TMI Blog2017 (7) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... the final order passed in pursuance of the direction of ld Dispute Resolution Panel, which is not demined by the assessee. Therefore, according to us the tribunal is not right appellate forum where assessee should have filed such an appeal where the order is passed u/s 144 read with section 144C of the Act. Hence, according to us the appeal of the assessee is not maintainable. Disallowance under section 40(a)(i) - commission paid to advertisement agency without deducting TDS - Held that:- DAn advertiser engages an advertising agency and the advertising agency in turn approaches print and electronic media for publication/broadcast of the advertisement. There is no direct link between the print and electronic media and the advertiser. In the normal course when orders are released by the advertising agencies, the name of the client is always disclosed on it, though there is no principal agent relationship between the print and electronic media on one hand and the advertising agencies on the other hand. As per the rules of INS, accreditation is awarded by INS to the advertising agency which becomes eligible to receive 15 per cent discount from media companies on procuring advertise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfied that the additional evidence so produced is required to enable it to pass orders or for any other substantial cause, it can allow the parties including the revenue to produce such additional evidence exercising its discretion in terms of the said Rule. Unexplained money added u/s 69A - amount representing share capital raised by NDTV Networks International Holdings BV, a subsidiary of the appellant company - Held that:- he assessee has submitted scanty details and also tried to hide certain facts by not denying or owning the emails exchanged. Further it is too naive to accept in the facts and circumstances of the case that any transaction carried out through banking channel should be believed as genuine. In fact the money mostly rout through banking channels only and for these transactions only various sections in the income tax act are incorporated dehors the banking transitions such as section 69, 68 etc. It is only the banking transactions through which the tax evaders bring their unaccounted money in to the books by creating or dealing with entities/ persons without substances. In the present era where the business is carried on through and from complex, dynamic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above loan with exhaustive evidences before the ld Assessing Officer. Needless to say that ld Assessing Officer after enquiry as deem fit confront the assessee with the result of the enquiry and after seeking the explanation of the assessee deal with the issue in accordance with the law Jurisdiction of DRP directing the ld Assessing Officer to enhance the variation as a result of further enquiry in respect of loan transaction between NDTV Network PLC UK and NDTV Networks BV - Held that:- According to the provision of section 144C(a) the Dispute Resolution Panel has power for enhancement to the variation proposed and further explanation added therein by the Finance Act 2012 with retrospective effect from 01.04.2009 also provides that the ld DRP has power to enhance the variation on any matter arising out of assessment proceedings relating to the draft order. Notwithstanding that such matter was raised or not by the eligible assessee. In view of this we dismiss ground No. 10 of the cross objection. Addition u/s 14A - Held that:- In view of the above of the ld Assessing Officer that the assessee has not been disallowed any expenditure and further the Nil expenditure could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10) 1. Appeal No 1212/Del/2014 is filed by the assessee against the order of Assistant Commissioner of Income Tax, Circle-13(1), New Delhi (hereinafter referred to as the ld AO) passed u/s 144 read with section 144C(13) of the Income Tax Act, 1961 in pursuance of the direction issued by the ld Dispute Resolution Panel [hereinafter referred to as the Ld DRP] u/s 144C(5) of the Act dated 31.12.2013 against the draft assessment order of the ld Assessing Officer wherein, transfer pricing adjustments proposed in terms of order of Additional Director of Income Tax, Transfer Pricing Officer-II(1), New Delhi (hereinafter referred to as Transfer Pricing Officer , TPO ) passed u/s 92CA(3) of the Income Tax Act on 30.01.2013 and other corporate additions proposed were also incorporated therein. 2. The assessee is a company engaged in the business of television news broadcasting through its three different channels. It is also producing customized software, programmes for broadcasters. It filed its return of income on 30.09.2009 declaring loss of ₹ 64,83,91,422/-. Subsequently, the return was picked up for the scrutiny and notice u/s 143(2) was issued on 19.08.2010. During the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es ₹ 82,45,612/- 2. Disallowance of commission u/s 40a(ia) ₹ 41,54,41,111/- 3. Disallowance on transmission and uplinking charges u/s 40(a)(i) ₹ 7,81,23,855/- 5. The ld DRP also directed the AO to restrict transfer pricing adjustment of ₹ 12,41,29,846/- to ₹ 5,09,65,629/-. 6. The ld Dispute Resolution Panel during the course of hearing directed the ld Assessing Officer further enquiries and consequent to those enquiries an addition of ₹ 254,75,00,000/- was made on account of unexplained unsecured loan u/s 68 on account of failure on part of the assessee to discharge its onus of proving the genuineness of the transaction of raising unsecured loan through its subsidiaries NDTV Networks PLC . All other adjustments/ variations proposed by the ld AO were directed to be retained in final assessment order. 7. Consequently, the ld Assessing Officer passed order u/s 144 read with section 144C(13) of the Income Tax Act on 21.02.2014 determining the total income of the assessee at ₹ 838,33,37,197/- agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DRP has erred, in not approving the disallowance amounting to ₹ 7,81,23,8557- proposed u/s 40(a)(i) of the Act on account of non-deduction of TDS on transmission and uplinking charges paid to Intelsat Corporation, USA, by relying on the decision of Hon'ble Delhi High Court in the case of Intelsat Corporation in ITA No. 977 of 2011 dated 19.08.2011, whereas the SLP (Civil) No. 4319 of 2012 filed by the Revenue against the above decision is pending before the Hon'ble Supreme Court on this issue. 3. That on the facts and circumstances of the case and in law, Hon'ble DRP has erred in not approving the disallowance amounting to ₹ 82,45,6121- proposed on account of software expenses by relying on the decision of the Ld. CIT{A) for the AYs 2006-07 and 2007-08 without going into merit of the issue. Reliance in this regard is hereby placed on the judgment of the Hon'ble Supreme Court in the case of Tata Consultancy Services Vs State of Andhra Pradesh ( 2004) 271 ITR 401 (SC). 11. The assessee has filed cross objection vide appeal No. 233/Del/2014 wherein, initially it has raised five cross objection as under:- 1. That on the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that alleged transmission and uplinking charges paid to Intelsat Corporation, USA could not be disallowed under section 4o(a)(i) of the Act in view of the decision of the Special Bench of Tribunal in the case of Marilyn Shipping and Transport v. ACIT (136 ITD 23) (SB). 4. That on the facts and circumstances of the case and in law, the Ld. AO erred in agitating in Ground No. 3 of the captioned appeal that the Hon'ble DRP had erred in not approving disallowance amounting to ₹ 82,45,612 being software expenditure held as capital expenditure in the draft assessment order by following the earlier order of Ld. CIT(A) on identical facts. 5. That in view of the decision of the Hon'ble Special Bench in the case of Biocon Ltd vs DCIT (LTU), Bangalore on the allowability of ESOP expenditure (wherein the Respondent Assessee being an Intervenor for the AY 2006-07 2007-08), that the Ld. AO ought to have been directed to compute the ESOP expenditure to be allowed in the year under consideration in accordance with aforesaid decision and to exclude the reversal of ESOP expenditure offered to tax amounting of ₹ 83,31,150/- in the computation of income in the year under co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be deleted. Cross objection No. 8:- That the Ld. AO/Ld. DRP has grossly erred in law and on facts of the instant case in making an addition of ₹ 642,54,22,000/- (as sum equivalent to $150 Million) by invoking section 69A of the Act purely on surmises, conjectures and suspicion, failing to appreciate that under section 69A of the Act, the burden lay upon him to establish that, Appellant had made an investment of which it is an owner and has not been recorded by it in its books of accounts. 1.1 That the Ld. AO/Ld.DRP has grossly erred in law and on facts of the instant case in making an addition of the aforesaid sum of ₹ 642,54,22,000/- by invoking section 69A of the Act even without appreciating that the aforesaid sum was not an unexplained sum of money as the said sum was a capital contribution made by M/s Universal Studios International BV against the subscription of share capital and had also duly been recorded in the books of accounts of the investee company i.e. NDTV Networks International Holdings BV(NNIH). 1.2 That the findings of the Ld. AO that the Appellant had not complied with the provisions of section 212 of Companies Act, as the prescrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of ₹ 78,40,990 by invoking the provisions of section 14A of the Act read with Rule 8D of the Rules by rejecting the claim of the Appellant that it has not incurred any expenditure in respect of the investments from which the earnings are exempt under the Act. Cross objection No. 12:- That on facts of the case and in law, the Ld. TPO/AO has erred in not discharging their statutory onus to establish that any of the conditions specified in clause (a) to (d) of Section 92C (3) of the Act have been satisfied before disregarding the arm s length price determined by the Appellant and proceeding to determine the arm s length price themselves. Cross objection No. 13:- That Ld. AO erred in enhancing the ALP by ₹ 74,63,229/- in respect of the international transaction pertaining to provision of business support services ('BSS') to its associated enterprises (AE) by arbitrarily rejecting the comparables adopted by the Appellant and by selecting the comparables which were not comparables on the basis of FAR (functions performed, assets employed and risks assumed). 13.1 That the Ld. TPO erred in inadvertently considering the amount of price received fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that according to the Revenue if the assessment order is passed u/s 143(3) of the Income Tax Act pursuant to the direction issued by the DRP then only the assessee has right to file an appeal before the Tribunal. He vehemently opposed the above objection of the revenue. He further stated that above stated Cross objection (CO) of the assessee has been dismissed by the coordinate bench vide order dated 23.03.2017 refusing to condone the delay as it was delayed by 169 days. He further submitted a copy of the letter dated 31.03.2013 issued by Deputy Commissioner of Income Tax, Circle 13(1), New Delhi by the then assessing officer to the assessee forwarding draft assessment order wherein, it has been stated that draft assessment order is passed u/s 143(3) of the Income Tax Act read with Section 144C of the Income Tax Act for AY 2009-10 in the case of the assessee. Therefore, he submitted that draft assessment order is passed u/s 143(3) by the ld Assessing Officer and not u/s 144 as claimed by the Revenue therefore final assessment order canot be passed u/s 144 of the act. He further referred to the draft assessment order passed by ld Assessing Officer which is placed at page no. 355 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to invoke the provisions of section 144 of the Act. He therefore first referred to provision of section 145(3) of the Act to submit that the accounts of the assessee are correct and complete. He further referred to the annual accounts of the company to show that assessee has been granted an exemption by the Ministry of Corporate Affairs for not including the annual account of the subsidiaries of the company. He referred to page No.1746 to 1883 of the paper book Vol No. V which is the Directors Report of the company dated 30/4/2009 to show that assessee was exempted as it has been granted approval u/s 212(8) of the Companies Act, 1956 for the financial year ended on 31.03.2009 waving the publication of publishing of individual balance sheet etc of the subsidiaries and other documents otherwise required to be attached with the account of the company. He therefore, submitted that assessee has obtained permission required by the law for not enclosing the relevant details of subsidiary company and therefore, Assessing Officer cannot say that assessee has not submitted the accounts of the subsidiaries and therefore the accounts of the assessee are not incomplete. In the end, he submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as in the grounds of appeal filed by the revenue. 5. Sir(s), one of the contention which the revenue is raising, is not the subject matter of appeals or of the cross objection, is about the maintainability of the appeal filed by the assessee i.e. ITA No. 1212/Del/2014 and is on the ground that since the assessment has been framed u/s 144 of the Income Tax Act, and no appeal has been provided u/s 253(1)(d) of the Act (since the assessment has been framed u/s 144 of the Act and not u/s 143(3) of the Act), the said appeal is not maintainable. 6. However, in rebuttal it is submitted that the revenue is not invoking Rule 27 of the ITAT Rules nor any application has been filed by the revenue in that regard. Further in the submissions made apart from justifying the contention that a. Assessment has been made u/s 144 of the Act; b. No appeal would lie before the Honble Tribunal; It has not been stated that in the absence of such a ground being subject matter of appeal, how an adjudication can be sought from the Honble Tribunal. The submission of the assessee is that the Honble Tribunal has to decide an appeal and record its finding only on the subject matter of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended that the appeal is not maintainable overlooking that such a ground is not the subject matter of appeal. That the revenue has placed reliance on Rule 27 of the Income Tax Appellate Tribunal Rules in support of its contention that such a contention is permissible to be raised. The assessee vehemently opposes such a contention on the ground that it is impermissible to invoke Rule 27 Income Tax Appellate Tribunal Rules, 1963. In support the assessee seeks to rely upon the judgment of the Honble High Court of Delhi in the case of Divine Infracon Pvt. Ltd. (ITA No. 771/2015) decided by the Honble High Court on 13.08.2015, wherein an identical contention was raised before the High Court by the revenue and it was held by the High Court that the Tribunal had erred to have permitted Rule 27 to be invoked as it was not the subject matter of appeal. The discussion would be found in paragraphs 5 to 13 of the said judgment wherein it was held that the Honble Tribunal could only deal with the subject matter of appeal and it would not be open to a respondent to travel outside the scope of the subject matter of the appeal under the guise of invoking Rule 27. Aforesaid submissions have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment: Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment: Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under this section. (2) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. In support the appellant seeks to rely upon the judgment of the Nagpur High Court in the case of CIT vs. BadridasRamrai Shop reported in 7 ITR 613, wherein their Lordships while considering the provisions of section 13 (which is parimateria with section 145) had held that the only difference between the proviso to section 13 and the provisions of section 23(4) (corresponding to section 144) is that the latter authorizes the Income Tax Officer to make the assessment to the best of his judgment while the former tells the Income-tax Officer that he has to make his computation upon such basis and in such manner as the Income-tax Officer may determine . The proviso to section 13 gives the Income-tax Officer as wide, if not wider, powers than he is given under section 23(4). At page 621 their Lordships have held as under: In our opinion Section 22(3) is designed to enable a person who has made a return which he subsequently discovers contains an omission or a wrong statement to correct that wrong statement at any time before the assessment is made. It does not apply to the case of a person who has made a false return knowing it to be a false return and whose false retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Motor Co. Ltd., 119 ITR 573 (Mad.) (affirmed by Supreme Court in 201 ITR 391), and CIT vs. Kerala Financial Corporation Ltd., 155 ITR 246 (Ker.), CIT vs. MariappaGounder (P), 147 ITR 676 (Mad.) affirmed by the Supreme Court in 232 ITR 2, it has been held that section 145(3) of the Act is a machinery section which does not qualify as charging section of the Income Tax Act. It is thus submitted that contention of the revenue is entirely misconceived. Since section 145(3) is not a charging section but is a machinery provision, whereas section 144 is a charging provision 14.3 In brief it is submitted that merely because the AO in his draft order of assessment had stated that the provisions of section 145(3) of the Act is applicable and therefore he assumes jurisdiction us/ 144 of the Act to determine the true and correct income of the assessee company does not be read to a concluded assessment was made u/s 144 of the Ac. Had the same been an assessment made u/s 144 then it is obvious there could have been no reference us/ 144C, could have been made to the DRP; whereas the AO while forwarding the draft order has required the assessee either accept the order or to file objection befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 144 of the Act (since the same has been stated in the relevant particulars of the Form 36B filed by the appellant) is completely misconceived and erroneous. It is submitted that such an averment is not only misconceived but is wholly fallacious. It is submitted that since the appellant was required to state in Form 36B in column the section quoted in the final assessment order passed by the Assessing Officer ( AO ) in pursuance to the directions of the Hon ble DRP, the assessee had no option but to state the section stated in the order. It is thus submitted that there is no admission as has been alleged. However, it is denied that the appellant had accepted the assessment being framed u/s 144 rws 144C(13) of the Act and the same is evident from Ground number 1 specifically taken by the appellant in appeal no. 1212/Del/2014 that the assessment so completed is without jurisdiction and barred by limitation. 18. Section 253(1)(d) of the Act, though states that the appeal can be filed with the Hon ble ITAT against the order passed by the AO under section 143(3) in pursuance to the direction of DRP. Apparently, in the present case, the draft assessment order was passed u/s 143(3) rw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that for filing an appeal, the AO ought to have determined the total assessed income and demand and issued notice u/s 156 of the Act. Otherwise, whatsoever appeal cannot be filed with the CIT(A). It is undisputed that no demand notice was issued along with the draft assessment order dated 31.03.2013 and which was issued on 21.02.2014. Thus, the assessment in the present case is barred by limitation as held in the case of Purushottam T Patel (Supra). 22. Since in the present case, draft assessment order was issued u/s 143(3) rws 144C of the Act, the AO himself directed the appellant to files its objections before the DRP meaning thereby that the assessment was completed u/s 143(3) and not 144 of the Act. 23. From para 8 onwards of the said submission, the AO has contested that the right to appeal is not an inherent right unless it is provided for in the statute. The above proposition has no relevance on the facts stated above since if an assessee does not have a right to appeal it could only be trite of law in the peculiar facts of the present case wherein an assessment which is draft assessment u/s 143(3) and subsequently changed to u/s 144 in a complete biased, arbitrary a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission dated 01.05.2017 of the AO. He has submitted that even if the CO of the Revenue has been dismissed still Revenue can challenge the maintainability of the appeal of the assessee. 20. To show that impugned order in fact has been passed u/s 144 of the Act, he refereed that in Form No. 36B filed by the assessee in Column No. 2 it has been stated by the assessee itself that order is passed u/s 144 read with Section 144C(13) of the Act. He further referred to ground No. 1 of the appeal of the Revenue to show that assessee is specifically objecting the assessment order dated 21.02.2014 which is passed u/s 144 read with section 144C(13) of the Income Tax Act, 1961. He therefore, submitted that now the assessee cannot say that the order has not been passed u/s 144 of the Act. He therefore, vehemently contested that order has been passed by the Assessing Officer u/s 144 of the Act which has been mentioned in the draft order passed by the AO on 31.03.2013 and final order was in fact passed u/s 144 of the Act. He further referred to the various objections by the assessee before the ld Dispute Resolution Panel and stated that in none of the objections assessee has challenged the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r s Report of the company dated 30.04.2009 states that Ministry of Corporate Affairs has granted approval to the company u/s 212(8) of the Companies Act. He vehemently referred to both the dates and pointed out that there is a false statement by the company in its Director s Report dated 30.04.2009 claiming that it already has such an approval when it was not even applied for. He further stated that despite there being such an approval even on 03.07.2009 does not exempt company from disclosing the information to various regulatory and Govt. authorities. He therefore, submitted that claim of the company falls flat as on 30.04.2009 it did not have any exemption and further the exemption was not with respect to disclosure to Govt. authorities. He vehemently stated that annual accounts of the company create serious doubts as it is apparently backdated. He further referred to page No. 989 of the paper book where there is reference to schedule 29 of the financial statement of the company for the year ended on 31.03.2009 which contains notes on accounts with respect to shareholders agreement dated 23.05.2008. He stated that the impugned disclosure did show that 26% effective indirect stak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit and loss account of NDTV Network PLC along with Profit and Loss account was submitted but the notes on account of that subsidiary was never submitted before the ld AO during the assessment proceedings. He further stated that copy of share subscription agreement dated 23.05.2008 and identity, creditworthiness and genuineness of the investor as well as the copy of the balance sheet etc of the investee company were never submitted before the AO. He submitted that as many as eight different types of documents were submitted by the assessee as additional evidence before the ld DRP. He submitted that information regarding investors in 100 million US$ step up coupon convertible bonds was also not submitted despite the fact that most of the investors are from tax heaven jurisdiction. Regarding the claim of the assessee that order is time barred, he submitted that order is within time and assessee could not show that how the order is barred by limitation by placing definite time lines. 23. He further submitted that the order titled as draft Assessment order is passed invoking provision of section 144 of the Act because the assessee has failed to comply with the notice issued u/s 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct dated 21.02.2014. The assessee company filed its return of income for AY 2009-10 on 30.09.2009 declaring loss of (-) ₹ 64, 83, 91,422/-. The return was processed u/s 143(1) of the Act. Later on, the case was selected for scrutiny assessment by issue and service of notice u/s 143(2) on 19.08.2010 followed by issue of several notices u/s 142(1) of the Act. The AO after receipt of the directions of the DRP finalized assessment u/s 144 r.w.s 144C (13) of the Act on 28.02.2014 in conformity with the directions of the DRP by determining total taxable income of ₹ 838.33 crore. 