TMI Blog2014 (6) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... agement or control or capital of the other enterprise - Sub-section (2) of section 92A enlists specific situations which make two or more enterprises associates of each other for the purposes of sub-section (1). A transaction between associated enterprises satisfying the prescribed criteria becomes an international transaction - one of the essential limbs/constituents of an international transaction is "associated enterprise" - Section 92B(2) outlines the circumstances under which a transaction between two persons would be deemed to be between associated enterprises - Such deeming fiction is in addition to the one created u/s 92A(2) - The deeming fiction u/s 92A(2) are limited to the parameters of management, control or capital - Section 92B(2) travels beyond these parameters - Transaction between an enterprise and a person which is not an associated enterprise u/s 92A, may be deemed to be transaction between associated enterprises for the purposes of section 92B(l) if the conditions contained in section 92B(2) are attracted. Section 92B(2) embodies a legal fiction - It deems a transaction to have been entered into between two associated enterprises - section 92B(2) is a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DER Per Chandra Poojari, A. M. This appeal of the revenue is directed against the order of DRP, Hyderabad dated 08/11/2013 for AY 2006- 07 wherein the revenue has raised the following grounds: 1. The learned DRP erred in law and on facts of the case. 2. The Hon ble DRP ought to have appreciated the fact that the assessee company is a subsidiary company of M/s IJM Corporation, Berhad. 3. The DRP ought to have held that the transactions between the assessee and IJMI fall under section 92B(2) of the Act. 2. Briefly the facts of the case are that the assessee is a Private Limited Company jointly promoted by IJM (India) Infrastructure Ltd., and Andhra Pradesh Housing Board, a statutory board created under the Andhra Pradesh Housing Board Act, 1956. The assessee is engaged in the business of development of integrated township and sale of flats. Return of income was filed by the Respondent on 21.10.2005 declaring a total loss of Rs. 1,10,52,094/-. 3. As against the said return of income, the original assessment was completed u/s. 143(3) of the Income Tax Act, 1961 vide order dated 12.12.2008 at a total income of Rs. 13,62,89,230/-. The disparity between the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Assessee contended before the Assessing Officer that all the above conditions should be cumulatively satisfied. Referred to the Delhi ITAT Special Bench decision in the case of L.G. Electronics India (P.) Ltd. v. ACIT, Circle-3, Noida - [2013] 140 ITD 41(SB)/29 taxmann.com 300 (Delhi-Trib.)(SB). In the present case, both the assessee and IJM India Infrastructure Limited with whom the assessee had subject- transactions are domestic companies. Therefore, the subject transaction ''; cannot be characterized as international transactions. The assessee had also placed reliance on the decision of the Jurisdictional Tribunal in its own case for the assessment year 2007-08 in ITA No. 2072/Hyd/2011, dated 31.12.2012 wherein it has been held vide para 28.7 and 28.8 of the order as under:- 28.7 The legal fiction created in respect of the specified transaction can be used only for the purpose of examining whether such transaction constitutes on 'international transaction' under section 928(i). In case section 928(1) is not attracted, the fiction under section 928(2) ceases to operate. In our opinion, the impugned transaction between the Appellant and IJMll does not fal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... live, though they agreed with the Appellant's counsel, and confirmed tile order of the TPD (AD). In our opinion, the argument of the Department is devoid of merit. Accordingly, we agree with the contention of the Appellant's counsel on legal issue. Since we have decided on legal issue on applicability of transfer pricing on the Appellant, we refrain from going into the other grounds raised by the Appellant on the issue of transfer pricing. The addition made towards transfer pricing transactions is deleted in its entirety. 8. The DRP following the above decision of this Tribunal deleted the addition u/s. 92CA of the Income Tax Act, 1961 and held that the subject-transactions were not in the nature of international transactions. 9. Before us, the learned DR submitted that the DRP ought to have held that the transactions between the assessee and IJMII fall under section 92B(2) of the Act. He contended that the order of the DRP may be cancelled. 10. The learned AR of the assessee on the other had relied upon the order of the DRP and following the decisions in support of assessee s case: 1. C.G. Electronics (India) Pvt. Ltd. Vs. ACIT (Delhi), 140 ITD 41 (SB). 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facility provided or to be provided to anyone or more of such enterprises. A transaction between associated enterprises satisfying the prescribed criteria becomes an international transaction. 28.2 One of the essential limbs/constituents of an international transaction is associated enterprise . Section 92B(2) outlines the circumstances under which a transaction between two persons would be deemed to be between associated enterprises. Such deeming fiction is in addition to the one created under section 92A(2). The deeming fiction under section 92A(2) are limited to the parameters of management, control or capital. Section 92B(2) travels beyond these parameters. 28.3 Transaction between an enterprise and a person which is not an associated enterprise under section 92A, may be deemed to be transaction between associated enterprises for the purposes of section 92B{l) if the conditions contained in section 92B(2) are attracted. Section 92B(2) provides: (2) A transaction entered into by an enterprise with a person other than an associated enterprise shall, for the purposes of subsection (1), be deemed to be a transaction entered into between two associated enterprises, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases, the third party intermediary will generally not be the ultimate consumer of the services or goods. The intermediary would facilitate the transfer of services or goods from one enterprise to its associate enterprise with no value addition or insignificant value addition. The intermediary is used to break a transaction into two different parts, which parts when viewed in isolation would not satisfy the requirements of section 92A. The legal form of the transaction in such circumstances is ignored. The substance of the transaction is given effect to, not by disregarding the existence of the intermediary but by deeming the transaction with the intermediary itself to be one with an associated enterprise. 28.7 The legal fiction created in respect of the specified transaction can be used only for the purpose of examining whether such transaction constitutes an 'international transaction' under section 92B(1). In case section 92B(1) is not attracted, the fiction under section 92B(2) ceases to operate. In our opinion, the impugned transaction between the assessee and IJMII does not fall under section 92B(2). This is for the following reasons. (a) Both the assessee and I ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
