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TMI Blog2015 (2) TMI 1118X X X X Extracts X X X X X X X X Extracts X X X X ..... ee with its Associated Enterprises (AE) were not at Arm‟s Length. All the grounds raised in the appeal are argumentative in connection with the above stated issue. 2. At the outset, Ld Counsel for the assessee submitted that the assessee is engaged in the business of ship management and other related services and its AE at Hong Kong namely M/s. Angro-Eastern Agencies (HK) Ltd (AEHK). In the year under consideration, assessee had an international transaction with the AE in connection with the issue of 25000 equity shares to the AE. The face value of the share is Rs. 10 each and the premium is Rs. 790/- per share. The Transfer Pricing Officer (TPO) adjusted the above price and the Arm‟s Length Price (ALP) of the premium segment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 122.62 crores.During the assessment proceedings the AO found that 1,00,000 shares of the face value of Rs. 10 each were issued by the assessee to MSC Ship Management (Hong Kong) Ltd. of which the assessee was a wholly owned subsidiary,that the assessee had issued in three tranches totaling to 13,37, 553 shares and realised Rs. 3,67,59,192/- (Rs.1,33,75,530/- as share capital and Rs. 2,33,83,66 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share premium has been decided by the Hon‟ble Bombay Court in the case of Vodafone India Services Private Limited(VISPL)in WP.871of 2014 on 23.07.2014.Department - al representative (DR)fairly conceded that the issue is decided in favour of the assessee by the said judgment of the Hon‟ble jurisdictional High Court. We have heard the rival submissions and perused the material before us.We find that identical issue had arisen in the case of VISPL(supra).Briefly stated in the case of VISPLit was found that it was a wholly owned subsidiary of 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 durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 arising from an International Transaction,that the issue of equity shares by the assessee to VTIHL did not give rise to any income from International Transaction,that arising of income on account of International Transaction was a condition precedent for application of Chapter X of the Act. Deciding the writ petition,the Hon‟ble Court held as follow: "24.A plain reading of Section 92(1) of the Act very clearly brings out that income arising from a International Transaction is a conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital account transaction can be subjected to tax as Income. This is settled by the decision of this Court in Cadell Weaving Mill Co. vs. CIT 249 ITR 265 was upheld by the Apex Court in CIT vs. D.P. Sandu Bros. Chember (P) Ltd. 273 ITR 1. This Court has in Cadell Weaving Mills Co. (supra) inter alia, observed as under:- " It is well settled that all receipts are not taxable under the Income tax Act. Section 2(24) defines "income". It is no doubt an inclusive definition. However, a capital 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herwise 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 receipts received by the assessee on issue of equity shares to its holding company, a nonresident entity, nor the alleged short-fall between the so called fair market price of its equity shares and the issue price of the equity shares can be considered as income within the meaning of the expression as defined under the Act.(Emphasis by us.) We find that the facts of the case under consideration are similar to the fact of VIHPL.Hon‟ble Bombay High Court has held that the capital receipts received by the assessee on issue of equity shares to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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