3. The assessee filed an appeal against the said the assessment order of the AO u/s 144 r.w.s. 144C (13) of the Act before Honble ITAT u/s 253(1)(d) of Act, even when no appeal against the order passed by the AO under section 144 of the Act in pursuance to the direction of the DRP is provided u/s 253(1)(d) of the Act. 4. For sake of clarity, relevant provisions of clause (d) of sub-section (1) of section 253 of the Act is reproduced as under: -an order passed by an Assessing Officer under sub-section (3), of section 143 or section 147 [or section 153A or section 153C] in pursuance of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s : CIT v. Ashok Engineering 194 ITR 645 (SC) 4 CIT v. Mahaveer Prasad Sons (1980) 125 ITR (165 Del) 5 Caltex Oil v. CIT 202 ITR 375 (Bom) 6 9. Right of appeal is not a vested right. This proposition of law is so deeply embedded in the common law system that there is no exception to the general rule. Thus whereas the appeal is a creation of statute, the manner in which such appellate proceedings are determined is also provided for under the law. a) In KondibaDagaduKadam v. SavitribaiSopanGujar Ors., AIR 1999 SC 2213 7 , Honble Apex Court held as under:- It has to be kept in mind that the right of appeal is neither a natural nor an inherent right attached to the litigation. Being a substantive statutory right it has to be regulated in accordance with law in force at the relevant time. The conditions mentioned in the section must be strictly fulfilled before an appeal can be maintained and no Court has the power to add to or enlarge those grounds. The appeal cannot be decided on merit on merely equitable grounds. b) Further, there can be no quarrel that the right of appeal/revision cannot be absolute and the legislature can impose conditions for main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the case of CIT v. Calcutta Knitwears [2014] 362 ITR 673 (SC) 13 as the foremost principle in interpretation of fiscal statutes, so that where the statute is clear and unambiguous, the literal interpretation has necessarily to follow as decided in the context of third-party jurisdiction in a search under section 158BD after review of both English and Indian precedents, in Swedish Match AB v. SEBI [2004] 122 Comp Cas 83 (SC); CIT v. Ajax Commissioner of Stamp Duties (NSW) v. Simpson [1917] 24 CLR 209 and Grundy v. Pinniger [1852] 1 L J Ch. 405. Hardship or inconvenience cannot also justify a different interpretation in view of the judicial restraint against the plain meaning of language employed by the Legislature. In PrakashNathKhanna v. CIT [2004] 9 SCC 686 14 , Honble Apex court explained that the language employed in a statute is the determinative factor of the legislative intent. The Legislature is presumed to have made no mistake. The presumption is that it intended to say what it has been said. Assuming there is a defect or an omission in the words used by the Legislature, the court cannot correct or make up the deficiency. Where the legislative intent is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/Coch/2013 book by the Finance Act, 2004 with effect from 01-04-2005 the consequential amendment to section 253 was omitted to be carried out. This omission may be unintended. One may argue that an appeal is provided against the order of penalty u/s 271 in 253(1)(a) and 253(1)(c) of the Act, therefore, all branches of section 271 i.e. from 271A to 271G are included in section. This argument may not be correct because section 271 is an independent section and it has its own sub sections. Sections 271A to 271G are not sub sections under section 271 and they are independent sections by themselves. This is obvious from section 253(1)(a) and 253(1)(c) itself. The legislature has mentioned sections 271 and 271A separately in section 253(1)(a) and 253 (1)(c) of the Act. Therefore, the legislature treated sections 271 and 271A as separate and independent sections. In other words, sections 271A to 271G are independent and separate sections and it is not part / branch of sections 271 of the Act. Therefore, argument, if any, that section 271FA is part of section 271 is not correct. This Tribunal is of the considered opinion that section 271FA is separate and independent of section 271 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 12AA or under clause (vi) of sub-section (5) of section 80G or under section 263 or under section 271 or under section 272A or an order passed by him under section 154 amending his order under section 263 or an order passed by a Chief Commissioner or a Director General or a Director under section 272A; or (d) an order passed by an Assessing Officer under sub-section (3), of section 143 or section 147 in pursuance of the directions of the Dispute Resolution Panel or an order passed under section 154 in respect of such order. Nowhere in section 253 mentions the order passed by Director of Income-tax (Intelligence) or any other officer of the Income-tax Department levying penalty u/s 271FA is appealable before this Tribunal. This Tribunal being a quasi judicial authority established under the provisions of the Income-tax Act cannot travel beyond the provisions of the Act. Therefore, unless and until an appeal is specifically provided in section 253 of the Act against the order levying penalty u/s 271FA, this Tribunal is of the considered opinion that the present appeal is not maintainable before this Tribunal. 5. Now coming to the direction given by the Director of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independent sections by themselves. This is obvious from section 253(1)(a) and 253(1)(c) itself. The legislature has mentioned sections 271 and 271A separately in section 253(1)(a) and 253 (1)(c) of the Act. Therefore, the legislature treated sections 271 and 271A as separate and independent sections. In other words, sections 271A to 271G are independent and separate sections and it is not part/branch of sections 271 of the Act. Therefore, argument, if any, that section 271FA is part of section 271 is not correct. This Tribunal is of the considered opinion that section 271FA is separate and independent of section 271 and therefore, the reference of section 271 in section 253(1)(a) or 253(1)(c) may not be included section 271FA. As already observed, the omission to include section 271FA in section 253 may be unintended. Therefore, it is open to the department to bring to the notice of the concerned authority about the omission to provide appeal before the Tribunal for making consequential amendment to section 253 of the Act in case the department found that the omission is unintended. 11.3. Honble ITAT-Hyderabad bench examining provisions of section 253 in case of ACIT v D.E.Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or after the 1st day of July, 2012, by the assessee under sub- section (2) of section 144C in pursuance of which the Assessing Officer has passed an order completing the assessment or reassessment, direct the Assessing Officer to appeal to the Appellate Tribunal against the order.] 4.2 This sub-section (2A) was introduced by the Finance Act, 2012 w.e.f. 01.07.2012. While inserting sub- section (2A) in Section 253, the legislature has taken care to insert sub-section (3A) also, which specifies that the appeal shall be filed within 60 days of the date on which the order sought to be appealed against is passed by the AO pursuant to the directions to the DRP under sub-section (5) of section 144C. Not only that, sub-section (4) also was amended by inserting sub-section (2A) in sub-section (4) for filing of cross- objections. This indicates that the legislature has consciously not amended sub-section (6). Therefore, the contention of the Ld. CIT/DR that it could be an omission or mistake in not amending the sub-section (6) for the appeals preferred to in sub-section (2A) cannot be accepted. Since the legislature intentionally has not exempted appeals in sub-section (2A), it can be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 144C(3), the assessment order should have been passed on or before 31.3.2012 and in view of this, the impugned order dated 15.6.2012 is barred by limitation. 8. We find that the orders against which appeal can be preferred before the Tribunal are provided in section 253 of the Act. Section 253(1)(d) reads as under: an order passed by an Assessing Officer under sub-section (3), of section 143 or section 147[or section 153A or section 153C] in pursuance of the directions of the Dispute Resolution Panel or an order passed under section 154 in respect of such order. 9. A bare perusal of the provision shows that the order passed u/s 143(3) by the Assessing Officer when such order is passed in pursuance of the directions of the DRP only shall be appealable before the Tribunal and in case of an order passed u/s 143(3) by the Assessing Officer which is not in pursuance to the directions of the DRP, appeal shall not lie against such order directly before the Tribunal. 10. In the instant case, the contention of the A.R of the assessee is that the impugned order passed u/s 143(3) by the Assessing Officer is not an order which is passed in pursuance of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d pursuant to the direction given by the DRP. In this regard, it is pertinent to note that the institution of the DRP came into being by means of insertion of section 144C by the Finance (No. 2) Act, 2009 w.e.f. 1.4.2009. As per this section, an assessee who is dissatisfied with a draft order can approach the DRP for necessary relief. Such a relief can be allowed by giving direction under sub-section (5) of this section. Sub-section (13) of section 144C provides that the AO is obliged to pass a final assessment order in conformity with the direction given by the DRP. This shows that the direction tendered by the DRP is binding on the AO notwithstanding the AO's reservations on it. The Finance Act, 2012 inserted sub-section (2A) to section 253 w.e.f. 1.7.2012 providing that: 'The Principal Commissioner or Commissioner may, if he objects to any direction issued by the Dispute Resolution Panel under sub-section (5) of section 144C in respect of any objection filed on or after the 1st day of July, 2012, by the assessee under sub-section (2) of section 144C in pursuance of which the Assessing Officer has passed an order completing the assessment or reassessment, direct the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal is not covered by provisions of section 253 of the Act, the appeal is not maintainable. (b) The Tribunal being a quasi judicial authority established under the Income Tax Act cannot travel beyond the provisions of section 253 of the Act. (c) It is well settled principle of law that consent of a litigant party will not confer any jurisdiction on a judicial or quasi judicial authority unless and until it is otherwise conferred by the legislature. (d) The Tribunal cannot travel beyond the provisions of the Act and cannot admit an appeal even if the opponent party gives consent permitting the appellant to file an appeal. (e) Power of filing appeal against any direction issued by the Dispute Resolution Panel to the ITAT is restricted to cases covered under provisions of section 253(1)(d) and section 253 (2A) of the Act. 12. Respectfully following the above referred to legal position that assessee has right of appeal only if there is a statutory provision for it,it is respectfully submitted that in this case, no appeal lies against the order of the Assessing Officer passed u/s 144 read with section 144C (13) of the Act as would be evident from a careful reading of cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs, the assessee furnished partial information and did not comply with terms and conditions of notices u/s 142(1) of the Act on certain issues. The assessee was also found contravening provisions of section 145(2) of the Act. After considering replies and arguments as filed on behalf of the assessee, a show cause notice was issued to the assessee to show cause as why assessment should not be completed u/s 144 of the Act. After giving opportunity of being heard and considering objection/replies of the assessee, the AO assumed jurisdiction u/s 144 of the Act as evidenced from last paragraph on page 48 of the draft assessment order. A draft assessment was issued on 31.03.2013 u/s 144/144C(1) of the Act proposing taxable income of ₹ 641.08 crore as against declared loss of ₹ 64.83 crore . (It is to clarify here that due to typographic mistake on first page of the order, section 143(3)/144C(1) of the Act was wrongly mentioned as against correct section 144/144C(1) of the Act.) The assessee filed objection u/s 144C before Hon'ble Dispute Resolution Panel (the DRP) against the proposal of the AO to finalize assessment at ₹ 641.08 crore as against declared loss of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondoned by the exemption order of Ministry of Corporate Affairs. 5.4. The AO had asked for details about these transactions through her letters during the course of the assessment proceedings. The AO has mentioned that the requisite information was not produced before ADIT Investigation, Unit-ll(2), New Delhi nor produced before her during the course of assessment proceedings. Therefore, the AO has come to the following conclusion (which is narrated on Page 46 of the draft assessment order): As the material information which was required under the law to be attached with the balance sheet of the assessee company was neither attached nor being provided pursuant to summons issued by the Department in December 2010 nor in response to notice issued in February 2013, a reasonable belief was formed that the accounts of the assessee are not maintained and prepared in accordance with the Accounting Standards issued by the Central Government and were therefore incomplete and incorrect based upon which the true and correct income of the assessee liable to tax cannot be determined. 5.5. A show cause notice was issued by the AO to the assessee u/s 145(3) of the IT Act r/w relevant s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions of the notice u/s 142(1) of the as well as by rejecting books of A/c of the assessee u/s 145(3) of the Act. It is pertinent to point out that even in the appeal bearing ITA No. 1212/Del/2014 filed by the assessee before the Hon'ble ITAT on 04.03.2014, the assessee has not taken any ground against the assumption of jurisdiction by the AO u/s 144 as also confirmed by the DRP. Thus, the assessee admits that assumption of jurisdiction u/s 144 by the AO was correct on facts and in law. Non-compliance to terms and conditions of notice u/s 142(1) of the Act 5. It is evident from the finding of facts as recorded in the assessment order that the assessee had not complied with terms and conditions of notice u/s 142(1) as mentioned at page 47/48 of the draft assessment order. Details of non-compliance of notice u/s 142(1) are noted in Annexure 'A' to this submission. In view of above, provisions of clause (c) of subsection 1 of section 144 are also applicable and proviso to section 144(1) cannot be invoked in this case. Reasons for rejection of books of A/c under section 145(3) of the Act 6. It is evident from findings recorded by the AO in the assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or vocation in the financial statements prepared and presented on the basis of such accounting policies. For this purpose, the major considerations governing the selection and application of accounting policies are following, namely:- (i) Prudence - Provisions should be made for all known liabilities and losses even though the amount cannot be determined with certainty and represents only a best estimate in the light of available information; (ii) Substance over form-The accounting treatment and presentation in financial statements of transactions and events should be governed by their substance and not merely by the legal form; (iii) Materiality - Financial statements should disclose all material items, the knowledge of which might influence the decisions of the user of the financial statements. (Extracted from Accounting standards notified u/s 145(2) [No.9949 [F.N0.132/7/95-TPL], DATED 25-1-1996]) It is pertinent to mention here that exemption u/s 212(8) of the Companies Act cannot supersede the requirement under the Income Tax Act, 1961 which is not subordinate to Indian Companies Act, 1956. It is evident from the paragraph (v) of terms and conditions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would lead to violation of section 211 of the Companies Act in as much as the annual accounts may then not be regarded as presenting a True and fair view . It is evident from the order of the AO that the assessee had not followed several Auditing Standards as prescribed by the Central Government as contemplated by section 2(33) of the Companies Act 1956. 11. Examining importance of Accounting Standards as notified by Central Government under Companies Act 1956, Hon'ble Supreme Court in case of J.K. Industries Ltd. and another Vs Union of India and others (2008) 297ITR 176 (SC) has held as under: Under section 211(3A) Accounting Standards framed by the National Advisory Committee on Accounting Standards constituted under section 210A are now made mandatory. Every company has to comply with the said standards. Similarly, under section 227(3)(d), every auditor has to certify whether the profit and loss account and Similarly, balance sheet comply with accounting standard referred to in section 211(3C). Similarly, under section 211(1) the company accounts have to reflect a true ad fair view of the state of affairs. Therefore, the object behind insistence on compliance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. The Proviso to section 144(1) further explaining term used opportunity of being heard stipulates that such opportunity shall be given by the AO by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to best judgement. It was further provided that provisions of Proviso to section 144(1) shall not apply where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under this section. 14. In this case, the AO, after rejecting books of A/c u/s 145(3) and taking note of non-compliance to terms and conditions of the notice u/s 142(1), assumed jurisdiction u/s 144 of the Act. However, due to typographical mistake on first page of draft order, section 143(3) read with section 144C was written instead of correct section 144 read with section 144C(1). However this rectifiable mistake was corrected as evident from directions of DRP u/s 144C(5) of the Act. (in this regard, paragraph 2.2.1 of the assessment order may be referred to). 15. It is evident from above discussion that the assessee had neither complied with the terms and conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further time limit to pass the order as stipulated u/s 144C was followed by the AO. In view of these facts, it is incorrect to argue that last date of passing final assessment order in this case was 31.03.2013 as against this in this case last date to pass order in compliance to the direction of the DRP was 28.02.2014 u/s 144C read with second Proviso to section 153(1) of the Act. 19. Issue 2: Whether provisions of section 144C is not applicable to draft order u/s 144 of the Act The argument of the assessee that provisions of section 144C are not applicable to the draft order u/s 144 is legally incorrect statement. Clause(b) of sub-section (15) of section 144C stipulates that provisions of section 144C are applicable to: - All the cases of foreign company - All the cases where variation in the income arise due to transfer pricing additions It is evident from provisions of section 144C of the Act that a proposed order of assessment where variation in return of income of above referred to classes of assessee known as eligible assessee are proposed are covered u/s 144C. The proposed order of assessment may be u/s 143(3), 147 or section 144 of the Act. The provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d non-submission of the information by the assessee on certain points, issued directions u/s 144C(5) of the Act to the AO on 31.12.2013. It is pertinent to mention here the assessee did not challenge assumption of the jurisdiction by the AO u/s 144 of the Act, however, it did take a ground against rejection of books of A/c, which was not pressed before the DRP and was rejected after scrutiny by the DRP and the DRP confirmed assumption of jurisdiction u/s 144 of the Act. The DRP gave categorical findings on the issue under the title Nondisclosure of vital information in paras 5.3 to 5.5 of its directions, which are reproduced verbatim as under:- Non-disclosure of vital information 5.3. According to AO, as per Section 212 of the Companies Act, 1956 as well as the Indian Accounting Standards 7,12,18,19, 27, 28, 33 and 107, the transactions of the subsidiaries were to be consolidated and disclosed in the audited accounts of the assessee since it is the parent company of all the Netherland and UK based companies. On being asked, the assessee produced a conditional order dated 03.07.2009 of the Ministry of Corporate Affairs which exempted from attaching the details of subsidiari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t assessment order, the AO has given reasons for rejection of the books of accounts of the assessee and why best judgment assessment u/s 144 of the IT Act is warranted in this case. The AO issued show cause notice to the assessee before resorting to Section 144 of the IT Act. (Emphasis supplied) Further, in para 5.13 of its directions, the DRP categorically held asunder:- 5.13 Therefore, DRP is of the considered view that the corporate veil needs to be pierced in this case as has rightly been done by the AO. The action of the AO to that extent is upheld. Corporate veil cannot be pierced without rejecting the account books of the assessee and without travelling beyond such account books after such rejection. Thus, by upholding the piercing of corporate veil after itself causing enquiries to be made u/s 144C (7), the DRP has upheld the rejection of account books of the assessee and has upheld completion of assessment u/s 144 by the AO. The AO after receipt of the directions of the DRP finalized assessment order u/s 144 r.w.sl44C (13) of the Act on 28.02.2014 in conformity with the directions of the DRP by determining total taxable income of ₹ 838.33 crore. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee had neither complied with the terms and conditions of the notice u/s 142(1) nor had followed accounting standards as notified by Central Government, accordingly, the AO assumed jurisdiction u/s 144 of the Act and finalized assessment proceeding u/s 144 read with section 144C of the Act. This leads to an irresistible conclusion that the AO has assumed jurisdiction u/s 144 on two counts - one, rejection of books of A/c 145(3) and second, non-compliance of terms and condition of notice u/s 142(1) of the Act. For aforestated reasons, an argument that the assessment order should have been passed u/s 143(3) instead of section 144 of the Act is not found tenable. It is pertinent to mention here that assumption of jurisdiction under section 144 of the Act in cases of non-compliance of notices u/s 142(1) is clearly stipulated by clause (c) of subsection 1 of section 144 of the Act and assumption of jurisdiction u/s 144 due to rejection of books of A/c u/s 145 (3) is provided under section 145(3) of the Act by including wordings ...the Assessing Officer may make an assessment in manner provided in section 144 . Several Courts including Hon'ble Apex Court hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts of NNPLC was not furnished by the assessee even till the completion of the assessment proceedings. 1.4 The AO therefore issued show cause notice u/s 145(3) on 28.03.2013 specifically pointing out that the requisite information had not been furnished by the assessee. In response, vide reply dated 28.03.2013 filed on 30.03.2013, the assessee stated that the information regarding subsidiaries had not been filed earlier or attached with the Annual Report, because the assessee had obtained exemption u/s 212(8) of the Companies Act, 1956. The contention is not acceptable, because order u/s 212(8) was issued by the MCA on 03.07.2009, whereas Annual Report was signed on 30.04.2009. Further, para (v) of the exemption order mandates filing of such data to various regulatory and government authorities as may be required by them. 1.5 Apart from the above, the following documents were not furnished by the assessee during the assessment proceedings :- (i) Copy of Share Subscription Agreement dated 23.05.2008 between Universal Studios International BV ( USBV ), NBC Universal, Inc. ( NBCU ), NDTV Networks BV ( NNBV ), NDTV Networks International Holdings BV ( NNIH ) and NDTV along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. 27. The ld AR in rejoinder submitted that the assessee filed return of income on 30.09.2009 and the Transfer Pricing Officer passed u/s 92CA(3) on 30.01.2013 and consequently draft assessment order was passed on 31.03.2013 wherein, the ld Assessing Officer himself has mentioned that order is passed u/s 143(3) of the Act. He further referred to page No. 914 of the paper book, which is Form NO. 35A of objections to the draft order before the ld DRP were submitted to show that in the fifth column the details mentioned is that the draft order is passed u/s 143(3) read with Section 144C of the Act. He therefore submitted that as the draft order was not passed u/s 144 of the Act there was no occasion to mention such section in that Form. With respect to Form NO. 36B he submitted that as the assessment order is passed u/s 144 the assessee does not have any option but to mention that section only. He therefore vehemently stated that Revenue is misleading by quoting different sections in the orders and now trying to argue that appeal is not maintainable. He vehemently referred to the letter of the Assessing Officer forwarding the draft assessment order. He further referred to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the copy of the annual report of the appellant company. It comprises of the following: a. Copy the index to the annual report (page 1746-1748); b. Details of Board of Directors, Auditors, Compliance Officer, Company Secretary, Performance indicators (Page 1749-1753); c. Letter to shareholders dated 22.07.2009 (Pages 1754-1755); d. Directors Report dated 30.04.2009 (Pages 1757-1764); e. Corporate Governance Report dated 30.04.2009 (Pages 1765- 1778); f. Management Analysis (Pages 1779-1790); Auditors Report (Pages 1791-1793); h. Consolidated Balance Sheet and Profit and Loss Account along with schedules (Pages 1794-1823); i. Consolidated Financial Statement of the appellant and subsidiaries duly audited on 30.04.2009 (Pages 1825-1857); 3. From the above, it is apparent that pages 1825 to 1857 are consolidated financial statement of the appellant company. It is submitted that out of the above, page 1825 is the Auditors Report to the Board of Directors dated 30.04.2009 on the Consolidated Financial Statement of the appellant Company and its subsidiaries. In this report, it has been stated that We have audited the attached consolidated Balance Sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial statement of the subsidiaries. In the application was made on 08.05.2009 and approval was also granted on 03.07.2009, as stated aforesaid which is prior to the AGM and also the date of filing of the return for the instant year and much prior to the draft of the proposed order of assessment dated 31.03.2013. 