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2016 (1) TMI 853

TP adjustment on account of interest free loans given to the AEs - Held that:- On perusal of the said orders / directions of the Revenue Authorities, we find, in principle DRP did not agree with the TPO's proposal of relying on the internal comparables and adopting 15% as applicable rate of interest in benchmarking the transactions with CNK Singapore. However, having held so, DRP also relied on SBI-PLR, which is not the applicable interest rate in the country of Singapore. It is the settled prop .....

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count of ‘under charged premium amount’ does not attract the TP provisions. - Decided in favour of assessee.

Disallowance made u/s 14A read with Rule 8D - Held that:- Issue remanded for reconsideration consedring the case of the assessee that the assessee has not earned any dividend income or exempt income during the year and therefore, the said provisions of section 14A of the Act do not attract.- Decided in favour of assessee for statistical purposes.

Disallowance in resp .....

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ra For The Respondent : Shri G.M. Doss, DR and Shri Mahesh Shah ORDER PER D. KARUNAKARA RAO, AM: There are two appeals under consideration relating to AYs 2009-2010 and 2010-2011. Since, the issues raised in both the appeals are identical, therefore, for the sake of convenience, they are clubbed, heard combinedly and disposed of in this consolidated order. Appeal wise adjudication is given in the following paragraphs of this order. 2. Grounds raised in both the appeals are argumentative in natur .....

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d share premium adjustments. After making corporate disallowance / additions, the Assessing Officer determined the assessed income at ₹ 72,84,03,200/- against the return of income of ₹ 69.43 Crs (rounded of). AO considered the relief granted by the DR in respect of the adjustments made to the share premium transaction. Therefore, net addition made by the AO in the assessment is only ₹ 59,06,445/- against the TPO‟s suggested adjustment of ₹ 1,13,10,586/-. Issue wise .....

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R of India. TPO rejected the contention of the assessee and also concessions to the extent of 2,49,268/- and proceeded to make adjustment in this regard applying the interest rate of 15% relying on the internal comparables. The adjustment suggested by the TPO in this regard works out to ₹ 12,84,845/-. During the proceedings before the DRP, assessee reiterated the said submissions. DRP considered the same and agreed with the contention of the assessee to some extent and rejected the interna .....

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id AE is not out of any borrowed funds. He relied on the Hon‟ble Bombay High Court judgment in the case of Reliance Utilities and Power Limited 313 ITR 340 for the presumption that the loans are given out of assessee‟s own funds and not out of the borrowed funds. He also objected to the decision of the Revenue Authorities in resorting to levy of notional interest and relied on various binding judgments in favour of the assessee. He was also critical about the rejection of assessee .....

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king cannot be done based on the LIBOR. In such case, the suo moto adjustments proposed during the TP proceedings by the assessee, which works out to 2,24,260/- should be considered. 6. On the other hand, Ld DR for the Revenue dutifully relied on the order of the AO and the directions of the DRP. 7. We have heard both the parties and perused the orders / directions of the Revenue Authorities as well as the cited precedents and the also the relevant material placed before us. On perusal of the sa .....

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adjustments of the assessee, which amounts to addition of ₹ 2,49,260/-, we direct the Assessing Officer to restrict the addition of adjustment to the said amount and delete the balance of addition. Accordingly, relevant grounds raised on this issue are partly allowed. 8. The second issue relates to benchmarking of corporate guarantee related taxes. Brief facts in this regard are that the assessee has AE (CNK Australia) an SPV incorporated for acquiring the shares in Tempo Holidays Austral .....

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5 of 2013) (Bom. HC). Ld AR also submitted that assessee shall not press on the other arguments, if the transactions of guarantee commission is benchmarked @ 0.5% considering the discussion in the case of Everest Kanto Cylinders Ltd (supra). 11. On the other hand, Ld DR relied heavily on the orders of the AO / TPO / DRP. 12. On hearing the arguments of the Ld AR without prejudice to the other, we find that guarantee commission transactions are being benchmarked @ 0.5%. For the sale completeness .....

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ib) 0.5% 4.37. Without prejudice to the appellant‟s submissions that no adjustment should be made on account of guarantee commission, the appellant also submits that, if at all your honours upholds the adjustment on account of guarantee the same should be restricted in range of 0.2% to 0.5%, based on recent Tribunal judgments. 13. Considering the above stated facts, we direct the AO to restrict the adjustments to 0.5% as upheld by the Hon‟ble High Court in the case of Everest Kanto C .....

