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TMI Blog2017 (1) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... has raised the following Ground of appeal:- "a. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in holding that adjustment arrived at by the Transfer Pricing Officer in respect of notional interest is not justifiable and directed the said adjustment to be deleted." 3. The grievance of the Revenue in this appeal is with respect to the action of the CIT(A) in holding that addition of Rs. 78,48,476/- made by the Assessing Officer on account of the transfer pricing adjustment is not maintainable. Briefly put, the facts relevant to appreciate the controversy in this appeal can be summarized as follows. The respondent assessee is a company incorporated under the provisions of the Companies Act, 1956 and is inter-alia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ountries. In 1999, assessee decided to restructure its US operations by forming a holding company in USA and accordingly PEI was incorporated. The assessee made equity investments in PEI, its 100% subsidiary. As part of the restructuring plan, the shares of PEI were subscribed by the assessee at USD 20.35 per share and in-turn PEI invested the sum in acquiring control over ASI RCC Inc.USA at the same rate i.e. US $ 20.35. During the year under consideration, ASI RCC Inc. USA was having excess funds and, therefore, it redeemed the preference shares held by PEI. On account of availability of funds due to redemption of preferred stock by ASI RCC Inc. USA, PEI used such funds to reduce its share capital and accordingly, bought-back its equity s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upto the date on which the amount was remitted to the assessee. The Assessing Officer has passed an order making an addition of Rs. 78,48,476/- to the returned income in conformity with the adjustment proposed by the Transfer Pricing Officer. 3.3 Before CIT(A), assessee placed reliance on the material submitted to the Transfer Pricing Officer during the proceedings under section 92CA of the Act and also reiterated the stand taken before the Transfer Pricing Officer. The CIT(A) noted fallacy in the approach of the Transfer Pricing Officer and came to conclude that the adjustment arrived at by the Transfer Pricing Officer on account of notional interest was not justified. According to the CIT(A) Transfer Pricing Officer was wrong in assuming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn and therefore, it could not have been treated as a loan transaction so as to impute any notional interest thereof. In the course of hearing, Ld. Representative for the assessee placed reliance on the following decisions to submit that the action of the Transfer Pricing Officer was unwarranted and the CIT(A) was justified in deleting the addition:- (i) Aegis Ltd. vs. Addl. CIT , ITA No.1213/Mum/2014, A.Y. 2009-10 Dated 27/07/2015. (ii) DIT v. Besix Kier Dabhol SA, 26 taxmann.com 169 (Bom) (iii) Aditya Birla Minacs Worldwide Ltd. DCIT, 56 taxmann.com, 317 (Mum-Trib)2015 (iv) Parle Biscuits (P) Ltd. vs. DCIT, 46 taxmann.com 11 (Mum-Trib) 2014 (v) DCIT v. Vikaas Oberoi 37 taxmann.com 46 (Mum-Trib) 2014 (vi) Alcargo Global Logistics Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h regard to the value at which the buy-back of shares has been undertaken by the investee subsidiary company, the CIT(A) noted that the valuation of shares has not been disputed by the Transfer Pricing Officer during the proceedings before him. In fact, the CIT(A) has categorically observed that the Transfer Pricing Officer in his order has observed the per share price of the shares as reflected in the Balance Sheet of the assessee for the various years. On this point, we also note that before the Transfer Pricing Officer, assessee had given justification of the buy-back price by pointing-up the NAV of the investee company on the date of buy-back, which was much lower than buyback price. We find nothing adverse on such assertions of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered opinion , the ratio of the reasoning approved by the Hon'ble Bombay High Court in the case of Besix Kier Dabhol SA (supra) clearly militates against the action of the Transfer Pricing Officer in re-characterizing the transaction of investment in the equity shares of the subsidiary as a loan transaction in the instant case. To the similar effect are the decisions of the Mumbai Tribunal relied upon by the assessee before us. Therefore, in our view, the stand of the Transfer Pricing Officer has been rightly negated by the CIT(A). 4.3 Before parting, we refer to the argument set-up by the Ld. Departmental Representative that the matter of valuation of shares be examined afresh by the Transfer Pricing Officer as per the Discounted Cash ..... X X X X Extracts X X X X X X X X Extracts X X X X
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