10. Further, as directed by the Hon'ble Bench, copy of the minutes maintained under the Companies Act, 1956 shall be produced in original by tomorrow morning. 29. He further submitted that before the ld DRP the Revenue had several occasions in remand as well as personal appearance but this objection was never raised there that order is not u/s 143(3) but u/s 144 of the Act. He therefore, submitted that in absence of any whisper by the Revenue now it could not contest that order is passed u/s 144 of the Act. He further submitted that decision of the coordinate bench in case of Allcargo Logistics Ltd has no application to the fact of the present case. He further stated that there is no evidence of non-compliance by the Assessing Officer as well as in the draft order or in final order. Therefore, now Revenue cannot say that there was noncompliance. He further stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment; whereas in order dated 31.3.2013 he had stated the order to be draft order and no such sum was determined by him. There is a conceptual difference between an order where an assessment has been made to best of his judgment and a draft order 41.4 It is submitted that where a draft assessment order is made sum of tax payable is not determined and therefore in absence of any determination of tax, the draft order of assessment is not an order u/s 144 of the Act. It is submitted that this is also evident from provisions contained in section 145(3) of the Act, which read as under: (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2) , have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144. [Emphasis supplied 41.5 It will be evident from the aforesaid statutory provisions that invocation of provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the tax. It has further observed that the latter is as crucial as the former. Therefore, unless the total income is determined and the determination of tax is also done, it cannot be said that the process of assessment is complete. What section 153 requires is that the assessment should be completed within the prescribed time-limit. The words Order of assessment cannot be construed to mean assessment of total income only. Those words would mean an Order in writing whereby the total income of the assessee is assessed and the tax payable by him is determined. When an Order in writing in respect of both these things is passed, it can be said that there is a complete Order of assessment. These two steps may be taken simultaneously or separately, but it cannot be gainsaid that both of them will have to be taken within the time prescribed by the Act. Admittedly, in this case the second step was not taken within the prescribed time. After determining the total income, the Income-tax Officer possibly left the matter to his subordinates for the purpose of calculating the tax payable by the assessee on the basis of the assessed total income. Even if we assume in favour of the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt of draft assessment order, the AO shall complete the assessment on the basis of draft order within one month from the end of the month in which the acceptance is received or period of filing of objection expires. The ld DRP on the objection shall issue the direction after considering the draft order, objections of the assessee, evidences furnished by the assessee, report of authorities, records of the draft order, evidence collected, and result of enquires made. The ld DRP is further empowered to make or cause further enquiry. Consequently, it may confirm, reduce, or enhance the variation proposed in the draft order but it has no power to set aside any proposed variation. Every direction issued by the ld DRP are binding to the Assessing Officer subject to the provisions of right of appeal to the Assessing Officer for some intermittent period before the tribunal. On receipt of the direction of the ld DRP , AO shall complete the assessment within 1 month from the end of the month of receipt of the direction without granting any further opportunity of hearing to the assessee. On above analysis of the provision of section 144C it is apparent that draft order is not required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order is required to be passed u/s 143(3) or u/s 144 of the Act. According to us the draft assessment order is required to be passed u/s 144C(1) of the Act. it is further to be noted that it is not the draft order but it is draft of the proposed order of assessment. Therefore, there is no requirement of mentioning any sections by the Assessing Officer except 144C(1) in the draft of the proposed order of assessment. It is further required to be noted that the draft of the proposed order of assessment is altogether different from the assessment order as such draft does not include the notice of demand but also does not have any enforceability of tax dues from the assessee where as the assessment order has such ingredients and it is accompanies with notice of demand u/s 156 of the act. According to us the draft of the proposed assessment order is just like a statement of facts and reasons formed by the assessing officer during the assessment proceedings about the proposed additions etc for which assessee has right to go to higher forum of three commissioners to show that proposed variation by the ld AO is incorrect. It is an internal dispute resolution mechanism of revenue so t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi Television Ltd. and its subsidiaries alongwith their amount since 01.04.2006 with documentary evidence. (5) PAN and IT Returns of these subsidiaries since 01.04.2006. The assessee was directed to attend the office of the ADIT(Inv.) along with the above called for information on 31.12.2010. On that date no information was provided by the assessee and on behalf of M/s RRPR Holding Pvt. Ltd. a request was made for adjournment which was allowed and case was adjourned for 17.01.2011. Similar request was made by the assessee company and case was adjourned for 17.01.2011. However, on the next date also no information was provided by the assessee. It is seen that the assessee company is having at least 21 subsidiaries as recorded by Ministry of Corporate Affairs OM No. 47/469/2009-CLIII dated 03.07.2009. However the documents as prescribed under section 212 of the Indian companies Act, 1956 were not attached nor any recital in terms of sub- section 6 of section 212 of the Indian Companies Act, 1956 was made in the Balance Sheet and Audited Accounts that was finalized and signed by the Board of Directors of the assessee company on 30.04.2009 and also certified by the auditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 209,210,211 and 212 of the Indian Companies Act, 1956 asking the assessee to explain why the books of accounts of the assessee not in accordance with the provisions of section 145(3) of the IT Act, 1956 be rejected and assessment of the assessee company is completed in accordance with the provisions of section 144 of the IT Act, 1961. The said notice was served upon the assessee by fax on 29.03.2013 and in view of the scheduled limitation on 31.03.2013 assessee was requested to submit its reply by 30.03.2013. The reply of the assessee was duly received on 30.03.2013 whereby it was stated by the assessee that the assessee company was exempted to attach the details of subsidiaries with its balance sheet and other accounts in terms of the provisions of sub-section 8 of section 212 of the Indian Companies Act, 1956 and for the first time a copy of the said permission granted by Central Government was furnished. The order of Ministry of Corporate Affairs dated 03.07.2009 was a conditional order and therefore the same was required to be disclosed in the accounts of the assessee and a recital was required to be made by the assessee in its accounts to the effect of the said order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e during the relevant accounting period and when the accounts of the assessee were finalized and approved by the Board of Directors of the assessee company i.e. on 30.04.2009. Vide its letter dated 30.03.2013 the assessee vide para 8 contended that section 145(3) of the Act, talks about correctness or completeness of the accounts of the assessee only and not of its subsidiary or affiliates and therefore the provisions of section 145(3) were claimed to be applicable only in cases where the accounts of the assessee on stand alone were not complete and correct. The contentions of the assessee is not maintainable as the provisions of section 212(1) of the Indian Companies Act, 1956 prescribed that accounts of the subsidiaries as well as reports prescribed therein are to be attached with accounts of the holding company and in the instant case the assessee being the holding company, it was mandatory to attached the documents in respect of its subsidiaries as prescribed in section 212(1) of the Indian Companies Act, 1956 and the same not having been done by the assessee, the accounts as prepared and attached by the assessee with its return of income was neither complete nor correct. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was carried out or obtained by the assessee. The subscription price was a negotiated price arrived between the parties based on proposed business potential and business forecast and projections. From the above it is more than clear that the money received by the assessee through its subsidiaries was not as per the fair value of the shares proposed to be transferred and the requirements of Indian Accounting Standard 18 as also elsewhere which defines the fair value the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm s length transaction has not been complied with and the said transaction is merely colorable exercise to cover up the trail of money. In view of the above, it is held that assessee has failed to discharged its primary onus cast upon it and therefore the entire amount received by the assessee through its subsidiaries and through an agreement dated 23.05.2008 to which assessee is equally a party is covered by the provisions of section 69A of the IT Act, 1961. The said amount of ₹ 6,42,54,22,000/- was received by M/s NDTV Networks International Holdings BV ( a subsidiary of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing standard 24, 7, 12, 18, 19, 27, 28 and 33. According to the Assessing Officer it was material information, which was required under the law to be attached with the balance sheet of the assessee, was not at all attached and therefore the accounts of the assessee are not complete and correct. Notices were also issued to be assessee in February 2013 for compliance for submitting the balance sheet of its subsidiary companies. Therefore the AO was of the view that accounts of the assessee were incomplete and incorrect. Hence, he invoked the provisions of section 145(3) of the Act due to non-compliance of provision of section 209, 210, 211 and 212 of the Indian Companies Act, 1956. As the ld Assessing Officer has invoked the provisions of section 145(3) of the Act as he is not satisfied about the correctness and completeness of the accounts of the assessee, he is required to make the assessment in the manner provided u/s 144 of the act. Before the ld AO it was also contended by the assessee that non submission of the requisite details of subsidiary or its affiliate companies has nothing to do with the Correctness and completeness of the accounts of the assessee and therefore, the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the balance sheet of a holding company having a subsidiary or subsidiaries at the end of the financial year as at which the holding company s balance sheet is made out, the following documents in respect of such subsidiary or of each such subsidiary, as the case may be : (a) a copy of the balance sheet of the subsidiary; (b) a copy of its profit and loss account; (c) a copy of the report of its Board of directors; (d) a copy of the report of its auditors; (e) a statement of the holding company s interest in the subsidiary as specified in sub-section (3); (f) the statement referred to in sub-section (5), if any; and (g) the report referred to in sub-section (6); if any. (2) 55 [(a) The balance sheet referred to in clause (a) of sub-section (1) shall be made out in accordance with the requirements of this Act, (i) as at the end of the financial year of the subsidiary, where such financial year coincides with the financial year of the holding company; (ii) as at the end of the financial year of the subsidiary last before that of the holding company where the financial year of the subsidiary does not coincide with that of the holding company.] (b) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so far as they are profits or losses for the period before the date on or as from which the shares were acquired by the company or any of its subsidiaries, except that they may in a proper case be so treated where (a) the company is itself the subsidiary of another body corporate; and (b) the shares were acquired from that body corporate or a subsidiary of it; and for the purpose of determining whether any profits or losses are to be treated as profits or losses for the said period, the profit or loss for any financial year of the subsidiary may, if it is not practicable to apportion it with reasonable accuracy by reference to the facts, be treated as accruing from day to day during that year and be apportioned accordingly. (5) Where the financial year or years of a subsidiary referred to in sub-section (2) do not coincide with the financial year of the holding company, a statement containing information on the following matters shall also be attached to the balance sheet of the holding company: (a) whether there has been any, and, if so, what change in the holding company s interest in the subsidiary between the end of the financial year or of the last of the financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich may extend to six months, or with fine which may extend to 57[ten] thousand rupees, or with both: Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully. 38. On reading of the above provision, it is apparent that the balance sheet of the holding company i.e. the assessee, must have details of the subsidiary as prescribed. The requirement of reconciling the financial year of the subsidiary and holding company is also mandatory, further the profit and loss account, report of the board of directors, and of auditors of those subsidiaries are required to be prepared according to the provisions of the companies Act, 1956. It is also mandatory in case of foreign subsidiaries. Further, a statement is required to be prepared of the holding company s interest in the subsidiary, as well as other details shall be signed by the person by whom the balance sheet of the company is required to be signed. The provision of sub-section 9 also prescribe a punishment with imprisonment up to 6 months along with the fine or with the fine only for non-compliance of this section. In view of this the importance of compliance with this prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the assessee u/s 212(8) of the companies Act 1956 for the Financial year ended on 31.03.2009 from the Ministry of Corporate Affairs. To our utter surprise the approval of the Ministry of Corporate Affairs was granted to assessee only on 3.07.2009 but in the Director s report dated 30.04.2009 Chairman of the company Dr. Pranoy Roy has disclosed to all the regulatory authorities such as SEBI and stock exchanges that approval has already been granted by the Ministry of Corporate Affairs. In fact the application for such approval was made only on 8th May 2009. Further, the above exemption was also subject to the following six conditions:- I. The company will present in the annual report the consolidated financial statement of it is subsidiaries duly audited by the statutory auditors. II. The consolidated financial statement will be prepared in strict compliance with the accounting standard and listing agreement as prescribed by SEBI III. Following information in aggregate for each subsidiary should be disclosed in one page of the consolidated balance sheet respectively- (a) capital (b) reserves (c) total assets (d) total liabilities (e) details of investment (exempt in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lving the fiscal and corporate liability of the assessee go unnoticed so far. However, the tribunal in the present case except expressing anguish cannot cross the limits laid down by the law. It is for other regulatory and supervisory agencies to get alarmed with such an act. In view of these glaring facts we do not have any hesitation to say that the conduct of the assessee shows that assessee had never an intention to disclose the details of its subsidiary companies and its financial transactions to its stakeholder and to regulatory authorities including the Income tax Authorities. Our statement also gets fortified by our other observations in this order. 44. The provision of section 144 of the Act prescribes four conditions under which the ld AO can make the best judgment assessment. The provisions are as under:- BEST JUDGMENT ASSESSMENT Section 144 If any person-- (a) fails to make the return required under sub-section(l) of section 139 and has not made a return or a revised return under sub-section(4) or sub-section(5) of that section, or (b) fails to comply with all the terms of a notice issued under sub- section(1) of section 142, or fails to comply with a directio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act and therefore, the AO rightly assumed powers u/s 144 of the Act. 46. According to provisions of section 144(1)(b) if the assessee fails to comply with the all the terms of the notice issued u/s 142(1) then the ld Assessing Officer after taking into account all revenant material which he has gathered make the assessment of the total income or loss of the assessee to the best of his judgment. In the case where the notice u/s 142(1) has been issued to the assessee prior to the making of an assessment under the section, no further opportunity is required to be given to the assessee. As during the course of assessment proceeding the assessee has failed to comply with all the term of the notice issued u/s 142(1) the Assessing Officer cannot be found at fault for invoking the provisions of section 144 of the Act. Therefore , the ld Assessing Officer not satisfied with the completeness and correctness of the account of the assessee is duty bound to make an assessment in the manner provided u/s 144 of the Act and further as the assessee has failed to comply with all the terms of the notice u/s 142(1) the assessment is correctly proposed to be made by the AO u/s 144 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er under sub-section (3) of section 143 or section 147 in pursuance of the directions of the Dispute Resolution Panel or an order passed under section 154 in respect of such order. (e) an order passed by an Assessing Officer under sub-section (3) of section 143 or section 147 or section 153A or section 153C with the approval of the Commissioner as referred to in sub-section (12) of section 144BA or an order passed under section 154 or section 155 in respect of such order. (f) an order passed by the prescribed authority under sub-clause (vi) or subclause (via) of clause (23C) of section 10. 49. The orders passed according to the clause (d) are an order passed by the AO under section 3 of section 143 or section 147 or section 153A or section 153C in pursuance to the direction of the Dispute Resolution Panel or an order passed u/s 154 with respect to such orders are appealable. According to us the order passed u/s 144 of the Act pursuance to the direction of the Dispute Resolution Panel does not find place as an appealable order before the tribunal. It is also an accepted proposition of the law that unless the right to appeal is provided under the statute to a specified auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of ₹ 415441111/- being commission paid to advertisement agency disallowed because of the reason of non-deduction of tax at source. During the year the assessee has shown total sales of ₹ 2354166296/- and the assessee was asked to furnish the details of commission paid to advertisement agency and tax deduction at source made thereon. The assessee submitted a detailed reply before the AO contesting that no tax is required to be deduced , however, the ld Assessing Officer has rejected the contention of the assessee and held that tax should have been deducted on such sum and disallowance of ₹ 415441111/- was proposed by giving following reasons in the draft assessment order:- The reply of the assessee has been considered and is not found tenable. The assessee has relied upon the case of CIT Vs Living Media India Ltd (supra), which is clearly distinguishable from the facts in the present case of the assessee. The same are enumerated hereunder:- In the case of Living Media, the assessee was a publisher of magazines like India Today, Business Today etc., and was a principal on its own. It did not carry out directions of any other agencies and was the ultimate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee) wherein the client reference / caption was Jet Airways (I) Limited, for advertisement in the different programmes of NDTV Ltd. Invoice of gross amount of ₹ 28,75,600/- was raised; Agency Commission was deducted of ₹ 4,31,340/- and net amount of ₹ 24,44,260/- + service tax, education cess and secondary cess, was shown to be receivable from the client through the Agency i.e. M/s TLG India Private Limited (Agency). The details have already been reproduced in para above. It is clear from the above invoice that the transaction is between assessee and the ultimate client i.e. owner of Jet Airways (I) Limited through the Agency i.e. TLG India Private Limited. The payment of gross amount' is remitted by the ultimate client to the Agency, which, after deducting its 15% commission, remits the net amount to assessee. In any case, the Agency is only acting in the capacity of facilitator and providing services both to the advertiser and as well as assessee. For these services, the Agency is being remunerated at the specified rates i.e. 15% commission as mentioned in the invoices. It is immaterial as to whether assessee makes payment to Agency as Commission f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount as is clear from the billing, the only difference1 is that instead of reflecting a gross amount in its books (e.g. ₹ 28,75,600/- in the sample voucher of TLG India Private Limited, then deducting commission of ₹ 4,31,340/- @ 15% of gross amount of ₹ 28,75,600/- the assessee is directly booking net amount of ₹ 24,44,260/- in its books of accounts. However, this is'only a financial arrangement arrived at between assessee and the agent and it cannot be denied that expense has been incurred by the assessee, the only difference being that it is not in the form of direct payment to Agent, but rather in indirect form e. the Agent withholds amounts due to it and remits the balance to the assessee. This in no way takes away from the expenditure incurred by the assessee as the remuneration in the form of commission/discount received by the agent flows from the payments received by it. From the above discussion it is amply clear that the assessee was fastened with expenses of commission which instead of being borne by it by way of actual payment has been withheld by the Agency before remitting net amount to the assessee and can be termed as Constructive r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thousand five hundred rupees. Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such commission or brokerage is credited or paid, shall be liable to deduct income-tax under this section. Explanation - For the purpose of this section,- (i) Commission or brokerage includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services)or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities: (it) The expression professional services means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as is notified by the Board for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required to be made from the amount of commission. Thus, the assessee was obliged to deduct tax at source the payment to agents or amount withheld by agents. More so, CBDTCircular No. 715 dated 08.08.1995 also specifies that commission received by the Advertising Agency from the Media would require deduction of tax at source u/s 194J. Furthermore, reliance is placed on the following decisions, which are directly related to the crux of the matter under consideration :- 1) CIT Vs Director, PrasarBharti (Kerala High Court) 2) CIT Vs Singapore Airlines !TANos 306/2005 123/2006 dated 13.4.2009(Delhi High Court). 3) CIT Vs Idea Cellular Ltd ITA Nos 145/2009 784/2009 dated 19.2.2010 (Delhi High Court). 4) ACIT VsBharti Cellular Ltd ITA No 1678 1679/Kol/2005 dated 4.4.2006 (ITAT, Kolkata Bench.) 