same parties. We are not entitled to restrict the ambit of the words of the Supreme Court "any other document" to mean a document prior to the transfer of the CGP share on 8th May, 2007. The words "any other document" would certainly include the 2007 Framework agreements which were so elaborately dealt with in the judgment. If there is an ambiguity, it is for the parties to have the same clarified by the Supreme Court. 209. The judgment of the Supreme Court would undoubtedly be the petitioner's main plank and supports its case to a considerable extent, especially as it is the very agreements that fall for consideration even in the proceedings relating to the petitioner's assessment. Mr. Salve rightly contended that the Supreme Court had analyzed the Framework Agreements and held that the call options are contractual rights; that they vested and continue to vest in the petitioner and that they had not been transferred or assigned by the petitioner. We proceed, as indeed we must, that before the ITAT, a very heavy burden would rest upon the Revenue even regarding the petitioner's assessment in view of the judgment in Vodafone's case. Every Court, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development after the judgment of the Supreme Court. The Finance Act of 2012 amended the definition of "transaction" contained in section 2(47) by introducing an explanation thereto. Section 2(47), as amended, reads as under : "2. Definitions (47) "transfer", in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into; or is treated by him as, stock-in-trade of a business carried on by him as, stock-in-trade of a business carried on by him, such conversion or treatment; or (iva) the maturity or redemption of a zero coupon bond; or (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1992); or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest therein may be : (a) Direct or indirect. (b) Absolute or conditional. (c) Voluntary or involuntarily. (d) By amendment or otherwise. (iv) A non-obstante provision regarding the nature of a transfer. If an act, arrangement, transaction etc. constitutes a transfer as defined in the section it would be so notwithstanding the transfer of rights having been categorised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India. 216. Two aspects of a transfer are clarified - the asset itself and the manner in which it is dealt with. The asset is no longer restricted to the asset per se or a right therein, but also extends to "any interest therein". Prior to the amendment, the words "any interest therein" were absent. Further, the nature of the disposal is also expanded. It now includes the creation of any interest in any asset. Moreover, the disposal of or creation of any interest in the asset may be direct or indirect, absolute or conditional, voluntary or involuntary. It may be by way of an agreement or otherwise. Further, the concluding words constitute a non-obstante provision. It prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the petitioner. Thus, even assuming that the judgment of the Supreme Court remains unaffected by the clarificatory amendment, the Revenue would be entitled hereafter in other cases, at least, to appreciate, analyze and construe the transactions relating to call options, including the Framework agreements in a proper perspective which it may not have done earlier. 220. These are important issues. There is no justification for withdrawing the proceedings from the channel provided by the Income Tax Act, bypassing the Tribunal and considering all these questions in exercise of the High Court's extra-ordinary jurisdiction under Article 226. 221. Mr. Salve contended that adjudicatory orders can be sought to be sustained only for the reasons stated in the order and not for reasons discovered in proceedings for judicial review thereof. The contention was based on the judgment of the Supreme Court in Mohinder Singh Gill Anr. v. The Chief Election Commissioner, New Delhi Ors. [1978] 1 SCC 405. He, therefore, opposed the Advocate General's application to file a further affidavit. 222. Mr. Salve's submission, in fact, indicates another reason not to entertain a Writ Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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