TMI Blog2014 (11) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... not give rise to income in an International Transaction. The application of Chapter X of the Act to such transaction is without jurisdiction - the sine qua non to apply Chapter X of the Act would be arising of Income under the Act out of an International Transaction - This income should be chargeable under the Act, before Chapter X can be applied - The definition of income does not include within its scope capital receipts arising out of capital account transaction unless so specified in Section 2(24) of the Act as income - There is no charge in the Act to tax amounts received and/or arising on account of issue of shares by an Indian entity to a nonresident entity in Sections 4,5,15,22,28,45 and 56 of the Act. This is as it arises out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... July, 2009, the Petitioner allotted 4,58,372 equity shares of ₹ 10/each at premium of ₹ 7,100/per share (total price being ₹ 7,110/per share), aggregating to a total consideration of ₹ 325.90 crores to its holding company; (c) On 24 January 2010, the Petitioner allotted further 1,02,659 equity shares of ₹ 10/each at premium of ₹ 6,437/per share (total price being ₹ 6,447/per share) aggregating to total consideration of ₹ 66.18 Crores to its holding company. Thus, in the Financial Year 2010-11, the Petitioner allotted an aggregate of 5,61,031 equity shares at an aggregate consideration of ₹ 392.08 Crores after determining its valuation in terms of CCI guidelines; (d) On 14 October 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per share; and (h) The Petitioner filed its preliminary reply dated 22 January 2014 objecting to the jurisdiction of the department to initiate any proceeding under Chapter X of the Act. In the circumstances, the Petitioner requested the TPO to decide the preliminary issue of jurisdiction viz: whether Chapter X of the Act is at all applicable in respect of issue of shares by the Petitioner to its non-resident holding company. 3 The present Petition was filed on 27 January, 2014, challenging the show cause notice dated 17 January 2014, as being without jurisdiction. At the hearing of the Petition, on 30 January 2014, learned Counsel for the Respondents stated that the TPO had already decided the Show Cause Notice dated 17 January 2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he TPO who passed an order on 28 January 2013, taking a view that the Petitioner ought to have valued each equity share at ₹ 53,775/resulting in shortfall to the extent of ₹ 45,256/per share, aggregating to ₹ 1,308.91 crores. TPO further held that this difference between the ALP and the issue price (including premium) was required to be treated as deemed loan given by the Petitioner to its holding company and deemed interest on such deemed loan at ₹ 88.35 Crores was also treated as interest income. The issue of jurisdiction was decided as a preliminary issue by the Dispute Resolution Panel (DRP) by its order dated 11 February 2014 in favour of the RespondentRevenue. 5 After the hearing learned Counsel for the Peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no charge in the Act to tax amounts received and/or arising on account of issue of shares by an Indian entity to a nonresident entity in Sections 4,5,15,22,28,45 and 56 of the Act. This is as it arises out of Capital Accounts transaction and, therefore, is not income; (iv) Chapter X of the Act does not contain any charging provision but is a machinery provision to arrive at ALP of a transaction between Associated Enterprises; and (v) Chapter X of the Act does not change the character of the receipts but only permits requantification of income uninfluenced by the relationship between the Associated Enterprises. 9 In view of the aforesaid Judgment dated 10 October 2014 passed in Writ Petition No.871 of 2014 which was filed by this ve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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