5) Bharti Cellular Ltd Vs ACIT (2011) 12 Taxmann 30 (Cal.) (High Court of Calcutta) 6) Vodafone Essar Cellular Vs ACIT dated 17.8.2010 (Kerala High Court) 7) Around the World (268 ITR 477 (Mad.) 8) Tube Investment (223 CTR 99). The important aspects decided by Hon'ble Courts are discussed hereunder:- The Kerala High Court in the case of Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agent simultaneously gets paid commission of 15 per cent which he is free to appropriate as his income. TDS on the commission charges of 15 per has to be paid by the respondent to the income tax department with reference to the date on which 85 per cent of the advertisement charges are received from the agent. In fact, it is only to comply with the provision, clause 2(e) extracted above is incorporated in the agreement wherein it is stated that agent will pay to the Doordarshan through DD or cheque the TDS amount payable on the commission retained by agents which we have already found as payment of commission by the respondent to the agent. In the case of CIT Vs Singapore Airlines Ltd., Others reported in ITA No 306/2005 123/2006, judgment delivered on : 13.4.2009 (Delhi High Court) the relationship between principal and agent has been dwelt upon in detail. It has been held by the Hon'bie jurisdictional High Court that once an obligation is cast, it is for the assessee to retrieve the necessary information from the agents (travel agent) who works for the assessee and to deduct TDS on the actual income received by the agent on sale of such items. Even though the said j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate contractual relationship between his principal, that is, the person whom he represents, and the third parties; (iii) An agent, though bound by instructions given by him by the principal does not work under the direct control and supervision of the principal. The agent thus uses his own discretion to act on behalf of the principal subject to the limits to his authority prescribed by the principal. (iv) There is no necessity of a formal contract of agency, it can be implied which could arise from the act of parties or situations in which parties are put. It is also the case of Revenue the essential ingredient of principal to agent as defined in Section 182 of Contract Act are all present in the case of the assessee, which is enumerated hereunder :- RELATIONSHIP BETWEEN PRINCIPAL AND AGENT (i)The agent makes the principal answerable to third persons whereby the principal can sue third parties directly and renders himself, that is, the principal, liable to be sued directly by the third parties In the case of the assessee, advertisements are being received through agents, apart from other direct modes. In so far as advertisements booked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or services rendered acting on behalf of the assesse, is defined in explanation (1) to section 194H as any payment received or receivable , directly or indirectly by an agent for services rendered acting on behalf of the assessee. In view of the fact, relying upon the decision of Honble High Court: is concluded that the payment retained by the agent is inextricably linked to the advertisement to be published by the assessee, it cannot but lead to a that the payment retained by the agents is a commission within the meaning 194H of the Act. This is especially so, as indicated above, at no point in time obtains proprietary rights to the advertisement, it is clearly not a case of disc case since there is no value or price paid by the assessee on which the a deduction. The price or value is received by the assessee company through the medium of the agent from the advertisers which is also one of the facets of services offered by the agents. The price or value of the advertisement to be published in the media received from the advertisers by the agents for and on behaif of the assesse is held in trust. Thus, the money retained by the assessee is commission within the meaning of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent for an agency work other than a salary. (d) Again, a commission is the recompense of reward of an agent, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transaction or on the profit to the principal. (e) Commission generally denotes the compensation which an agent receives on Sales. (f) Commission is compensation paid to another for services rendered in the handling of another's business or property and based proportionately upon the amount or value thereof. (g) The Hon'ble Court in the above cited case has given a passing remarks, that if the principal is asked to deduct tax at source in respect of commissions paid to their agents, it does not affect the principals. The concerned agent can always file their income tax returns and claim the credit for the payments already made on their behalf by theassessee. On the other hand, such a provision serves public purpose inasmuch as viz.,such distributors who would be otherwise liable to pay tax, but are evading the tax, would come under the Income Tax Act. This is only a passing remarks, which justifies the incorporation of such a provision like putting obligation on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed on account of non-compliance of the provisions. From the invoice raised, as per method of accounting guidance note of ICAI, the assessee is supposed to credit the gross amount of ₹ 28,75,000/- in the receipt side and debit ₹ 4,31,340/- under the head agency commission in the profit and loss account. The net effect would be offering income of ₹ 24,44,260/- in P L a/c. Instead, the assessee has straight away credited the net amount on ₹ 24,44,260/- in the receipts side. What has missed is that the expenditure of ₹ 4,31,340/- which is supposed to be routed through profit and loss account is shadowed and omitted to be debited in the net income but it does not mean that the said expenses have not been incurred. The provisions of Sec 40 as discussed supra contain the expression 'following amounts shall not be deducted in computing the income chargeable under the head ...'. The word 'deducted' in the section is not followed by the word in 'profit and loss account'. The intent of Legislature is very clear that even if the gross amount is 'deducted' by any sum, which is not shown directly in the P L a/c, net effect wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13, the assessee has submitted details of quantum of advertisement revenue generated to advertising agencies, which amounts to ₹ 235,41,66,296/-, which is net of commission paid to the agencies @15%. The assessee was asked to furnish gross amount charged during the year under consideration but no details have been furnished by assessee. Therefore considering the 15% commission paid by the assessee, as per assessee's letter dated 07.03.2013, on a revenue of ₹ 235,41,66,296/- the grossed up revenue comes to ₹ 276,96,07,407/- and commission on the gross revenue @15% comes to ₹ 41,54,41,111/- which has been paid by the assessee. In view of the facts as discussed in the foregoing paragraphs it is clear that the transactions (on which discount as claimed by the assessee) was not paid on principal to principal basis but was in the nature of principal- agents for the services rendered to 3rd parties, and by no stretch of imagination can be termed as discount and the assessee has itself in its invoices categories the said amount as commission. Therefore, the discount (as claimed by assessee) paid by the assessee is nothing but agency commission liable for dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accredited agencies duly deduct tax as required under law under section 194C of the Act on the amount paid by the advertiser. This customary practice is consistently followed in this above business and is governed in accordance with guidelines of Indian Newspaper Society (in short INS) for print or Indian Broadcasters Federation (in short IBF) for electronic. An advertiser engages an advertising agency and the advertising agency in turn approaches print and electronic media for publication/broadcast of the advertisement. There is no direct link between the print and electronic media and the advertiser. In the normal course when orders are released by the advertising agencies, the name of the client is always disclosed on it, though there is no principal agent relationship between the print and electronic media on one hand and the advertising agencies on the other hand. As per the rules of INS, accreditation is awarded by INS to the advertising agency which becomes eligible to receive 15 per cent discount from media companies on procuring advertisement space for/time in publication/broadcast for advertisers. It may be noted that even the discount is not at the will or contractual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. Hence, he disallowed the above sum holding as under:- 4. Transmission and uplinking Charges In the P L Account the assessee had debited ₹ 14,52,51,704/- under the head Transmission and Uplinking Charges. In the notes to account the assessee has furnished the details of expenditure in foreign currency. It has been reported that ₹ 14,52,51,704 has been incurred under the head subscription, uplinking and news service charges. Vide order sheet dt.15.02.2013, the assesses was required to furnish the details regarding TDS on uplinking and transmission charges. The assessee in its reply dt. 11.03.2013 and 22.03.2013, submitted that the payment has been made to a foreign company and in view of the decision of Hon'ble ITATDelhi, in DCIT vs. PanAmSat International System Inc. 103 TTJ 861 (Del), it is not obliged to deducts TDS. The relevant para of reply dt. 11.03.2013 and 22.03.2013 are reproduced as under: Relpy dated 11.3.2013 (filed on 22.03.2013) We have been show-caused as to why disallowance be not be made in respect of transmission and uplinking charges for the non-deduction of TDS u/s 40(1)(ia) paid to Intelsat? Please note that we hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merits: The payments in question made to Intelsat Corporation are not a Royalty within the provisions of Act as they exist during the year in question. (A retrospective amendment is made in Section 9(1)(vi) by the Finance Act 2012 to include consideration paid for the use or right to use of transmission by satellite within the ambit of the definition of Royalty ) Even after the above amendment in the Income Tax Act, 1961, there is no change in definition of the tern Royalty under the DTAA between the India - USA. Therefore, even today the payments in question could not be taxed as Royalty in the hands of recipient in view of the favourable position on this issue in relevant DTAA. These payments were made after obtaining the requisite certificates from the Chartered Accountant (CA) who certified that the above sums were not chargeable to tax in India, as it constituted business income under Article 7 of the DTAA and in the absence of Permanent Establishment ( PE ), same could not be liable to tax in India. Intelsat Corporation is a non-resident company incorporated under the laws of USA and is a tax resident of USA and, therefore, the provisions of DTAA entered be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Vishakhapatnam) wherein it has been held that section 40a(ia) of the Act can be invoked only to disallow expenditure of the nature referred to therein which is shown as payable as on the date of balance sheet. It is admitted fact in present case that the above amount were paid during the year in the foreign currency as disclosed in the Audited Accounts of the year in question Therefore, the provision of section 40(a)(ia) of the Act could not be invoked in view of the decision in the case of Merilyn Shipping Transports (supra) as no expenses remained as payable as on March 31, 2009. Thus, in alternate on this account also no addition is warranted. The submission of assessee was duly considered and are not acceptable. The payments made under the head Transmission and uplinking charges are covered under the definition of royalty as define in section 9 of the I. T. Act. The provisions of the section 9 which defines the term royalty are reproduced as under: Section 9 Income deemed to accrue or arise in India. (1) The following incomes shall be deemed to accrue or arise in India.... (vi) income by way of royalty payable by- (a) The Government; or (b) A person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge is not required under the DTAA. It is only in the case of fee for technical services/include services. Therefore the clause regarding make available in the DTAA will not help the assesse in any way, from the liability of deducting TDS on Transmission and Uplinking charges The decision of Honble ITAT Delhi in the case of PANM international system is also not applicable because the payment of transmission and uplinking charges has now been covered under the definition of royalty through amendment in Finance Act,2012. In the case of PANM International system the issue examined by the Honble ITAT was regarding making technical knowledge available for the TV Channels. Where in the case under consideration the uplinking and transmission charges are being taken as royalty as defined u/s 9(1)(Vi). The above definition clearly indicates that transmission and uplinking charges are covered under the definition or royalty (process) and it has been categorically introduce by the finance 2012 that process includes and shall be deemed to have always included transmission by satellite (including up-linking , amplification, conversion for down-linkiong of any signal). Since the transmissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case as well as the decision of the Hon ble Delhi High Court. We are convinced with the argument of the ld AR that the issue is squarely covered by the decision of Hon ble jurisdictional high court. The ld DR could not controvert that how this issue is not squarely covered in favour of the assessee and he also could not show us any other judicial precedent so as to persuade us to disagree with the views of the ld DRP. Further merely because the revenue has filed an SLP before the hon ble Supreme Court against the decision of Delhi High Court cannot be a reason for sustaining the disallowance. In view of this we do not find any infirmity in the direction of the ld DRP in directing the ld Assessing Officer to delete the disallowance transmission and up linking charges paid to Intelsat Corporation USA of ₹ 78123855/- In the result the ground No. 2 of the appeal of the Revenue is dismissed. 61. Ground No. 3 of the appeal of the Revenue is against direction of the ld DRP to delete the disallowance of ₹ 8245612/- on account of software expenses. During the year the assessee has incurred expenditure of ₹ 32435619/- on software expenses and claimed the same as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 2,07,009/- and 5,58,006/- respectively is held as allowable deduction during the year. AO is directed to delete the addition made in this regard. Therefore, DRP is also of the view that these expenditures are revenue in nature and hence allowable. AO is directed not to make this addition in assessment order. Objection 1 is treated as disposed off. 62. The ld DR relied upon the order of the ld Assessing Officer whereas the ld AR relied upon the orders of the ld DRP. 63. We have carefully considered the rival contentions. The assessee has been allowed the identical claim in earlier years by the ldCIT(A) and based on that decision the ld DRP was also of the view that the above expenditure incurred by the assessee is revenue in nature. The ld DR could not controvert that why the order of the ld DRP is erroneous. In view of this we do not find any infirmity in the direction issued by the ldDRP. In the result we confirm the direction of the DRP. In view of this ground No. 3 of the appeal of the revenue is dismissed. 64. In the result ITA No. 2658/Del/2014 filed by the Revenue is dismissed. CO No. 233/Del/2014 in ITA No 2658/Del/2014 ( By Assessee) 65. The g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent years. The coordinate bench for AY 2006-07 has already dealt with this issue in favour of the assessee. With respect to the reversal of ₹ 8331150/- in the current year as stated by the ld AR it has been credited to the profit and loss account but has not been adjusted in the computation of total income. Therefore, according to him the sum of ₹ 8331150/- has already been charged to tax twice. Though the above ground was not raised before the ld DRP as well as before the ld AO, in the interest of justice we set aside this ground of cross objection back to the file of ld Assessing Officer to deal it in accordance with the law. 70. In the result cross objection No. 5 is allowed with above direction. 71. Now we come to the prayer of the assessee for the grant of permission to raise additional cross objection as under:- 1. The hearing in the aforesaid cross-objection No. 233/del/2014 filed by the assessee- appellant is fixed for hearing on 30th July 2015. Along with the aforesaid cross-objection seven more connected matters have been fixed. In respect of all the eight matters, the assessee has filed six paper books as well as its detailed written submissions fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee in order to avoid, avoidable controversy is seeking permission to raise all such grounds as additional ground of cross objection in the appeal filed by the revenue i.e. ITA No. 2658/De/2014.6. The assessee thus without prejudice to its contention that, appeal filed by the assesee bearing ITA No. 1212/Del/2014 is maintainable, respectfully prays that, it be permitted to raise such ground as additional grounds of cross - objection. Additional/ Modified objections:- Cross objection No. 6:- That the Learned Assistant Commissioner of Income Tax (Ld. AO), Circle 13(1), New Delhi has erred both on facts and, in law in determining income of the Appellant at ₹ 8,38,33,37,197 /- as against the returned loss of ₹ 64,83,91,422 in an order of assessment dated February 21, 2014 framed u/s 144 read with section 144C (13) of the Income-tax Act, 1961 (Act) and the assessment framed is apparently without jurisdiction as well as barred by limitation. Cross objection No. 7:- That the various findings recorded by the Ld. AO/Ld. DRP in the impugned orders are highly perverse and have been recorded with preconceived notions and without considering the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in not appreciating that the borrower of the loan namely NDTV Networks Plc, UK (NNPLC) is a separate assessee which is liable to be taxed separately for its income and no addition is warranted of the aforesaid loan transaction in the total income of the Appellant under section 68 of the Act. Cross objection No. 10:- Without prejudice to Cross objection No. 9 above, that the Ld. DRP exceeded its jurisdiction while directing the Ld. AO to enhance the variations as a result of further enquiry in respect of the loan transaction between the NDTV Networks Plc. UK and NDTV Networks BV, as such a direction is outside the purview of powers of the Ld. DRP in view of section 144C(8) of the Act. 10.2 That the Ld. DRP failed to appreciate that being an appellate authority in view of the amendment in Finance Act 2012, the Ld. DRP ought not to have issued any directions for taxing any new source of income which is not emanating from the impugned draft assessment order. Cross objection No. 11 :- That the Ld. DRP has grossly erred in law and on facts of the case in directing the Ld. AO to record his reasons before invoking Rule 8D of the Income Tax Rules (Rules), 1962, withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts of the case and in law, the Ld. AO has erred in levying interest under 234B/D of the Act while completely disregarding the provisions of the Act and the judicial precedence in this regard. Cross objection No. 16 :- That on the facts of the case and in law, the Ld. AO has erred in withdrawing interest under section 244A of the Act while completely disregarding the provisions of the Act. Cross objection No. 17:- That on the facts of the case and in law, the Ld. AO has grossly erred in initiating penalty proceedings under section 271(1)(c) of the Act. The above grounds of appeal are mutually exclusive and without prejudice to each other. 7. The assessee cross objection further submits that, each of the aforesaid cross- objection has already been raised by the assessee in its appeal and thus none of the ground of cross-objection, can either be stated to be not arising from the impugned assessment order or are fresh issues which would warrant any investigation of any fresh fact and that it had filed an appeal before the expiry of period of limitation and thus here can be no justifiable basis to contend that, a right had vested in the revenue in respect of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee we have held that as the order passed by the ld Assessing Officer is u/s 144 of the Income Tax Act against which the appeal of the assessee is not maintainable. The assessee has raised the similar grounds now in this cross objection. It is undisputed that all these issues has arisen out of the order of the ld Dispute Resolution Panel and ld Assessing Officer. The assessee has also given reasons that why it could not be raised earlier. Further, the grounds raised could not be raised by the assessee for bonafide reason. In view of this in the interest of justice we admit additional grounds of cross objection raised by the assessee and deal with them on merit. 75. The ground No. 6 and 7 of the CO are against the challenge to the assessment framed as well as general averments against the finding recorded by the ld AO as well as the ld DRP. On these grounds no specific arguments were raised by the assessee therefore, we dismiss both of them clarifying that the order is without jurisdiction and barred by limitation has already been considered by us while deciding the appeal of the assessee. In no uncertain terms we have held that ld Assessing Officer is correct in passing order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... criber and genuineness of the transaction. The ld Assessing Officer was further of the opinion that the transaction of the share capital is more doubtful in view of the admitted fact by the assessee that the share issue price are not supported by any valuation report. Therefore, he made an addition of ₹ 642,54,22,000/- to the total income of the assessee. Assessee being aggrieved with the order of the ld Assessing Officer preferred objection before the ld Dispute Resolution Panel. The ld Dispute Resolution Panel vide para No. 5 of the direction held as under:- Unexplained money added u/s 69A of the IT Act Shares of a subsidiary company of the assessee located abroad was sold for ₹ 642.5 crores and bought back within a short span for ₹ 58 crores is the focal point of this controversy. The AO has mentioned that she was in receipt of information from various sources including Hon'ble Members of Parliament and Ld. Members of Bar. Further, the Investigation Wing of the Income Tax Department had also issued summons u/s 131 to the assessee to obtain information. During the course of the draft assessment proceedings, AO has issued enquiry letters calling for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erlands. This transaction took place during the course of the Financial Year i.e. 2008-09 which is relevant to the present assessment year i.e. 2009-10. The shares were sold for INR 642 croresand were bought back by NDTV Networks BV, Netherlands for INR 58 crores in the next financial year. The starting point of the enquiry and all other subsequent proceedings are revolving around this transaction. Non disclosure of vital information 5.3 According to AO, as per Section 212 of the Companies Act, 1956 as well as the Indian Accounting Standards 7, 12, 18, 19, 27, 28, 33 and 107, the transactions of the subsidiaries were to be consolidated and disclosed in the audited accounts of the assessee since it is the parent company of all the Netherland and UK based companies. On being asked, the assessee produced a conditional order dated 03.07.2009 of the Ministry of Corporate Affairs which exempted from attaching the details of subsidiaries with its balance sheet and other accounts in terms of provision of sub-section 8 of Section 212 of the Companies Act, 1956. The AO has pointed out that even this order of the Ministry of Corporate Affairs was not fully complied with. The assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 144 of the IT Act. 5.6 The AO examined the selling of shares of NDTV Networks Pic, UK and buying back of the same within a short span. Neither the buyer nor the seller had done any valuation of the shares from an independent valuer. The price of the shares was claimed to have been negotiated by the buyer and the seller based on the proposed business potential and business forecast and projections. The AO has come to the following conclusion which is reproduced for the sake of convenience: In view of the above, it is held that assessee has failed to discharged its primary onus cast upon it and therefore the entire amount received by the assessee through its subsidiaries and through an agreement dated 23.05.2008 to which assessee is equally a party is covered by the provisions of section 69A of the IT Act, 1961. The said amount of ₹ 6,42,54,22,000/- was received by M/s NDTV Networks International Floldings BV (a subsidiary of the assessee company) on account of subscription to its shares by M/s Universal Studios International BV. As per requirements of law and accounting standards discussed above, the said sum should have been disclosed by the assessee. Whereas, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. The step down subsidiaries of the assessee and the share holding structure make it very clear that the assessee is in control of all its subsidiaries. (See the diagram above) 5) The authorized share capital of NNPLC was only about ₹ 46 lakhs. 6) NNPLC had declared a loss of ₹ 8.67 crores for the year ending 31.03.2009. 7) The shares of NNIH was not valued by an independent valuer at the time of transaction. 8) The value of the share of NNIH at the relevant time of transaction was $ 1 per share i.e. around ₹ 40 to ₹ 50 approximately. These shares were sold/ subscribed at the rate of ₹ 7015.05 per share to Universal Studios BV Netherland. 9) These very shares were bought back by one of the step up subsidiaries of NNIH (the step down subsidiary of the assessee) (see the diagram above) namely, NDTV Networks BV, Netherlands for ₹ 634.17 per share in the financial year 2009-10. 10) The effect of the above transaction was money introduced in the books of subsidiaries of the assessee and booking of loss in the hand of Universal Studios BVNetherland. By selling the shares in the very next year NBC Universal Inc. has booked a loss of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in ventures across the globe. This group has invested into the shares of NNIH Netherlands. The creditworthiness of this group who has bought/ invested into the shares of thesubsidiary company cannot be doubted. 