TMI Blog2015 (2) TMI 1118X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant by : Shri Niraj Sheth, K.K. Ved, N.A. Patade Respondent by : Shri S.D. Srivastava, CIT-DR ORDER PER D. KARUNAKARA RAO, AM: This Appeal filed by the assessee against the order of the Assessing Officer/ Dispute Resolution Panel (DRP)/TPO for the AY 2009-2010, who made upward adjustment amounting to ₹ 18,66,46,818/- by holding that the international transactions relating to the issuance of equity shares entered into by the assessee 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er hand, Ld DR relied on the orders of the Revenue Authorities. 5. We have heard both the parties and perused the orders of the Revenue Authorities as well as the cited decision of the Tribunal in the case of MSC Crewing Services P Ltd (supra) and also the judgment of the jurisdictional High Court in the case of Vodafone India Services (P) Ltd (supra). 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of interest should be arrived at by adding 3% to the return obtained by the assessee from a fixed deposit placed with the bank against bank guarantee obtained by it.As a result, as against the total adjustment of ₹ 1,73,95,81,824(1,56,42,92,456+17,52,89,368)initially proposed by the TPO,the AO finally sustained addition of ₹ 1,22,62,39,100/-(Rs.114,93,15,931+7,69, 23,169/-),as per the directions of the DRP. 3.At the time of hearing before us,the Authorised Representative of the assessee stated that the issue of 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this amount of ₹ 1308.91 crores was income. As a consequence of the above,said amount of ₹ 1308.91 crores was required to be treated as deemed loan given by the assessee to VTIHL and periodical interest thereon was to be charged to tax as interest income of ₹ 88.35 crores in the AY.2009-10.According to the assessee, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the premium is undoubtedly on capital account. Share premium have been made taxable by a legal fiction under Section 56(2)(viib) of the Act and the same is enumerated as Income in Section 2(24)(xvi) of the Act. However, what is bought into the ambit of income is the premium received from a resident in excess of the fair market value of the shares. In this case what is being sought to be taxed is capital not received from a non-resident i.e. premium allegedly not received on application of ALP. Therefore, absent express legislation, no amount received, accrued or arising on capital 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in this case, we are required to ascertain the scope of Section 2(24)(vi) and for that purpose we have to read the sub section strictly. We cannot widen the scope of sub section by saying that the definition as a whole is inclusive and not exhaustive. In the present case, the words chargeable 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' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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