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upra). After hearing Ld Representatives of both the parties and on perusal of the said decision of the Tribunal in the case of MSC Crewing Services P Ltd (supra), we find paras 2 and 3 of the Tribunal‟s are relevant in this regard. Considering the significance of the said paras 2 and 3 of the Tribunal‟s order (supra) and for the sake of completeness of this order, the said paras are extracted as under: 2.Effective ground of appeal is about transfer pricing adjustment of ₹ 122.6 .....

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ivable arising out of the international transaction of issue of shares by the asséssee to its AE and proposed a further addition of ₹ 17, 52,89,368/- being interest @ 15.55%.Against the proposed addition matter was referred to DRP by the assessee.It was held by the DRP that the correct amount which ought to have been charged as premium was ₹ 876.75 per share.The DRP also held that the rate of interest should be arrived at by adding 3% to the return obtained by the assessee fro .....

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a non-resident company, Vodafone TeleServices(India)Holdings Limited(VTIHL). It required funds for its telecommunication services project in India from it holding company i.e. from VTIHL during the AY.2009-10.On 21.08. 2008,the assessee issued 2,89,224 equity shares of the face value of ₹ 10/- each on a premium of ₹ 8,509/- per share to VTIHL.This resulted in the assessee receiving a total consideration of ₹ 246.38 crores from the holding company on issue of shares between Augu .....

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the Act did not tax inflow of capital into the country nor did it create any legal fiction to treat such alleged shortfall in capital receipt on issue of equity shares by an Indian company to its non-resident holding company, as income. It was also argued that there could be no question of treating the alleged shortfall as a deemed loan or taxing the alleged deemed interest on a deemed loan. It was contended that that provisions of chapter X had no application in cases where no income was arisin .....

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of the Act. This even when the definition in Section 2(24) of the Act is an inclusive definition. It cannot be disputed that income will not in its normal meaning include capital receipts unless it is so specified, as in Section 2(24) (vi) of the Act. In such a case, Capital Gains chargeable to tax under Section 45 of the Act are, defined to be income. The amounts received on issue of share capital including the premium is undoubtedly on capital account. Share premium have been made taxable by a .....

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al receipt is not income under section 2(24) unless it is chargable to tax as capital gains under Section 45. It is for this reason that under section 2(24)(vi) that the Legislature has expressly stated, inter alia, that income shall include any capital gains chargeable under section 45. Under Section 2(24)(vi), the Legislature has not included all capital gains as income. It is only capital gains chargeable under Section 45 which has been treated as income under Section 2(24). If the argument o .....

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rgeable under section 45" are very important. They are not being read by the Department. These words cannot be omitted. In fact, the prior history shows that capital gains were not chargeable before 1946. They were not chargeable between 1948 and 1956. Therefore, whenever an amount which is otherwise a capital receipt is to be charged to tax, section 2(24) specifically so provides." In view of the above, we find considerable substance in the assessee's case that neither the capital .....

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f appeal taken by the AO is consequential to the ground raised by the assessee and we have already decided the appeal of the assessee in its favour, so, the ground of appeal filed by the AO is decided against him. 6. Considering the above as well as the undisputed issue of the capital nature of the transaction in question, we are of the opinion that the adjustments made by the TPO are outside the scope of the TP provisions. We accordingly allow the issue raised by the assessee in its favour. Thu .....

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1962 and made disallowance. On appeal, DRP confirmed the AO‟s decision. Aggrieved, assessee raised the issue before the Tribunal. Before us, Ld Counsel for the assessee reiterated the submissions made before the lower authorities and relied on various precedents viz., judgment of the Hon‟ble Punjab & Haryana High Court in the case of CIT vs. Lakhani Marketing (P&H) (272 CTR 265); decision of the Delhi High Court in the case of Cheminvest Limited (ITA No.749/2014); decision o .....

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roceedings, AO asked the assessee to reconcile the amount of tour sales as per the books of account and AIR statement. After considering the submissions of the assessee in this regard, AO rejected the same and made an addition of ₹ 1,73,44,191/- on account of tour sales being un-reconciled with the AIR statement in the draft assessment order. Aggrieved, assessee carried the matter in appeal before the DRP, wherein the DRP granted part relief to the extent of ₹ 1,23,59,044/- and confi .....

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y on the basis of AIR information are not sustainable. In any case, the onus is on the AO to prove that the assessee had not reported any transaction and is in receipt of income from a particular source. 18. After hearing both the parties and on perusal of the factual matrix of the case as well as on perusal of the decisions cited by the Ld AR, we are of the opinion that the onus is on the Assessing Officer to inform the assessee giving all the details as to on, on what issue, the reconciliation .....

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