3) The assessee also filed annual reports of NBC Universal for FY 2008 to 2010 filed before the SecuritiesExchange Commission USA. Further, a copy of the annual report of GE Corporation, copy ofbank account of NNIH in ING Bank Netherlands, copy of the auditedaccount of NNIH were produced before the AO to establish the genuineness of the transaction. The holding structure of the NBC Universal is public available document. The transaction was recorded in the books of all the concerned parties. 4) The transaction was through banking channels. 5) Notes to the accounts forming part of the audited accounts of the assessee for the FY 2008-09 in Schedule 21B clearly mentions about the transaction in item no. 20 regarding the share holders agreement between NDTV group companies with NBC Universal Inc and its affiliate Universal Studios International BV for subscription of 26% of effective interest stake in NNPLC for an amount of USD 150 million. Further, the notes to accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... theory of money laundering. 9) Assessee relied on the following judgments to strengthen its claim apart from relying on Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Netherlands: a) G.V. Films Ltd. vs. S. Priyadarshan and Anr. (C.S. No. 454 of 2005, O.A. Nos. 543 and 2302 of 2005 and W.P.M.P. No. 19093 of 2005 and W.P. No. 17576 of 2005) b) Vodafone International Holdings B.V. vs. Union of India and Anr. (Civil Appeal No. 733 of 2012 (Arising out of S.L.P. (C) No. 26529 of 2010)) c) CIT vs. K.T.M.S. Mahamood (Tax Case No. 1117 of 1984) d) Chuharmal vs. CIT, M.P. (Special Leave Petition (Civil) No. 1863 of 1986) Consideration of the DRP 5.10 DRP has considered all the material available with it, the draft assessment order and the remand reports of the AO. Before proceeding further, it will be of use to put the entire controversy in global perspective. Organization for Economic Co-operation and Development (OECD) and G20 countries are running a project known as Base Erosion and Profit Shifting (BEPS). The website of OECD - http://www.oecd.org/ctp/beps.htm (accessed on 24.12.2013) has the following on this issue : In an increasingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nities for MNEs to greatly minimize their tax burden. This has led to a tense situation in which citizens have become more sensitive to tax fairness issues. It has become a critical issue for all parties: ■ Governments are harmed. Many governments have to cope with less revenue and a higher cost to ensure compliance. Moreover, Base Erosion and Profit Shifting (BEPS) undermines the integrity of the tax system, as the public, the media and some taxpayers deem reported low corporate taxes to be unfair. In developing countries, the lack of tax revenue leads to critical under-funding of public investment that could help promote economic growth. Overall resource allocation, affected by tax-motivated behavior, is not optimal. ■ Individual tax pavers are harmed. When tax rules permit businesses to reduce their tax burden by shifting their income away from jurisdictions where income producing activities are conducted, other taxpayers in that jurisdiction bear a greater share of the burden. ■ Businesses are harmed. MNEs may face significant reputational risk if their effective tax rate is viewed as being too low. At the same time, different businesses may assess su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re are many circumstances, apart from the one given above, where separate existence of different companies, that are part of the same group, will be totally or partly ignored as a device or a conduit (in the pejorative sense). 68. The common law jurisdictions do invariably impose taxation against a corporation based on the legal principle that the corporation is a person that is separate from its members. It is the decision of the House of Lords in Salomon v. Salomon (1897) A.C. 22 that opened the door to the formation of a corporate group. If a one man corporation could be incorporated, then it would follow that one corporation could be a subsidiary of another. This legal principle is the basis of Holding Structures. It is a common practice in international law, which is the basis of international taxation, for foreign investors to invest in Indian companies through an interposed foreign holding or operating company, such as Cayman Islands or Mauritius based company for both tax and business purposes. In doing so, foreign investors are able to avoid the lengthy approval and registration processes required for a direct transfer (i.e., without a foreign holding or operating c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt a dissecting approach. The Revenue cannot start with the question as to whether the impugned transaction is a tax deferment/saving device but that it should apply the look at test to ascertain its true legal nature [See Craven v. White (supra) which further observed that genuine strategic tax planning has not been abandoned by any decision of the English Courts till date]. Applying the above tests, we are of the view that every strategic foreign direct investment coming to India, as an investment destination, should be seen in a holistic manner. While doing so, the Revenue/ Courts should keep in mind the following factors: the concept of participation in investment, the duration of time during which the Holding Structure exists: the period of business operations in India: the generation of taxable revenues in India: the timing of the exit: the continuity of business on such exit. (Emphasis added) 5.13 Therefore, DRP is of the considered view that the corporate veil needs to be pierced in this case as has rightly been done by the AO. The action of the AO to that extent is upheld.5.14 The principles laid down in Vodafone case (as underlined above) can be applied to this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of share capital and is to be decided by the Board of Directors. It is contended that there is no bar in law regarding the amount of premium that a company can charge. However,it remains to be a part of the share capital only. It is further contended that the channels of NDTV had a huge potential for growth and hence, it formed direct and indirect subsidiaries abroad to attract foreign investment, one of which is NNPLC. It is also contended by theassessee that the investments of NNPLC in various companies of entertainment verticalsalready existed much before the share subscription and all those invested companies were functional. On this basis, it was claimed that the amount of share premium charged was genuine. 2.3.11.1 On this issue, it is observed that the factual matrix of the case reveals that 915948 shares of NNIH having face value of ₹ 50 approx, per share were purported to be subscribed by NBCU @ ₹ 7015.05 per share. Although it is correct that in appropriate circumstances, a company can always decide the amount to be charged as share premium and there is no bar in law, which prohibits the company from doing so, yet in the present case, mere assertion regardi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lifting of the corporate veil. 2.3.11.2 It is settled law that if an arrangement has no commercial purpose or economic substance and its purpose is merely to evade tax and to constitute sham, colourable or bogus transactions with the pretence of corporate and commercial trading, then in such circumstances, it is not only possible but necessary to lift the corporate veil. Once we lift the corporate veil in the context of the impugned transaction in the present case, the clear facts emerging regarding the transaction reveal that the transaction isengineered to result in claim of loss to NBCU and corresponding routing of the assessee's own undisclosed money through its subsidiary.2.3.12 Regarding the NNPLC's accounts being signed in India and its directors being India, it was contended that this was factually incorrect. The accounts of NNPLC placed on record were stated to be those which were used for the purpose of consolidation of financial statements of NDTV group as a whole to comply with the provisions of the Companies Act. The assessee further claimed that this office had received information from HMRC, UK through the Treaty provisions, whereby the existence of NNPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding proposed addition of ₹ 642,54,22,000/- u/s 69A with directions to ascertain the taxability of this sum for AY 2009-10. Hence, the assessee's contention, being based on a factual inaccuracy, is not acceptable. 2.3.16 In view of the above, it is submitted that it is necessary to lift the corporate veil in the case and to assess the transaction in view of its real purport.2.3.17 In its further reply dated 10.12.2013, the assessee has reiterated its earlier contentions, which are repetitive in nature and have already been addressed in the earlier part of this report. The assessee has further discussed the ingredients of section 69A and has contended that these are not present in its case. 2.3.16.1 In respect of the assessee's above contentions, it is observed that upon lifting the corporate veil, which is both permissible and necessary in the case, it is clearly visible that the assessee is the ultimate parent company and the issue of shares and subsequent repurchase as above by your group companies was under the dictates of the assessee, which as per agreement also, was also a party to the transaction. Accordingly, the assessee was in ultimate control of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (USBV). As a result, an amount of ₹ 642,54,22,000/- (US $150 million) was received during the year by NNIH. The amount was received on account of subscription of 915,498 shares into NDTV Networks International Holdings BV equivalent to 26% effective indirect stake in NDTV Networks Pic. 2.3.18.3 The corporate structure used for the transaction is as under 2.3.18.4 From the above, it is clear that NDTV had a 56.80% stake in its indirect subsidiary NNPLC, 915,498 shares (26% equity) of which was reduced on account of referred transaction with NBC and USBV as stated above. As per the provisions of the Income Tax Act, 1961rthe Act ), the transaction attracts tax on resultant capital gains in the hands of NDTV. 2.3.18.5 NDTV Is a tax resident of India and section 5 of the Act provides that its global Income It taxable In India. Under section 45 of the Act, gain arising from transfer of a capital Quit It chargeable to tax under the head 'Income from Capital Gains'. Capital asset has been defined by section 2(14) as being property of any kind held by the assessee andExplanation of section 2(14) provides that property includes the rights of management and contro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e=fr. it is observed that the assessee company had incorporated NNPLC in UK in November, 2006 as its 100% subsidiary and thereafter, NNPLC was made subsidiary of NNBV, when a month after incorporation of NNPLC, NNBV was incorporated in December, 2006. Thus, being 100% subsidiary, NNPLC was conceived and controlled by NDTV. Although NNPLC cannot be said to be an agent or mere extension of NDTV solely on the ground of its being 100% subsidiary of NTDV, the facts regarding the control exercised by NDTV over the affairs of NNPLC are discussed below. 2.1.18 NNPLC was incorporated on 30.11.2006 with a meager capital of about ₹ 40 lacs only and was liquidated on 20.10.2011. The stated purpose of NNPLC was to create new business areas for NDTV as well as to unlock value of existing operations and skills, however. NNPLC did not carry on any business activities on its own. In between its incorporation and liquidation, the activities of NNPLC as the role of NDTV therein, are summarized below :-FinancialYear Activities Role of NDTV2007-08 Financial Year Activities Role of NDTV 2007-08 US ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) NDTV through its subsidiary NDTV Networks B V repurchased 26 percent indirect stake held by NBCU in NNPLC. (ii) NNPLC repurchased US$ 100 Million Step up Coupon Convertible Bonds issued by it earlier. i)NDTV has stated in its Annual Report that NDTV through its subsidiary NDTV Networks BV, repurchased 26 percent indirect stake held by NBC Universal Inc., in its subsidiary NDTV Networks Pic. Though the shares purportedly subscribed, not purchased, by NBCU were those of NNIH and not of NNPLC, the 2nd in vertical subsidiary of NNIH, yet it can be seen that the emphasis is on NNPLC and there is no reference to NNIH or NDTV BV. It is further pertinent to mention that the repurchase, occurring barely after 18 months, was for about ₹ 58 crores only as against the 'purchase' for ₹ 642.54 crores. There is no rationale in this transaction - no commercial purpose or economic substance, other than to create a loss of ₹ 584 crores for NBCU and introduction of own unaccounted money for NDTV. (ii) The final transaction before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is a fit case, in which corporate veil needs to be lifted and once the veil is lifted, with regard to the present proceedings for AY 2009-10, it can be observed as under :- (i) NDTV through NNPLC has introduced its own unaccounted income from undisclosed sources amounting to ₹ 642.54 crores in the garb of equity subscription. Detailed report regarding taxability of this sum has already been submitted to the Hon'ble DRP vide letter no. 1794 dated 11.12.2013. NDTV through NNPLC has enhanced the liability on account of Step Up Coupon Convertible Bonds by ₹ 110.50 crores in the Balance Sheet of NNPLC from ₹ 399 crores to ₹ 509.50 crores, which is stated to be on account of currency translation. Further, NDTV has Introduced unsecured loans amounting to ₹ 254.75 crores from NDTV BV in the books of NNPLC. The tax implications of this issue are the subject matter of the present report, which necessitated the lifting of corporate veil first, as discussed in the preceding paras of this report* [Bold and underlined lines In flower brackets are added by the DRP] 5.16 DRP has carefullyconsidered entire gamut of transaction and is of the opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks through its subsidiary NDTV Networks BV Netherlands. It is pertinent to mention that, as per the admission of the assessee the above subsidiary has been subsequently liquidated, which shows that the same was floated only to create a front for introducing the above amount. 5.16.2. The DRP has considered the addition proposed by the AO and finds the addition is fully justified in view of facts mentioned above. The DRP is of the considered opinion that the facts of the case fits for making addition u/s 68 of the IT Act as unexplained cash credit. Even addition u/s 69A as proposed by the AO is also justified, as after lifting the corporate veil, the assessee is found owner/ controller of the money under reference. 5.17. AO has brought to the notice of the DRP through his letter dated 20.08.2013 forwarded by the Addl. CIT,Range-13, New Delhi that an amount of ₹ 365.25 crores was raised by the assessee company which needed further examination. The relevant part of the letter of the AO is as under: 10. Another issue involved in the case is that during the year, the assessee company, through its guarantees, raised an amount of ₹ 365,25,00,000/- as unsecur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de further reply dated 29.11.2013, the assessee also filed copy of exchange rates for the relevant period. 2.4.4 Vide this office's letter dated 05.12.2013, the assessee was confronted as under :- 2.2 Regarding the raising ofRs. 365.25 crores as unsecured loans 2.2.1 Regarding the raising of an amount of ₹ 365,25,00,000/- as unsecured loans through your subsidiary NNPLC, vide letter dated 11.11.2013, you were requested to furnish the complete details along with documentary evidence regarding the source thereof, viz. the identity of the payers, the creditworthiness of the payers and the genuineness of the transactions. Youhave stated in your reply filed on 26.11.2013 that sum of ₹ 254.75 crores was raised by NNPLC from its immediate subsidiary NDTV Networks BV. Another addition of ₹ 110.5 crores is stated to be on account of currency translation. However, no evidence has been filed by you in support of your assertions. 2.2.2 In your above reply, you have also alleged as under :- Further; the complete list of the subscribers of bonds, subscription agreement and other relevant details were duly filed during the course of the assessment of AY 08-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... your position. 2.4.5 In response, vide letter dated 10.12.2013, the assessee stated that out of the total addition of ₹ 365.25 crores appearing in the Balance Sheet of NNPLC, an amount of ₹ 110.50 crores was on account of adjustment of fluctuation in exchange rate of currency and regarding the balance amount of ₹ 254.75 crores, the assessee stated that this was the unsecured loan obtained from NDTV BV. However, no confirmation was filed nor this office was afforded any verification regarding the creditworthiness of the lender or the genuineness of the transaction. In the absence of these, the assessee has not discharged its onus u/s 68 and there is no alternative but to propose that the amount of ₹ 254.75 crores may be added to the assessee's taxable income for the year under consideration. Further, it is pertinent to mention that although the assessee claimed that the complete list of the subscribers of bonds, subscription agreement and other relevant details were duly filed during the course of the assessment of AY 08-09 , yet no such details were found in the assessment records, which was specifically confronted to the assessee and yet, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t complete details regarding investors and source of investment was given to the AO at the relevant time. The details were also stated to have been furnished before Investigation officer and DIT (Inti) during enquiries by these officers. 2.2.2 Vide this office letter dated 05.12.2013, the assessee was informed that no such documents were found in the aissessment record for AY 2008-09. The assessee vide letter dated 09.12.2013 stated that it was again filing copy of the submission dated 08.02.2012 filed in the course of assessment of AY 2008-09 before AO, which consisted of the complete list of the subscribers to bonds, subscription agreement and other relevant details and documents enclosed as Annexure B. Copies of submissions dated 28.05.2012, 31.05.2012, 11.06.2012 and 20.07.2012 stated to have been filed before the then AO and copies of submissions dated 18.02.2011, 03.03.2011, 08.03.2011, 29.03.2011 and 30.03.2011 stated to have been filed before the Investigation Officer and DIT were also claimed to have been enclosed as Annexure C1-C5. 2.2.3 However, perusal of the documents enclosed by the assessee reveals that inresponse to requisition to prove the identity of the inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries were filed before the Ld. AO during the course of assessment vide submission dated 27.02.2013 11.03.2013. The copies of the said submissions were claimed to be duly enclosed as Annexure El E2 of the reply dated 09.12.2013. 2.3.4 I have perused the assessee's letters dated 27.02.2013 (running into 10 pages) 11.03.2013 (running into 2 pages) marked as Annexure El and Annexure E2 respectively. At the outset, it is submitted that there is no reference to the impugned issue of unsecured loans amounting to ₹ 254.75 crores raised during the year. The contents of the referred letters address certain queries raised by the AO and query regarding unsecured loans is not one of such queries. The bare letters are not even supported by any Annexures mentioned ion the said letters. 2.3.5 Under the circumstances, when the attached annexure-less letters do not contain any reference to query regarding unsecured loans nor attempt to address such query, therefore, filing of such letters does not serve any purpose. 2.3.6 It is pertinent to mention that during the course of hearing before the Hon'bleDRP on 23.12.2013,the assessee has filed a reply on the issue. It has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of money. Further, as per this document, the interest free credit facility was to be granted on the basis of a duly completed utilization request, where as no such utilization request or basis fpr seeking the above credit facility has been produced by the assessee before the AO or before the DRP. We are therefore in agreement with the AO's finding that the onus of proving the genuineness of the loan transaction has not been discharged by the assessee. The AO is, therefore, directed to make addition of ₹ 254.75 crores. 77. Based on the above direction of the ld DRP, the ld Assessing Officer held that transaction involved in the receipt of ₹ 642,54,22,000/- by the assessee s company during the year is a sham transaction through which the assessee has introduced its own unaccounted money and therefore, it represents the unexplained money owned by the assessee regarding the nature and source of which the assessee has not been able to offer satisfactory explanation, hence, the ld AO made the addition u/s 69A of the Act of ₹ 6425422000/-. Therefore, the assessee being aggrieved has preferred the ground in cross objection. 78. The ld AR vehemently contest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further referred to the confirmation letter dated 01.08.2013 placed at Page No. 668 and 669 to show the confirmation of the investor company. He also referred to page No. 670 to 673 of the paper book to show the share issue deed evidencing that the shares were issued to the investor company on receipt of share capital of US$ 150 million. He further referred to page No. 674 to show the bank certificate from BNP PARIBAS from which account a sum of US$150 million was transferred to the account of the investee company. He further referred to page NO. 722 to 725 of the paper book which is a Apostled company of confirmation from the investor dated 11.12.2013. He further referred to page No. 676 to 718 wherein, the annual report of Universal Studios International BV for 2008 was submitted . He referred to the fact that the investor company has invested in the investee company. He specifically referred to page No. 692 to 693 of the paper book to show that investor company has acquired 31.4% participating interest in the investee company. He further submitted that investor is a part of General Electric (GE) group company, which is one of the largest global business conglomerate whose ident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was founded in 1926 and therefore allegation against such a group is unfounded. He further submitted that all receipts are not income and in the present case whatever is received is on account of share capital which cannot be considered as income at all. For the proposition, he referred to the decision reported at 27 ITR 532. 80. He further submitted that subsidiary of the assessee company has issued share capital to the company evidencing the identity, creditworthiness and genuineness of the transaction. He further referred to the decision of Sofia Finance Ltd 205 ITR 98 and further referred to page No. 104 of that decision. He submitted that if the amount credited is capital receipt then it cannot be taxed but it is for the income tax officer to be satisfied that the true nature of the receipt is that of capital. He submitted that the amount received by the subsidiary is on account of capital receipt. He further referred to the decision of Hon ble Delhi High Court in case of CIT Vs. Kamdhenu Steel and Alloy Ltd 361 ITR 220 to submit that assessee is explaining source of money for share capital along with identities of the applicant and their creditworthiness is establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring he made an offer that assessee is ready to produce the investor before the bench. In the end he requested that his submission at page No. 43 onwards which are as under may further be considered:- Sr. No. CONTENTION OF THE APPELLANT: 26 GROUND NO. 3 TO 3.3 OF GROUNDS OF APPEAL ADDITION OF ₹ 642.54.22.000/- REPRESENTING ALLEGED UNEXPLAINED SHARE CAPITAL RAISED BY THE SUBSIDIARY OF THE APPELLANT COMPANY AND. BROUGHT TO TAX BY HOLDING THE SAME TO UNEXPLAINED MONEY U/S 69A OF THE ACT 26.1 The crux of the dispute in the present case is, whether the learned A.O. was correct in holding that the amount received by way of subscription of shares by NDTV Networks International Holdings BV of the subsidiary is assessee s own money and the transaction of issue of shares by assessee s subsidiary to M/s Universal Studios International BV is a sham transactions despite the fact that the identity, existence of the aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) Subsidiary companies outside India TotalThe details of subsidiary companies (outside and within India) are enclosed as Annexure 1 of this synopsis ii) One of its subsidiaries listed at Item No. (xvii) in the name of NDTV Networks International Holdings BV, is a company established under the Laws of Netherlands, had issued shares to M/s Universal Studios International BV, a company incorporated in Netherlands. iii) That the said company i.e. M/s Universal Studios International BV, had acquired shares of M/s NDTV Networks International Holdings BV. iv) Such shares were acquired through banking channel, when it made the payment of USD 150 million. v) That the said shareholder of the assesses s subsidiary is a subsidiary of NBC Universal Inc. vi) That the holding company of M/s NBC Universal Inc. is a company incorporated in USA and is a group company of GE group companies. vii) That the investee company had acquired the said shares through payment by banking channels which were duly entered in their books of accounts and is also reflected in their balance shee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 25.3.2008 (pages 670-673 of Paper Book) xi) Bank certificate from BNP Paribus evidencing payment of 150 million USD (pages 674-675 at pages 680 of Paper Book) xii) Annual report of Universal Studios BV (pages 676-719 of Paper Book) xiii) Apostilled copy of confirmation from Universal Studios International BV (pages 722-725 of Paper Book) xiv) Agreement dated 14.10.2009 (pages 1239-1263 of Paper Book) xv) E-mail dated 2.10.2009 (pages 1254-1265 of Paper Book) xvi) FIPB approval (pages 1860-1863 of Paper Book) xvii) FIPB application (pages 1864-1872 of Paper Book) xviii) Order of Assessment order and Transfer Pricing order of NDTV Networks Plc, UK for AY 2010-11 (pages 1876-1882 of Paper book) 26.10 In view of the aforesaid facts, the first and basic submission which the assessee seeks to make is, that the finding/observation/allegation of the A.O. and the DRP that the transaction is sham is merely a matter of conjecture, surmises and is based on illogical conclusion which it is submitted is unilateral. It is submitted, though it may be permissible for tax authorities to draw inference yet su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the DRP and the assessment order impugned before the Bench that the transaction was sham, is based on speculation, surmises and conjectures. 