TMI Blog2015 (7) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... passed u/s 143(3) r.w.s.144C of the Income Tax Act, 1961 (for short the Act ) passed in pursuance to the directions of the Dispute Resolution Panel (DRP) u/s 144C(5) of the Act 09.10.2014 for AY 2010-11. 2. Briefly stated the facts giving rise to this appeal are that the assessee company is a 100% subsidiary company of SMC Corporation, Japan, which is engaged in the business of manufacturing of air control equipment, valves and actuator. The assessee company filed its return of income on 07.10.2010 and same was revised on 14.11.2011, declaring an income of ₹ 29,35,56,847/- for AY 2010-11. 3. The Assessing Officer vide draft assessment order dated 25.02.2014 proposed to make an addition of ₹ 21,42,19,918/- on account of adjustment in the arm s length price (ALP) in respect of international transaction. The above addition was proposed consequent to the addition made in the preceding assessment year 2009-10 wherein the assessee company had issued 50,07,686 shares of ₹ 100% each to its parent holding company SMC, Japan. The TPO computed the value of shares at ₹ 449.21 per share and on this basis it was alleged that the assessee company had received an amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, subsequently, the Ld. Departmental Representative (DR) submitted that the same issue in the similar facts and circumstances of the case has been decided in favour of the assessee company for AY 2009-10 by the order of the Tribunal (Supra). 7. On careful consideration of above submission, at the very outset, we respectfully take cognizance of the decision of the Tribunal for AY 2009-10 (supra) in assessee own case, wherein in the similar set of facts and circumstances, the similar issue has been decided in favour of the assessee by following the ratio of judgment of the Hon ble Bombay High Court in the case of Vodafone India Services Pvt. Ltd. Vs. Union of India in Writ Petition No. 871 of 2014, dated 10.10.2014 wherein the Hon ble High Court has decided the issue in favour of the assessee. The relevant operative part of the order of the Hon ble Bombay High Court in the said case reads as under:- In view of the above, we find considerable substance in the Petitioner's case that neither the capital receipts received by the Petitioner on issue of equity shares to its holding company, a nonresident entity, nor the alleged short-fall between the so called fair market pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is case, the revenue seems to be confusing the measure to a charge and calling the measure a notional income. We find that there is absence of any charge in the Act to subject issue of shares at a premium to tax. Page 48 para 42 It was contended by the Revenue that in any event the charge would be found in Section 56(1) of the Act. Section 56 of the Act does provide that income of every kind which is not excluded from the total income is chargeable under the head income from other sources. However, before Section 56 of the Act can be applied, there must be income which arises. As pointed out above, the issue of shares at a premium is on Capital Account and gives rise to no income. The submission on behalf of the revenue that the shortfall in the ALP as computed for the purposes of Chapter X of the Act give rise to income is misplaced. The ALP is meant to determine the real value of the transaction entered into between AEs. It is a re-computation exercise to be carried out only when income arises in case of an International transaction between AEs. It does not warrant recomputation of a consideration received /given on capital account. It permits re-computation of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid submission also, there can be no dispute. However, as observed by the Supreme Court in CIT v/s. B. C. Srinivasa Shetti 128 ITR 294, there is a qualitative difference between the charging provisions and computation provisions and ordinarily the operation of the charging provisions cannot be affected by the construction of computation provisions. In the present case, there is no charging provision to tax capital account transaction in respect of issue of shares at a premium. Computation provisions cannot replace/ substitute the charging provisions. In fact, in B. C. Srinivasa Shetti (supra), there was charging provision but the computation provision failed and in such a case the Court held that the transaction cannot be brought to tax. The present facts are on a higher pedestel as there is no charging provision to tax issue of shares at premium to a non-resident, then the occasion to invoke the computation provisions does not arise. We, therefore, find no substance in the aforesaid submission made on behalf of the Revenue. 6. In another recent case of Shell India Markets (P.) Ltd. Vs. ACIT,W.P. No. 1205 of 2013, dt. 18.11.2014, Hon'ble Bombay High Court allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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