TMI Blog2014 (11) TMI 897X X X X Extracts X X X X X X X X Extracts X X X X ..... ery provision to arrive at ALP of a transaction between Associated Enterprises; and Chapter X of the Act does not change the character of the receipts but only permits re-quantification of income uninfluenced by the relationship between the Associated Enterprises. Revenue does not dispute the fact that the issue with regard to chargeability to tax in respect of amounts not received on issue of shares to non-resident AE's being on capital account - the distinction sought to be made on the ground of alternative remedy is not such as to warrant not entertaining the petition - The fact that the assessee chose not to declare issue of shares to its non-resident AE's in Form 3CEB as in its understanding it fell outside the scope of Chapter X of the Act - If the assessee did not file a particular transaction in Form 3CEB when so required to be filed, the consequences of the same as provided in the Act would follow - the mere not filing of Form 3CEB on the part of the assessee would not give jurisdiction to the revenue to tax an amount which it does not have jurisdiction to tax. Even if it is assumed that it is an International Transaction, the jurisdictional requirement for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Services Pvt. Ltd. v. Union of India 368 ITR Page-1. (Vodafone-IV). 4. Mr. Dave, learned Counsel appearing for the respondent revenue, while accepting the fact that the issue raised in this petition is in principle covered by the decision in Vodafone IV, yet submits that there are certain distinguishing features in this case which would warrant this Court not extending the benefits of the decision in Vodafone-IV to the present petitioner. 5. Before considering the rival submissions, it would be appropriate to reproduce the broad summary of the findings in Vodafone IV as culled out in the decision rendered in W.P. No.583 of 2014 filed by Vodafone Services Pvt. Ltd. v. Union of India (Vodafone-V) on 13 October 2014. The findings in Vodafone -IV have been summarized in Vodafone V as under (i) 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; (ii) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out that Chapter X of the Act would have no application as the transaction of issue of equity shares to non resident AE's would not give rise to any income. This for the reason that the transaction of issue of shares is on capital account not giving rise to any income. (h) On 30 January 2013, the TPO passed the impugned order under Section-92CA(3) of the Act holding that in view of Chapter X of the Act, once a transaction between the parties is an international transaction, adjustments to transfer pricing can be done even on capital account (balance sheet items). The impugned order of the TPO held that the shares were allotted to the AE's at a price which was lower than the ALP of issue of shares which resulted in short receipt of consideration. In the above view, the impugned order computes on the basis of ALP, an enhancement of the issue price of shares from ₹ 10 per share to ₹ 183.44 per share and also charges interest on the amount short received resulting in transfer pricing adjustment of ₹ 15220 crores on the above account. (i) Consequent to the above, on 30 January 2000 itself, the Assessing Officer issued a show cause notice to the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an identical grievance. In these circumstances, this petition ought not to be entertained . (b) The petitioner in its Form 3CEB had not disclosed its transaction of issue of shares to a non resident AE's even though it is an international transaction. This failure on the part of the petitioner to disclose the same in Form 3CEB filed should by itself disentitle the petitioner to any relief from this Court; and (c) In the present facts, the issue of shares by the petitioner to its non resident AE's the value of ₹ 10/- per share would in view of inter se change in share holding amongst the AE's in the petitioner would be covered by the definition of International Transactions as given in clause (e) in Explanation to the Section 92B of the Act. This is so as it would amount to restructuring and/or reorganizing of the petitioner. In support attention was invited to Para 15 of the affidavit in reply dated 23 September 2013 which shows the change in share holding pattern amongst AE's in the petitioner during the assessment year 2009-10. 9. We shall now consider the above submissions on behalf of the Revenue. So far as the availability of alternative rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dafone IV. If the petitioner did not file a particular transaction in Form 3CEB when so required to be filed, the consequences of the same as provided in the Act would follow. However, the mere not filing of Form 3CEB on the part of the petitioner would not give jurisdiction to the revenue to tax an amount which it does not have jurisdiction to tax. Therefore, we do not find any substance in this objection also. 11. The last objection taken by the Revenue was that in view of the variation in share holding pattern amongst different share holders of the petitioner during the year clearly brought the issue of shares within the clause (e) of Explanation to Section 92B of the Act. In terms of the above provision an international transaction would include a transaction of restructuring entered into by an enterprise with an AE. Mr. Pardiwala, learned Counsel appearing for the petitioner points out that there has been no restructuring of the organization but there has been a mere change in the share holding of different share holders of the petitioner. However, in the present facts we need not examine this for the reason that even if it is assumed that it is an International Transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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