27.2 It is submitted that it is well accepted that a subsidiary and its holding company are distinct and separate entities. They are subject to income tax on the profits derived by them on standalone basis, irrespective of their actual independence and regardless of whether the profits are reserved and distributed to shareholders/participants. It is well settled law that holding and its subsidiary are totally separate and distinct taxpayers. In the present case, it is an undisputed fact and admitted by the Ld. AO/DRP that the NBC Universal Inc, (a leading and an independent Group and the Joint Venture of the GE group) through its group company, Universal Studios International B V, subscribed to new shares amounting to USD 150 Mn (Rs. 642.54 crores) in a NDTV Group Company namely NDTV Networks International Holdings BV (NNIH) (a company incorporated as per the laws of Netherlands and resident of that country) on May 23, 2008. Thus, it is most respectfully submitted that the action of the Ld. AO in making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts (P.) Ltd.'s (supra) we have to see only in respect of the establishment of the identity of the investor. The Delhi High Court also in Divine Leasing Finance Ltd.'s case (supra), considering the similar question held that the assessee Company having received subscriptions to the public/rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's own income from undisclosed sources. The similar view has been taken by the other High Courts. 17. As the Apex Court has considered the law in Lovely Exports (P.) Ltd.'s case (supra) and in view of law laid down by the Apex Court, we find that the substantial questions framed in these appeals do not arise for our consideration. Accordingly, all these appeals are dismissed with no order as to costs. [Emphasis supplied]\ ii) 294 ITR 661 (Mad) CIT vs. Electro Polychem Ltd. iii) 166 Taxman 7 (All) Jaya Securities Ltd. vs. ACIT iv) 307 ITR 334 (Del) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of the foreign subsidiaries which are incorporated and governed by the laws of their respective countries and had treaty protection is complete defiance of the decision in the case of UOI vs. Azadi Bachao Andolan reported in 263 ITR 706 wherein it has been held as under: The decision of the Chancery Division in F.G. Films Ltd., In re 53 (1) WLR 483 was pressed into service as an example of the mask of corporate entity being lifted and account be taken of what lies behind in order to prevent fraud . This decision only emphasises the doctrine of piercing the veil of incorporation. There is no doubt that, where necessary, the Courts are empowered to lift the veil of incorporation while applying the domestic law. In the situation where the terms of the DTAC have been made applicable by reason of section 90 of the Income-Tax Act, 1961, even if they derogate from the provisions of the Income-tax Act, it is not possible to say that this principle of lifting the veil of incorporation should be applied by the court. 27.7 The DRP in its directions (pages 11-12 of Appeal Set) has referred to para 68 of judgment of Apex Court in the case of V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not merely confirmed the investment but has also established source of funding of investment thus whether such shares were acquired of assessee company or of subsidiary cannot be any ground to enable the revenue to lift the corporate veil. 27.12 The only basis to allege that the transaction is sham is issuance of share at astronomical price and repurchase at a lower rate. However, in the process, the revenue is overlooking the, same could make no difference. To clarify the same, it is submitted that, had the shares been issued by the appellant company instead of subsidiary, could it have made any difference in law, since is either of the two cases, there was no tax implication much less avoidance. Thus, the basic threshold condition being non existing the effort of the authorities to lift the veil is totally beyond jurisdiction. 27.13 It further observed that, while doing so, the revenue/courts should keep in mind the following factors: The concept of participation investment; The duration of time during which the holdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any case and without prejudice, the shares of USD 20 Million were issued to Fuse+Media LP, wherein they required 5% equity in the company M/s NDTV Network Plc. Now when it had issued 26% even on that basis, it would be USD 105 million as against investment of USD 150 million. Further, again convertible bonds were issued for conversion into equity shares after 5 years, when 20% of the holding was to the allotted to the bond holder namely. These bonds were issued for 100 million, and thus transaction was a genuine transaction. In any case, it is a commercial decision and the same has no consequence. Further, it is submitted that, when the shareholder who had acquired the share felt that, it is commercially unviable for it to remain invested it sold the same and as such so far raising of capital is concerned, the same is an irrelevant consideration. 28 Without prejudice to the allegation that M/s NDTV Networks International Holdings BV being a group company came into existence for a short period and did not carry on any business as alleged, the same by itself is not any ground or, basis to hold that the transaction of the subscription of shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reholder to satisfy the commercial or business prudency of the investor who make investment by acquiring shares at high premium. It is neither rule of law nor a rule of prudence that merely because a person seeks to make investment by acquiring assets at a higher premium holds the transaction to be sham, unless and until, the same is demonstrated by the tangible evidence. It is the alleger who has to establish the fact by leading positive evidence in support of his allegation that, apparent is real unless proved to be contrary. In the instant case, apparent is that there is a company incorporated under the laws of Netherlands and that it had made investment in assessee s subsidiary and had made the payment through its accounts which is duly reflected in its final account and that it has been further confirmed by it and also its holding company as also reflected such investment in their final balance sheet. 28.3 It is submitted that the charging of premium on fresh issue of shares is based on the business potential of the group which mainly consists of the entertainment vertical of the business. It is settled in law that the share premium receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the stock exchange. This submission has been made because the revenue has made an attempt to lift the veil of the corporate entity and if it be so, then obviously it is the value of the share of the said company that has to be considered. 28.6 In any case and without prejudice, what was the value of the share of the said company and at what rate the shareholder company acquired the share is totally irrelevant consideration and cannot be made any ground whatsoever to hold that, it is an unaccounted income of the assessee so as to invoke section 69A of the Act, which had absolutely no application. 28.7 On the facts of the present case, it is an admitted and undisputed fact that the transaction in question is subscription of the share capital in a foreign subsidiary of the assesee company by the Investor which in the normal charging provisions of the Act is not chargeable to tax. Thus, there is no basis to lift the corporate veil. It is further submitted that the addition in the present case was sustained by invoking the provisions of section 68 and 69A of the Act which in itself are complete and deeming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l BV, an independent company incorporated in Netherlands had under a shareholder agreement acquired 26% stake in NDTV PLC UK at an aggregate consideration. It is respectfully submitted that the learned DRP has completely ignored and overlooked the fact that the assessee company or its subsidiary had no role to play and the decision of investment was of an independent company. The learned DRP has failed to appreciate that the said company is subsidiary of GE group, one of the largest companies of the world. It is thus submitted that the finding of the learned DRP that assessee had sought to explain the share capital receipt of ₹ 642.54 crores through lengthy and circuitous transactions and commercial substance/economic rationale for which have not been satisfactorily explained lacks credence or any merit. 29.4 It is submitted that there is no basis to allege that explanation was either lengthy or transactions were circuitous. It is submitted that in what manner, the explanation was either lengthy or the transactions was circuitous lies only in one s imagination. No basis or any material has been led by the learned DRP to conclude and hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that face value of ₹ 45/- is the face value of the investee company namely M/s. NDTV Networks International Holding and is an irrelevant consideration. It is submitted that the investment was made by the investor namely M/s. Universal Studio International VV to acquire 26% indirect stake in M/s. NDTV Networks PLC UK. It is submitted that valuation of ₹ 7115/- per share is not an astronomical price as entire 26% stake had been subscribed by the investor company by making an investment to the tune of 150 million US Dollar which gives an enterprise valuation of 500 million US Dollar. It is submitted and as stated above, this enterprise valuation is supported by preceding investments made in NDTV Networks PLC UK in the preceding years whereby 5% stake had been allotted to an independent investor for a sum of 20 million US Dollar giving an enterprise value of 400 million US Dollar. Later, preference shares had also been allotted for 100 million US Dollar by NDTV Networks is not a valid basis to make an addition 30 It is submitted that the conclusion that transaction lacks economic substance and commercial purpose is a matter of mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering the entire submissions and the documents filed by the assessee in response to the specific queries raised by the AO, the AO was of the firm belief that the premium charged on allotment of shares is not justified. The AO was of the opinion that these funds were introduced by the assessee through share holders under the guise of the premium. The AO further observed that the company had a paid up share capital of ₹ 5,00,000/- on the date of incorporation. The certificate of registration issued by the Registrar of Companies on 29.4.2008 and the business plan valuation and justification for issue of shares at a premium was prepared and submitted to the subscribers on 14.4.2008. There are no reserves and surplus as on these dates available with the company. The Book value per share of the company is at ₹ 10/- per share could not justify charging of any premium on shares. The AO further observed that the assessee does not have any hidden assets in the form of patents, copy rights, intellectual property rights or even investments etc belonging to the company based on which the assessee would be likely to substantially enhance its profits, which may have a beari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce these individuals had responded and furnished the particulars elicited, the AO should not have added the amount as income. Almost similar approach was adopted in respect of the other 11 investors on the reasoning that the assessee did all that was required of it under the law by disclosing the identity of investors. The ITAT confirmed the order of the CIT (A). The Revenue, therefore, is in appeal before us. 7. In Lovely Exports (supra), the Supreme Court emphasized that the initial burden is upon the assessee to show as to the genuineness of the identity of the individuals or entities which seek to subscribe to the share capital. Once the relevant facts are furnished, the onus, stated the Supreme Court, shifts to the Revenue. In the present case, what this Court is to determine, therefore, is whether the burden had been fully discharged and whether the AO recorded its conclusion on the basis of the material on record. The AO in its order has produced the tabular statement describing the number of shares subscribed by the investors, the amounts paid by them, the individuals who paid the amount towards such capital and the gross income reported by each of such investors to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal is partly allowed to the above extent. The said judgment support the submission of the appellant where a shareholder confirms the investment made in acquisition of shares despite the fact that shares were issued on premium, no addition is sustainable. However, it held that, the addition wherein shareholders did not confirm acquisition of shares then the circumstances that shares were issued at premium was regarded as a an addition basis to sustain the addition. 30.4 Thus, it would be incorrect to allege that NNIH could not charge a premium especially when it had already made huge investments at the beginning of the year in its subsidiary who holds the operating subsidiaries companies. 30.5 Your Honours attention is also drawn to the amendment made by the Finance Act, 2012, wherein the legislature had inserted section 56(2)(vii)(b) of the Act, wherein they have intended to tax the amount of share premium received in excess of the Fair Market Value of the shares as Income from Other Sources . The said provision (as amended) is not applicable to the Applicant Company as NDTV is a company in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 68 or 69A of the Act in the hands of assessee or its group companies. 30.7 Having said so, the decision of USBV/NBCU to exit from the company M/s NNIH was based on the fact that entertainment business in India was based on the reasons that the business of NDTV Imagine Group has suffered huge losses and to revive the same the fresh equity infusion was required. It is a fact that the entire business of NDTV Imagine Group was later on sold by NNPLC at a total consideration of USD 7,34,85,427 to Turner Asia Pacific Ventures after due negotiation which included consideration to be paid to minority stakeholder amounting to USD 66,73,551 . The disclosure to that effect was also made (below the note on re-purchase of stake from USBV) in the Annual Report of the Group for FY 2009-10 which read as under:- ...The Company and NDTV Networks Pic, on 8 December 2009, entered into an agreement with Turner Asia Pacific Ventures, Inc. ( TAPV ) for the sale of controlling stake in Turner General Entertainment Networks India Limited (Formerly NDTV Imagine Limited - NDTV Imagine ). Pursuant to the said agreement, NDTV Networks Plc, on 23 February 2010 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under Section 23(3). ii) 37ITR 271 (SC) Umacharan Shaw Bros. vs. CIT ...Taking into consideration the entire circumstances of the case, we are satisfied that there was no material on which the Income-tax Officer could come to the conclusion that the firm was not genuine. There are many surmises and conjectures, and the conclusion is the result of suspicion which cannot take the place of proof in these matters. 31 The assessee also seeks to refer to page 12 (Directions of DRP), wherein in para 5.12, the DRP has recorded its finding and has stated that the duration of time during which the holding structure exists: the period of business operations in India; the generation of taxable revenues in India, the timing of the exit; the continuity of business on such exit is a relevant consideration. 31.1 The aforesaid observations were in the context of determination of capital gain and not for the purpose of business profit and had nothing to do with the issue related to the instant case. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for the year under consideration and the Ld. AO is factually and legally incorrect in alleging that there is non-compliance of Accounting Standards. ii) That the Company had disclosed the true nature of above transaction in its consolidated books of accounts / financial statements which is clearly evident from the disclosures made in the notes of accounts and had even explained the objective and rationale of the said transaction in the Annual Report for the year under consideration. Therefore, the Ld. AO is factually incorrect and wrong in stating that the applicant had failed to disclose the true nature of the above transaction. iii) The AO had alleged that the applicant company failed to prove the identity and creditworthiness of the share subscriber and also failed to satisfactorily prove the nature and the source of the funds. In respect of the above allegations, though the applicant had discharged its primary onus to prove the identity and creditworthiness of the share subscriber and to prove the nature and the source of the funds, yet in order to substantiate the above filed additional evidences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) Identity of shareholder; ii) Credit worthiness of shareholders.; and iii) Genuineness of transaction 34 Apart from the above the applicant submits that invoking of provisions of section 68 and 69A of the Act on the same amount, itself shows complete non application of mind by the Ld. AO/DRP. The applicant is saying so as the provisions of section 68 and 69A of the Act are parallel to each other, and basic ingredients of these two sections are opposite to each other as stated below: Section 68 of the Act Section 69A of the Act Conditions for applicability of section 68 of the Act:- Conditions for applicability of section 68 of the Act:- The existence of the books maintained by the assesee himself, and assessee is found to be owner of any money, bullion, jewellery or Other valuable article; A credit entry in the books of account a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee are not fulfilled in the present case. 34.5 It is well settled law that the deeming provisions need to be construed strictly, and there is no room for construction of the said provisions on the basis of fiction, assumption or surmises by alleging that since assessee was an ultimate parent company, therefore, the assessee company was in 34.6 In this regard, it is submitted that in the impugned assessment order as well as on the basis of the material on record it had been admitted and is an undisputed fact that the amount in question was the money received by the subsidiary of the Applicant company who would be treated 34.7 In addition to above, the acceptance of the Ld. DRP/AO in their respective orders that the share capital was subsequently re-purchased by the another subsidiary assessee of company from the erstwhile investor later on also shows and support that at no point of time the assesee or its any subsidiary was the owner of the said share capital. On the contrary, it is proven by the material on record and admission by the Ld. AO/DRP that investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the shareholders who have merely an interest in the company arising under the Articles of Association, measured by a sum of money for the purpose of liability and for sharing the profit; and that where companies are incorporated for a lawful purpose their properties are owned by them and there is no reason for even taxation purposes that their property should be treated as belonging to the shareholders. 34.10 The above proposition of law has been accepted and approved in Vodafone s case parent company is involved in giving principal guidance to group companies by providing general policy guidelines to group subsidiaries. However, the fact that a parent company exercises shareholder's influence on its subsidiaries does not generally imply that the subsidiaries are to be deemed residents of the State in which the parent company resides. In other words, the Supreme Court recognises the separate existence of the holding company and its subsidiary companies for tax purposes. 34.11 The second condition which needs to be satisfied cumulatively with the first condition is the said money has not been record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation received from the party who had invested in NNIH, its identity and credit worthiness had been duly established. Accordingly, we submit that the assertions of the Ld. AO that the documents do not have any evidentiary value is not correct in law and is totally devoid of any merit as it is well settled law that mere suspicion on the transaction could not be a basis of making an addition. In support of the above, the applicant company placed its reliance in the case of Dhakeswari Cotton Mills Ltd. v. CIT reported in 26 ITR 775 (SC)andUmacharan Shaw Bros. v CIT reported in 37ITR 271. 34.16 For your Honours ready reference, the Applicant here-in-below again explains the nature and source of said money in order to appreciate the facts here-in-again to make the case of the applicant beyond suspicion and doubt: 34.17 During the year, NDTV as a Group entered into a strategic long term partnership with NBC Universal, Inc. (NBCU) for NDTV s Networks business. The Group has raised US$ 150 million from NBCU for an effective stake of 26% in NDTV Networks Plc. The NDTV - NBCU strategic partnership was a coming toge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erations of past three calendar years are as under Calendar Year Revenue (In USD, in millions) 2008 16802 2009 15085 2010 16590 34.21 Thus, it is submitted with full conviction that the transaction is genuine and a bonafide transaction and had duly been recorded in the books of NNIH. Therefore, there is no question that the said money be treated as unexplained money in the hands of the applicant under section 69A of the Act. Even the Revenue had not brought any material on record which could displace or controvert the above submission/evidences of the assessee which is necessary and desirable in order to make an addition under section 68 or 69A of the Act. 34.22 It is submitted that, on the survey of the order of assessment which has resulted into a finding the said transaction pertaining to the receipt by the subsidiary which has been as sham, it is submitted that the same is based on compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er intended to be acted nor in fact it was acted and was a mere paper transaction, as against a transaction where such a transaction had factually been undertaken not on papers but has also been implemented in letter and spirit too. Further it has to be established that the parties to the transactions had motives to avoid tax whereas in the instant case it has not been shown that either the assessee had any motive to reduce its tax liability nor has been shown the shareholder a totally unconnected company had in any manner reduced their tax liability. The burden to establish the transaction is from being on revenue, could not be stated to have been discharged without establishing that the funds by which the shares are subscribed come from the assessee. It is submitted that this in the absence of any material, the funds flowed from the assessee s subsidiary or from the assessee, such a finding that the transaction is sham is on a result of an arbitrary approach, and is based on mere hypothetical assumptions. 34.25 In response to the aforesaid suspicion of the learned A.O. the assessee vide its submissions dated 29.11.2013 (pages 1170-1183 of Pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmal business transaction, it would be necessary for the assessee to file confirmation from NBCU, which would be subject to verification by the A.O. by calling upon the assessee to file an affidavit from NBCU or to produce the authorized representative of NBCU to confirm the assertions. However, no such confirmation has been filed by the assessee and therefore, it cannot be said that the onus has been discharged by the assessee even in the context of section 68 or section 69A of the Act, as sought to be justified by the assessee in its letter dated 29.11.2013. 34.29 It is thus absolutely clear that, the learned A.O. had proceeded on an assumption that the assessee did not filed any confirmation from NBCU regarding the transaction. It is further be noted that, he himself admitted that, had it been a normal business transaction such confirmation would have been furnished and it was thereafter for him to have rebutted the said material in the shape of confirmation. It is submitted that, the assumption so made is thus by not only overlooking the aforesaid additional evidence but failing to discharge its burden in the face of documentary evidence f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been brought on record by Shri S. K. Srivastava and has been taken on record by the learned DRP. It is submitted that Shri S. K. Srivastava an Ex IRS, is the person, who is acting adversely against persons in general and keeps on feeding his imaginative ideas before the authorities in order to harass them. The appellant at this stage is making no further submission but to only add that, it has no difficulty, if such material which has been brought on record by Shri S.K. Srivastava is even taken on record for purpose of determination of issued by Honble Tribunal but only with one prayer that the issue be examined dispassionately and, not be influenced by his inferences, as had been stated by him and noted by DRP, as its own findings. In other words, the submission is that such material, which is general to the issue, be examined dispassionately but not as Shri S. K. Srivastava, desired to do so 35 To highlight the aforesaid submission, the appellant seeks to refer straightway to page 125 of the Appeal Set where the learned Assessing Officer has made an attempt to justify his conclusion that transaction in sham by observing that no con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had any motive to reduce its tax liability nor has been shown that the shareholder a totally unconnected company had in any manner reduced their tax liability. The burden to establish the transaction is sham is on revenue, which could not be stated to have been discharged without establishing that the funds by which the shares are subscribed came from the assessee. It is submitted that in the absence of any material, the funds flowed from the assessee s subsidiary or from the assessee, such a finding that the transaction is sham is a result of an arbitrary approach, and is based on mere hypothetical assumptions. 35.3 It is further submitted that the finding of the DRP is that the issue of shares and subscription made by the shareholder is a sham transaction. It is submitted that, merely because the DRP has concluded the transaction to be sham by itself is insufficient to hold the transaction which has in reality been undertaken to be a sham on the ground that the investor at the time of making subscription did not have any material to satisfy itself that the value of shares subscribed by it represented the value of shares or that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nexure B to this synopsis but a judgment of Apex Court of two judgments in its judgments in the case of UOI vs. Azadi Bachao Andolan reported in 263 ITR 706 after considering the judgment in the case of McDowell and Co. Ltd. reported in 154 ITR 148 in para 141 at pages 761-762 have observed as below: Though the words sham , and device were loosely used in connection with the incorporation under the Mauritius law, we deem it fit to enter a caveat here. These words are not intended to be used as magic mantras or catch-all phrases to defeat or nullify the effect of a legal situation. As Lord Atkin pointed out in Duke of Westminster's case [1936] AC 1 (HL); [1935] 19 TC 490, 511): I do not use the word device in any sinister sense: for it has to be recognised that the subject, whether poor and humble or wealthy and noble, has the legal right so to dispose of his capital and income as to attract upon himself the least amount of tax. The only function of a court of law is to determine the legal result of his dispositions so far as they affect tax. Lord Tomlin said: There may, of course, be cases where documents are not bona fide nor intended to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was not a price at which it had been acquired. Even assuming it was so, even then too, the transaction cannot be regarded as sham so long it is duly confirmed by the shareholder who has contributed towards the share capital. It is submitted that the revenue does not have license to hold each and every transaction to be sham as the same according to it lacks logic. It is submitted that the burden of proving that a transaction is sham or that the person in whose name the property stands is not the real owner but is only a sham, is on the taxing authorities. The presumption is in favour of good faith and non- concealment of income, but that presumption may be displaced by circumstantial evidence, e.g. the state of affairs which admittedly existed in earlier years and the extent of the assessee s business in the relevant accounting year. The initial burden of finding some material, however slight, to support a finding of concealed income, is on the Department. (ClT vs. K. Mahim Udma reported in 242 ITR 133 (Ker), Indian Gum Industries Ltd. vs. Asst. CIT (Civil Sales Tax Revisions No. 183/2003, 194/2003, 195/2003, 230/2003, 231/2003 dated 29thAugust, 2013) HC Rajasthan, Sheikh Baboo v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alled upon to do so that the value of the shares was based on commercial consideration and was arrived at on the basis of proper working. This submission was placed before the learned DRP Likewise the A.O. s finding that the assessee had not furnished the certificate/confirmation from M/s NBCU is also contrary to the material on record. In any case and without prejudice, to hold the transaction to be sham, the test would be applied that the transaction should not be a facade. However, where the parties to the agreement accept that such a transaction has been entered into, there can be no justification to call the same as facade. 36 In view of the aforesaid, the addition made of ₹ 642,54,22,000/- may kindly be deleted. 85. Against this, the ld DR referred to the structure of the various entities of the group and referred to the date when they are formed and when they are struck off/ merged/ liquidated. He specifically referred to the corporate structure of the assessee. He submitted that the assessee formed a 100% subsidiary in the name of NDTV Network BV, Netherland on 09.01.2008 and it went into liquidation on 25.03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er that it does not catch eye of the Revenue. He submitted that the whole series of events of forming of the subsidiaries and their merger or liquidation is done for the sole purpose of evading tax on ₹ 642 crores. 87. To substantiate his argument he submitted that trail of the money received by the subsidiary company also shows that shareholder of the investor company is by NBCU Dutch holding (Bermuda Ltd). He therefore, submitted that the claim of the assessee that the money is invested by well-known group of highest repute is just eyewash. He further submitted that ₹ 642 crores was received by NDTV Networks International Holdings BV on account of securities premium from the Universal Studios International BV and a sum of ₹ 643 crores was paid by that company as dividend. Therefore, whatever sum was received by that company was paid as dividend to NDTV Group Company i.e.NDTV Networks BV the holding company of NDTV Networks International Holdings BV who is just holding 68% shares of that company. He referred to page No. 663 of the paper book of the assessee. He therefore submitted that immediately on receipt of the money of ₹ 642 crores byNDTV Networks I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - as against loss of f64,83,91,422/- declared by the assessee in its return of income. 2. The assessee filed objections before the Dispute Resolution Panel ( DRP ) and the DRP issued directions dated 31.12.2013 under section 144C(5) of the Act and deleted addition on account of disallowance of ₹ 41,54,41,111/- proposed under Section 40(a)(ia) out of commission paid, addition of ₹ 7,81,23,855/- on account of disallowance under Section 40(a)(i) proposed out of transmission uplinking charges and addition of ₹ 82,45,612/- on account of disallowance of software expenses. Further, the DRP directed the AO to re-compute the amount of transfer pricing adjustment, which led to revision of addition from ₹ 12,41,29,846/- to ₹ 5,09,65,629/-. 3. The DRP confirmed the addition of ₹ 78,40,990/- proposed by the AO on account of disallowance under Section 14A. The DRP also confirmed the addition of ₹ 642,54,22,000/- under Section 69A proposed by the AO on account of unexplained money. Further, the DRP enhanced the income of the assessee by another ₹ 254.75 crore under Section 68 of the Act on account of unexplained credit. 4. The AO passed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were initiated and during the penalty proceedings certain vital facts have come to the knowledge of the revenue which have direct bearing on the issue involved in this appeal. He submitted that the documents were sought to be filed now could not be filed earlier because the revenue strongly believed that appeal of the assessee is not maintainable. However, when the bench has decided to proceeded with the merits of the issue , then these additional evidences are required to be looked into as they go to the root of the matter. He referred to the several clauses of the show cause notice dated 15.06.2016 to show that various email exchanges between various persons should be looked into to show that it is complete and full proof case of tax fraud. He further submitted that during the course of penalty proceedings it is proved that money is routed back into NDTV(assessee) through complex cobweb of sham and shell subsidiaries floated abroad which were created for the sole purposes of this specific financial transaction of money from one party to the assessee without any obligation of repayment by assessee. He further submitted that during the penalty proceedings the statement of Shri KVL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ITAT requires any document to be produced. In the instant case, it is submitted the aforesaid evidence as tendered as has been required to be produced by the Hon ble Tribunal. The only other requirement is -for any substantial cause if the said -substantial cause is read with operative provision, then such evidence can only be admitted when no opportunity has been granted to the assessee. Thus it is only where an assessee complains that there has been lack of opportunity such evidence can be either produced or is admitted and not otherwise. Under the Rules the revenue is not permitted to adduce any fresh evidence. In fact the Hon ble Rajasthan High Court in the case of CIT vs. Rao Raja Hanumant Singh reported in 252 ITR 528 had held that even before the CIT(A), the AO has not been empowered to lead fresh evidence. Further it is submitted that the Hon ble Supreme Court in the case of Mahavir Singh vs. Naresh Chander reported in AIR 2001 SC 134, a copy of which is enclosed herewith, while examining the provisions of Order 41 Rule 27 of CPC, which is para-materia with Rule 29 of ITAT Rules, had exceeded in it jurisdiction of additional evidence, the appellate proceedings. A copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to compute income in view of section 145(3) of the Act which too was based on misconception. The detailed submissions made are at pages 193 - 197 and further in the compendium of documents filed on 03.07.2017 at pages 69 - 80, a copy which was separately furnished. The appellant had referred to the judgment of Privy Council in 6 ITR 414 in the case of KhemChand Ram Das. 4 The contents of paras 2 to 5 of the application are factual and therefore need no rebuttal with the submission that in para 4, it is incorrectly stated that the assessment has been framed u/s 144 read with section 144C(13) as the draft was prepared u/s 143(3) and there was no direction by DRP to frame assessment u/s 144 of the Act. Indeed it is submitted that the conditions under which assessment u/s 144 could be made were absent and lacking. 5 The contents of paras 6 to 11 are disputed and it is submitted and it is well settled law that penalty proceedings and assessment proceedings are separate independent proceedings. In fact, the revenue has filed a writ petition before the High Court in this very case, where the stand of the revenue is that the proceedings are separate and independent. Reliance is plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 29 of the ITAT Rules. 91. The ld AR further submitted that Revenue does not have any authority for adducing any fresh evidence. He relied upon the decision of Hon ble Rajasthan High Court in CIT Vs. Rao Raja Hanuat Singh 252 ITR 528 and the decision of the Hon ble Supreme Court in Mahavir Singh Vs. Naresh Chander AIR 2001 SC 134. He further objected that after conclusion of the argument by assessee the revenue cannot make request for admission of additional evidence. It should have been made only before commencement of the hearing. He further submitted that show cause notice is based on the statement of Mr. Sanjay Dutt who was not granted cross examination by the AO and therefore it cannot be said to be an evidence at all. It was further submitted that proceeding for compounding of offence under FEMA is a fresh evidence for which no substantial cause shown for its admission. 92. He further stated that even otherwise the none of the evidence warrant a different view in the matter for the simple reason that none of the evidences placed on record for admission as additional evidence shows that assessee is the owner of the money. It was further stated that no evidence has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of commencement of argument he submitted that though it cannot be a rule and neither there is a law but still the above additional evidences are submitted in response to the arguments of the counsel of the assessee. He further submitted that the arguments are not concluded yet and hopefully assessee has full chance to rebut those evidences in the rejoinder. He further referred to Rule 29 of the ITAT Rules to state that there is no bar in adducing the additional evidences by the Revenue. 94. We have carefully considered the rival contentions. The rule 29 of the ITAT Rules provides thatProduction of additional evidence before the Tribunal. 29. The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or , if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al evidence unless it is so required by the Tribunal. In this regard, he submitted that no additional or fresh evidence can be furnished by the revenue in an appeal filed by the assessee before the Tribunal as per the mandate of Rule 29 and only the assessee alone can be allowed to adduce additional evidence provided that he establishes before the Tribunal that his case has been decided without giving sufficient opportunity to him by the authorities below and the Tribunal is satisfied on this aspect for the reasons to be recorded in writing. He submitted that the Tribunal, no doubt, has the discretion to allow the production of fresh evidence if it requires the same to enable it to pass an order or for any other substantial cause. However, the Tribunal in the present case has not required the revenue to furnish any document as additional evidence. 11. The learned counsel for the assessee submitted that the words or for any other substantial cause , as held by Hon ble Supreme Court in the case of Mahavir Singh v. Naresh Chandra AIR 2001 SC 134, must be read with the word requires so that it is only where the appellate court requires additional evidence, the Rule will apply. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the assessee also argued that the discretion given to the appellate authority i.e., Tribunal to allow the production of additional evidence is strictly circumscribed by the limitations specified in the aforesaid Rule and the said Rule is not intended to enable a party to patch up the weak points of his case as held in the case of Muneswari v. Jugal Mohini AIR 1952 (Cal.) 368 and in the case of N. Kamalam v. Ayyasamy [2001] 7 SCC 503 at page 514. He also relied on the decision of Hon ble Punjab Haryana High Court in the case of Gram Panchayat, Kanehi, Tehsil District Gurgaon v. Ram Kumar [2001] (2) Punj. LR 186 to contend that the additional evidence in an appellate court cannot be produced by a party as a matter of right and the essentials of Order 41, Rule 27 have to be satisfied. 15. The learned counsel for the assessee submitted that there was no evidence available on record before the Assessing Officer to support the adverse findings recorded in the order of assessment to the effect that assessee has an agency PE in India and the additional evidence now being sought to be produced by the revenue seeks to patch up this weak part of the case attempted to be made ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (x) Charbhai Biri Works v. Asstt. CIT [2003] 87 ITD 189 (Pune)(TM). (xi) CIT v. Smt. Kamal C. Mehboobbani [1995] 214 ITR 15 1 (Bom.). 18. The learned CIT-DR contended that the Tribunal may refuse to admit additional evidence raised before it by any of the parties only if the said evidence lead to investigation into fresh facts or the same was within the knowledge of the party and could have been produced earlier. He also contended that the additional evidence being sought to be produced by the revenue in the present case, however, does not lead to investigation into fresh facts and the same having been come to the knowledge and possession of the Department only during the course of survey carried out at the liaison office of the assessee as well as at the office of UOPIPL on 10-3-2006, it could not have been produced earlier before the authorities below. In support of this contention, he placed reliance on the decision of Hon ble Supreme Court in the case of Manji Dana v. CIT [1966] 60 ITR 582. He also cited the decision of Hon ble Madras High Court in the case of Anaikar Trades Estates (P.) Ltd. v. CIT [1990] 186 ITR 3132 wherein certain affidavits given by the five pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence. 20. Reliance was also placed by the learned CIT-DR on the decision of Hon ble Calcutta High Court in the case of ITO v. B.N. Bhattacharya [1978] 112 ITR 423 wherein it was held that appel- late courts have power to allow additional evidence not only if they require such evidence to enable it to pronounce judgment but also for any other substantial cause . Further reliance was also placed on the decision of Hon ble Madras High Court in the case of R.S.S. Shanmugam Pillai Sons v. CIT [1974] 95 ITR 109, wherein it was held that if the Tribunal finds that the documents filed are quite relevant for the purpose of deciding the issue before it, it would be well within its powers to admit the evidence, consider the same or remit the matter to the lower authorities. The learned CIT-DR contended that the additional evidence being sought to be produced by the Department in the present case was not available for production before the lower authorities for the reason that the same was recovered during the course of survey carried on subsequently on 10-3-2006 and the same, therefore, deserves to be admitted accepting the application filed under rule 29 of Appellate Tribunal Rules, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant period. He received certain payments in the said bank accounts from companies and the said amounts had been utilized by him for meeting his expenses. The assessee claimed that the amounts so deposited in his bank accounts were not any consideration on remuneration but only for reimbursement of expenditure incurred by him in UK. This claim of the assessee, however, was negated by the Assessing Officer and entire deposits were included by him in the taxable income of the assessee. On appeal, the Appellate Asstt. Commissioner, however, deleted the said additions. The revenue appealed to the Tribunal and moved an application for permission to produce additional evidence to prove that the deposits made by the companies in the bank accounts of the assessee were in the nature of commission paid to him and not by way of reimbursement of expenses as claimed by him. The Tribunal found that there was no necessity of fresh evidence and accordingly, declined to admit the fresh evidence sought to be produced by the revenue. Aggrieved by the order of the Tribunal, the revenue preferred a reference application before the Hon ble Rajasthan High Court which was rejected by their Lordshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o ₹ 21,000. Her contention of having withdrawn the equivalent amounts of lower denomination notes from her bank account and kept the same at home before converting into high denomi- nation notes through a family friend was not found acceptable by the Assessing Officer on scrutiny of her passbook. He, there- fore, treated the amount of ₹ 21,000 as income of the assessee from undisclosed sources and added the same to her total income. On appeal, this addition, however, was deleted by the AAC accepting the stand of the assessee. This relief given by the AAC to the assessee was challenged by the revenue in an appeal before the Tribunal and additional evidence in the form of a letter dated 3-4-1979 was sought to be produced by it by way of additional evidence before the Tribunal. The Tribunal, however, did not admit the said additional evidence mainly on the ground that it required investigation of facts and proceeded to uphold the order of the AAC. Aggrieved by the refusal of the Tribunal to admit the additional evidence sought to be produced by it, the revenue filed a reference application before the Hon ble Bombay High Court and considering that the additional evidence so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he directed the ITO to recompute the capital gain taking the sale consideration at ₹ 2,58,338. On appeal to the Tribunal by the Department, it was contended that the provisions of section 52(2) were clearly applicable and reliance in support of this contention was placed on certain affidavits given by the concerned purchasers affirming therein on oath that the sale consideration received by them was actually more than what was shown in the document. The said affidavits were sought to be produced by the revenue as additional evidence before the Tribunal which was objected by the assessee on the ground that the said affidavits were available at the time of assessment proceedings and also at the time of consideration of appeal by the Appellate Assistant Commissioner and still the revenue did not make use of that material. The Tribunal, however, took the view that in order to decide the question of the applicability of section 52(2) of the Act which was the subject-matter of appeal before it, it would be necessary in the interest of justice to consider these affidavits and in that view, directed the restoration of the matter before the Appellate Assistant Commissioner after allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by the Hon ble Delhi High Court observing that whether to admit the additional evidence or not was in the discretion of the Tribunal and no prejudice was caused to the assessee because the matter was remitted to the AAC for affording an opportunity to the assessee to explain the said additional evidence as well as for recording such further evidence as the assessee might wish to offer. 27. Even in the case of B.N. Bhattacharya (supra) cited by the learned CIT-DR, the production of the record of the process server by the Department at the first time before the Hon ble Calcutta High Court during the course of hearing was strongly objected by the counsel for the assessee contending that such additional evidence could not be relied upon or should not be allowed to be relied upon in view of the provisions of Order 41, Rule 27 of the CPC. Relying on the decision of Hon ble Supreme Court in the case of K. Venkataramiah v. A. Seetharama Reddy AIR 1963 SC 1526, it was, however, held by the Hon ble Calcutta High Court that under Rule 27(1) of Order 41 of the CPC, the appellate court has the power to allow additional evidence not only if it requires such an evidence to enable it to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he matter should have been remanded by it to the Assessing Officer. 29. Keeping in view the aforesaid decisions of various High Courts cited by the learned CIT-DR which were decided after taking into consideration Rule 29 of the Appellate Tribunal Rules, we find it difficult to accept the contention of the learned counsel for the assessee that there is a complete bar for the revenue to produce any additional evidence suo motu and it can be permit- ted to do so only if the Tribunal requires such evidence and accordingly directs the Department to produce the same. In our opinion, the first limb of condition stipulated in rule 29 clearly permits both the parties to the appeal to produce additional evidence and seek the leave of the Tribunal for admission thereof making out a case that the same shall enable it to pass orders or for any substantial cause and if the Tribunal is satisfied that the additional evidence so produced is required to enable it to pass orders or for any other substantial cause, it can allow the parties including the revenue to produce such additional evidence exercising its discretion in terms of the said Rule. 30. It is a settled position that production o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 553 cited by the learned counsel for the assessee. In the case of Municipal Corporation of Greater Bombay v. Lala Panchan AIR 1965 SC 1008 cited by the learned counsel for the assessee, it was observed by the Hon ble Supreme Court that the power to admit additional evidence does not entitle the appellate court to let in fresh evidence only for the purpose of pronouncing judgment in a particular way and it is only for removing a lacuna in the evidence that the appellate court is empowered to admit additional evidence. In the case of Arjan Singh v. Kartar Singh AIR 1951 SC 193, it was held that the discretion given to the appellate court by Order 41, Rule 27 of CPC to receive and admit additional evidence is not an arbitrary one but is a judicial one circumscribed by the limitations specified in that Rule. It was also held that the legitimate occasion for the application of the said Rule is when on examining the evidence as it stands some inherent lacuna or defect becomes apparent. To the similar effect is another decision of Hon ble Supreme Court in the case of Natha Singh v. Financial Commissioner, Taxation AIR 1976 SC 1053. 31. As per rule 29 of the Appellate Tribunal Rules, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) it was held that the provisions of Rule 27, of Order 41 of Civil Procedure Code, 1908 are not designed to help parties to patch up weak points and make up for omissions earlier made. 32. In the case of Smt. Girijamma v. Kamala Engg. Works AIR 2000 Kar. 239, it was held that when there was a failure on the part of the applicant to produce the documentary evidence during trial in spite of having knowledge as to its existence, he could not be permitted to adduce the same as additional evidence in appeal. This position has been reiterated in the case of Mandala Madhava Rao v. Mandala Yodagiri AIR 2001 AP 407 wherein it was held that additional evidence can be adduced, inter alia, where the party seeking to produce additional evidence establishes that notwithstanding the exercise of due diligence, such evidence was not within their knowledge or could not after the exercise of due diligence be produced by him at the time when the decree appealed against was passed and the appellate court requires the said evidence to be produced to enable it to pronounce the judgment. Similarly, in the case of Ram Kumar (supra) cited by the learned counsel for the assessee, it was held by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pute in the present appeal or for any other substantial cause in terms of Rule 29 of the Appellate Tribunal Rules, 1963. The above evidences were not in possession of revenue at the time of passing of the original order or before ld DRP but have been collected during the course of penalty proceedings and also after filing of the appeal by the assessee. In fact the additional evidences are two statements of different persons one of them is the director of the company and second is also of the close associate of the assessee. The close associates of the assessee have produced certain copies of emails where he is one of the recipient of such mails along with others. In fact the mails are already available with the assessee as senior officers including chairman is recipient of those mails and has actively communicated through those mails. Hence they were in facts in possession of assessee since the mails are exchanged. Furthermore, regarding not making the prayer at the time of the commencement of the hearing we do not find that such an argument is at all relevant, as the assessee will get ample opportunity to rebut those evidences. Further with respect to the utility of those evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation was granted to the assessee and therefore, it cannot be used against the assessee. However, with respect to the various mails referred by the ld AO in the show cause notice replied by the assessee vide letter submitted on 02.11.2016. As per page No. 32 of the reply of the assessee 8 emails exchange were recorded and assessee has not denied the existence of such mail. The assessee has merely requested the ld AO to verify the authenticity and genuineness of such mail. In view of this these email exchanges are not denied or said to be fraudulent by the assessee their evidentiary values cannot be discarded. The correspondence in those mails clearly throws light on the state of arrangements made by the assessee and further corroborated by the various evidences produced by the assessee in its paper book submitted before us. With respect to the statement of Mr. Narayan Rao , who is the director of the company, filing the appeals before his under his signature for the company and who is part of the complete transaction as one of the main executors we donot find it necessary that unless the cross examinination is granted to assessee of Mr. Narayan Rao it cannot be used. Further the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hands of the appellant company. 2.2 It is submitted that the aforesaid contention is misconceived both on facts and in law. 2.3 It is well settled law that subscription to share capital is in the nature of capital receipt and could not be brought to tax even in the hands of the investee company, much less in the hands of appellant company. Reliance is placed on the following judicial pronouncements: i) 192 ITR 287 (Del) CIT vs. Stellar Investment Ltd. approved by the Apex Court in the case of CIT vs. Stellar Investments reported in 251 ITR 263 (SC) ii) 319 ITR 5 (St.) CIT vs. Lovely Exports Pvt. Ltd. iii) 361 ITR 220 (Del) CIT vs. M/s Kamdhenu Steel and Alloys Ltd iv) 205 ITR 98 (Del)(FB) CIT vs. Sophia Finance Ltd. v) 356 ITR 65 (MP) CIT vs. Peoples General Hospital Ltd. vi) 307 ITR 334 (Del) CIT vs. Value Capital Services Pvt. Ltd. 2.4 Moreover, the Hon ble Delhi High Court in the case of CIT v. Kamdhenu Steel and Alloys Ltd. reported in 361 ITR 220 at page 227 has held as under The genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact, received money from the said shareholder and it came from the coff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instead of discharging the aforesaid burden u/s 69A of the Act to show that appellant is owner3 of money by leading any valid evidence has attempted to side track the aforesaid issue by essentially making two fold submissions: a) That there is no burden on the revenue to locate the source of income and reliance has been placed on two judgments of Apex Court in the case of A. Govindarajulu Mudaliar v. CIT reported in 34 ITR 807 and CIT v. M. Ganapathi Mudaliar reported in 53 ITR 623; b) That since the structure is complex and the subscription is at a huge premium (which is not explained through any valuation) and there has been winding up of the structure in short duration and, ultimately since the flow of money is to appellant company establishes that transaction is sham and, thus not a genuine transaction; 4 It is submitted that none of the aforesaid contention even remotely lead to an in-escapable conclusion that assessee is the owner of money received as share subscription by NNIH through banking channel from USBVso as to invoke section 69A of the Act. 4.1 The appellant seeks to emphasize here at the risk of repetition (though not disputed) that burden u/s 69 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mn under the share subscription agreement date May 23, 2008 vi) 24.10.20 13 Share issue Deed dated 23.5.2008 670 673 43A - 43D Evidencing that shares were issued on receipt of share capital of USD 150 Mn. vii) 24.10.20 13 Bank certificate from BNP Paribus evidencing payment of USD 150 million 674 675 44-45 Bank certificate evidencing the bank account from which the subscription money of USD 150 Mn. was paid by USB V viii) 24.12.20 13 Apostilled copy of confirmatio n from Universal Studios Internationa l BV 722 725 89-92 Legally executed documents evidencing the identity, genuineness of nature of transaction and credit worthiness of USBV (investor in NNIH) ix) 24.10.20 13 Annual report of Universal Studios Internationa l BV 676 718 46-88 Evidence related to investment made in NNIH of USBV in its au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gupta decided on 03.03.2009 has held that once necessary evidence has been placed on record and the learned Assessing Officer has not led any material to the contrary; no adverse inference can be drawn. Also in the case of CIT vs. Genesis Commet (P) Ltd reported in 163 Taxman 482 (Del) it has been held that, an officer, if he was not inclined to believe the material placed by assessee he could have used coercive powers available to him 4.4 It is thus submitted that revenue is blowing hot and cold . It is submitted that having accepted the genuineness of the documents tabulated in para 4.2 above, including the agreements contention that further enquiries could not be made on account of delay in filing of apposilited confirmation is an afterthought. It is submitted at no stage either during the proceedings before passing the draft order or in the remand proceedings before DRP, the revenue attempted to make any enquiries and thus in absence of enquiries; adverse inference drawn is highly untenable. 4.5 It was contended at the time of hearing that in the course of assessment proceedings before the draft was prepared on 31.03.2013 the assessee had filed no confirmation from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morris in Herrington v. British Railways Board [1972] 2 WLR 537 (HL). Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. iii) 198 ITR 297 (SC) CIT v. Sun Engineering Works P. Ltd. 6.2 It is submitted that in the case of A. Govindarajulu Mudaliar v. CIT reported in 34 ITR 807 (SC) there was a credit in the accounts of the assessee in the books of the firm in which assessee was a partner. The AO rejected the explanation regarding the credits in the account of the assessee in the books of the firm. It was thus held that said credits are income of the assessee. It is submitted in the instant case it is undisputed that there is no credit in the name of the appellant in the books of NNIH. The credit in the books of NNIH is to account of USB V and therefore even assuming that explanation is not found satisfactorily (though wholly disputed) it does not lead to any conclusion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that on the basis of the aforesaid agreements the learned counsel has contended that it is not a case of pure and simple purchase and sale of shares, as claimed by the appellants but is a device created by which in a short duration, funds received as a share capital has been received by the appellant (instead of funds received as a share capital by M/s NDTV Networks International Holdings). The aforesaid allegation it is submitted is totally disputed which lacks any substance to hold that the fund received were the sums owned by the assessee to be taxed u/s 69A of the Act. 7.2 The Honble Bench during the course of hearing directed the assessee to file a copy of the memorandum of agreement dated 22.1.2008 entered between USBV, NBCU and NDTV Networks B.V. It was also directed to clarify that whether such MOU has been placed on record by the appellant company. 7.3 It is submitted that the copy of the MOU had been on record during the course of assessment proceedings for assessment year 2008-09 in pursuance to the direction of the learned Assessing Officer. A copy of MOU dated 22.1.2008 alognwith the reply is enclosed at pages 5-20 of PB Volume-VIII. It may be stated here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement between the NDTV Parent and Convergence at pages 163-166 of PB Volume-VIII. 7.6 Further even the copies of the agreements as stated in Annexure 2 (page 217 of Paper Book) are enclosed herewith: i) TheGeneral SharedServices Agreementdated 6.2.2007 between NDTV Lifestyle Ltd., NDTV Networks PLC and New Delhi Television Limited at pages 167-172 of PB Volume-VIII. ii) TheGeneral SharedServices Agreementdated 6.2.2007 between NDTV Convergence Limited, NDTV Networks PLC and New Delhi Television Ltd at pages 173-178 of PB Volume-VIII. iii) TheGeneral SharedServices Agreementdated 6.2.2007 between NDTV Imagine Limited, NDTV Networks PLC and New Delhi Television Ltd at pages 179-184 of PB Volume-VIII. iv) TheGeneral SharedServices Agreementdated 6.2.2007 between NDTV Labs Ltd., NDTV Networks PLC and New Delhi Television Ltd. at pages 185-190 of PB Volume-VIII. v) TheGeneral SharedServices Agreementdated 3.3.2008 between NDTV Emerging Markets Ltd., NDTV Networks PLC and New Delhi Television Ltd. at pages 191-196 of PB Volume- VIII. vi) The General Shared Services Agreement dated 3.3.2008 between NDTV Networks PLC and New Delhi Television Ltd at pages 197-202 of PB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 93 of PB) 8.1 He further contended that shares have been issued at an exorbitant premium though the company was incorporated only in April 2008 and thereafter also wound up in April 2009. 9 It is submitted that charging of premium on fresh issue of shares is based on the business potential of the group which mainly consists of the entertainment vertical of the business. It is settled in law that share premium received on the issue of shares has to be included in the paid up capital irrespective of whether the share premium has been maintained in a separate account apart from the reserve as held in the case of the Hon'ble Supreme Court in the case of CIT Vs Allahabad Bank Ltd. reported in 73 ITR 745. A detailed note on the formation of subsidiaries, their activities and the basis of valuation of USD 150 Mn. is separately enclosed as Annexures I and 2 of Note 1 already on record, though it is specific averment of the appellant that it would not be material in order to invoke the provisions of section 69A of the Act. 9.1 To support that the issuance of share premium without having valuation done has no consequence, the appellant placed its reliance on the ruling of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, no adverse inference could have been drawn in the facts of the present case in respect of charging premium. It is also important to note that the said provision is not applicable in the case of the investor being a foreign company investing in share capital of an Indian company at a premium. Further, it is a fact that both investor and investee companies are non-resident companies and the provisions of the domestic law would have no application whatsoever. 10 The learned counsel for the revenue also contended that subsequently in a short period of time said share capital was repurchased at a much lesser price which resulted into capital loss in the hands of the investor (USBV) which rendered entire transaction sham as it had no commercial and economic substance. 10.1 It is submitted that the said allegation is completely misconceived and devoid of any merits on account of the following reasons: i) The subsequent event of repurchase would not be material to determine the nature of the original transaction specially when the provisions of section 69A of the Act are invoked. On the contrary, the reliance on the same proves that original transaction of subscription ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lting in a decrease of NDTV networks Plc's stake in NDTV Imagine from 90.68% to 5% for a cash consideration aggregating to US$ 73.48 million. The transaction also involved a further infusion of a sum of US$ 50 million as equity capital in NDTV Imagine by TAPV, which has resulted in further dilution to 3.18%. 10.3 The above submission also overlooks Annexure - 2 of shareholders agreement (Pg. 94 - 134 of PB -1) which itself provides for merger of M/s NNIH, NDTV Networks BV after approval of all stake holders. 11 The learned counsel for the revenue has referred to para 68 of judgment of Apex Court in the case of Vodafone International Holdings BV vs. UOI reported in 341ITR 1. 11.1 It is submitted that the observations of the Apex Court in paras 67 and 68 has absolutely no application to the facts of the instant case. In the said case, the issue involved was whether the transaction of sale of shares outside India was a bonafide transaction and, if the answer to the question was affirmative, whether the assessee would be liable to tax in India in respect of the transfer of shares under the head capital gains . 11.2 It is submitted that the issue involved however in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant company. The appellant company has established that transaction of issue of shares by its subsidiary was a genuine transaction. It was submitted that M/s. Universal Studios International BV, an independent company incorporated in Netherlands had under a shareholder agreement acquired 26% stake in NDTV PLC UK at an aggregate consideration. It is respectfully submitted that the revenue has completely ignored and overlooked the fact that the assessee company or its subsidiary had no role to play and the decision of investment was of an independent company. The revenue has failed to appreciate that the said company is subsidiary of GE group, one of the largest companies of the world. It is thus submitted that the of the revenue that contention of the learned counsel of the assessee had sought to explain the share capital receipt ITA No. 1212/Del/2014 2658/Del/2014 C.O. No. 233/Del/2014 (AY: 2009-10 M/s. New Delhi Television Ltd, Vs.ACIT,of ₹ 642.54 crores through lengthy and circuitous transactions and commercial substance/economic rationale for which have not been satisfactorily explained lacks credence or any merit. 13 It is well settled rule of law that the pru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V Networks BV, is a company incorporated on 9.1.2008 in Netherland. It is submitted that, it is also on record that the said company is an investment company. It is also undisputed fact that there has been no finding or adverse observation that either under the Income Tax Act or any other Act that such company was dummy or non-existing company. 16 It is also submitted that it is well accepted that a subsidiary and its holding company are distinct and separate entities. They are subject to income tax on the profits derived by them on standalone basis, irrespective of their actual independence and regardless of whether the profits are reserved and distributed to shareholders/participants. It is well settled law that holding and its subsidiary are totally separate and distinct taxpayers. 17 The appellant also seeks to add that the assessment for NDTV for A Y 2010-11 was completed after due enquiries including enquiries through FT TR from Netherland tax authority and no adverse inference was drawn with respect to buy back of shares vis-a-vis with a settlement of loan of US BV. It is pertinent to emphasize that transaction of receipt of loan and repayment of loan have never been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed additions amounting to ₹ 648,42,28,619/- as proposed in the draft order and further enhanced your taxable income by another ₹ 254,75,00,000/-. 4. In compliance with the directions, the final assessment order was passed u/s 144/ 144C(13) on 21.02.2014 at an income of Rs. S. No. Nature of addition Amount of addition 1 Disallowance u/s 14A 78,40,990 2 Transfer Pricing adjustments 5,09,65,629 3 Addition u/s 69A on account of unexplained money 642,54,22,000 4 Addition u/s 68 on account of unexplained unsecured loans 254,75,00,000 Total 903,17,28,619 5. Penalty proceedings u/s 271(1)(c) of the Act were simultaneously initiated and notice u/s 274 read with section 271(1)(c) of the Act was issued to you on 21.02.2014. However, no reply has been received from you on the merits of the case till date. 838,33,37,197/, wherein the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that no independent valuation report for determining the value of shares of NNIH was obtained. The subscription price is stated to be a negotiated price arrived between the parties based on proposed business potential and business forecast and projections . Since no prudent businessman will purchase the shares of a paper company at a price, which was more than 140 times of the face value without any credible valuation, the transaction was held as a part of scheme of routing own fund of the assessee company in the assessment order. 10. It was observed during the assessment proceedings that subsequently, during the immediately succeeding FY 2009-10, the very same shares were bought back by NDTV B V for ₹ 58.08 crores @ ₹ 634.17 per share. If the transactions were not sham, how could the same shares having face value of ₹ 50/- per share approx. be issued @ ₹ 7015.05 per share and further bought back @ ₹ 634.17 per share. That also is claimed in a situation when the issue of shares and the repurchase of shares are by an entity and its immediate subsidiary respectively. The transaction resulted in a claim of loss amounting to ₹ 584.45 crores for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, after lifting the corporate veil, the DRP finds that in this case a sum of ₹ 642,54,22,000/- has been found credited in the books of assessee/ its subsidiary for the previous year (FY 2008-09) under consideration. Though the assessee has sought to explain the above amount through the lengthy and circuitous transactions, the commercial substance/ economic rationale for such transaction has not been satisfactorily explained. Assessee's theory of having sold a Dream to the investor has not been substantiated by any credible evidence as no details have been filed whatsoever for the so called business projections and the basis for computation of the sale price of the share at the astronomical price of ₹ 7,015/- which is 159 times of its face value of ₹ 45/-. Needless to mention that the subject company whose shares were sold was incurring huge losses and there was hardly any worthwhile business to justify the above sale price. Interestingly, the assessee/ subsidiaries have again repurchased the same share in the very next financial year at the price of ₹ 634.17 per share totalling ₹ 58 crores. Here also no details/ justification has been giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the 1st annual review was scheduled to be carried out before the end of financial year 2009-10 on 31.03.2010. However, even before the 1st annual review could take place, the shares were allegedly bought back by NDTV Networks B V without any review of progress of business plan and without any valuation carried out by either party. The celerity with which the shares were bought back without waiting for even the 1st review makes it evident that the agreement was not genuine and there was no intention to comply with the said agreement. 15. Parent company of USBV is in Bermuda and not in USA 15.1 It is pertinent to mention that NDTV had represented throughout before the AO, the DRP and the ITAT that NBC Universal Inc., USA ( NBCU ) is the parent company of Universal Studios International BV ( USBV ), which invested US $ 150 million (INR 642,54,22,000) in subscription of shares of NDTV Networks International Holdings BV ( NNIH ). However, this is found to be factually incorrect. The correct position is that 100% of shares of USBV were held by NBCU Dutch Holding (Bermuda) Limited, which was holding them in its capacity as General Managing Partner of CA Holding CV, Bermuda. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 131 of the Act on 23.07.2015, copy of which is enclosed. In this statement, in response to question no. 3, when asked about the rationale of incorporation of plethora of foreign subsidiaries, he admitted that the foreign subsidiaries were incorporated to circumvent the restriction imposed by Indian regulations, which confined the foreign direct investment in news channel companies to a maximum of 26%. No other rationale could be provided by him for creation of these many foreign subsidiaries, all like NNPLC without any commercial activities and without any employee or assets, except stating that it was on the advice of experts and for efficiencies. The explanation given by Mr. Rao regarding the objective of defeating the bar of 26% in news channels is not plausible, because the terms of agreement and subsequent events reveal that the fund of USD 150 million was introduced in companies connected with entertainment channels and no fund was introduced in any news channel company. Now if the fund was to be introduced in non-news companies only (like NDTV Imagine Limited, in which 100% FDI was permissible), then there was no bar in bringing the fund directly through FDI into India. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from his statement that he had family relations with Dr. Prannoy Roy and Mrs. Radhika Roy for over 30 years and he studied with Mr. Vikramaditya Chandra, Group CEO in Doon School during the period 1977-1980 and he along with his family and associate companies held shares of NDTV ranging from 100 to 17,00,000 in number at various times and in FY 2006-07, such shareholding was of the value of more than ₹ 70 crore and that he was approached by Dr. Prannoy Roy for the task of corporate structuring. He also stated that he was part of core group led by Mr. Vikram Chandra, in active consultation with PWC and KPMG, which also included the Roys and Mr. Rao and this group was referred to as Nines . 16.5 Mr. Dutt has stated that he along with Mr. Sanjay Jain quit when he became aware that the real purpose was to route the money without any intention of paying taxes and in violation of the various legal provisions. In support of his averments, he has also furnished copies of emails, as described in his statement also, which are reproduced below :- (i) Mail dated 21.05.2008 at 10:16 PM from Mr. Vivek Mehra (PWC) to Dr. Prannoy Roy others: -Subject: Press Announcements etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emain with NDTV Ltd. As a consequence of this successful closing of the partnership with NBCU, the parent company NDTV Ltd now has funds of US $150 which gives it the flexibility to use for any opportunities in the future including acquisitions, expansion in the news space, or in the beyond- news space as and when they arise. The NDTV - NBCU strategic, partnership in the Networks businesses is a coming together of two leading professional media organizations with similar ethics and goals and promises to be a major force in the media scene in India. (v) Mail dated 22.05.2008 at 03:06 PM from Mr. Vivek Mehra (PWC) to Dr. Prannoy Roy others: -Subject: Re: FW: Press Announcements etc Dear Prannoy, Here is a shot at it, based on your draft Appreciate your problems but honestly the problem could become worse if we give a handle to the tax authorities. I am concurrently discussing with other partners now the draft below. Let's get on a call ASAP, Regards Vivek (vi) Mail dated 22.05.2008 at 03:43 PM from Dr. Prannoy Roy to Mr. Vivek Mehra (PWC) others: Subject: Press Announcements - Final ? Thanks very much Vivek... based on our discussion ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh a cobweb of foreign subsidiaries till it finally reached NDTV. The valuation for the subsequent buyback by NDTV group for ₹ 58 crore in October, 2009 was also evidently based on an adjusted figure of ₹ 42.54 crore (received over and above ₹ 600 crore) after giving the effect of forex fluctuation, etc.16.7 Thus, the real nature of transaction was actively and deliberately concealed under a thorough, methodical and calculated planned strategy. 17. Money is routed back into NDTV through complex cobweb of sham subsidiaries abroad 17.1 Pursuant to INR 643.35 crore transferred by NNIH to NDTV Networks BV in the form of dividend, NDTV Networks BV further transferred money as under:- Trail 1 Out of ₹ 643.35 crore received, NDTV Networks BV invested INR 389 crore in NDTV (Mauritius) Media Limited, a 100% subsidiary of NDTV NDTV (Mauritius) Media Limited invested ₹ 387.59 crore in NDTV Studios Limited on 29.09.2008 [NDTV (Mauritius) Media Limited merged in NDTV One Holdings Limited, Mauritius on 30.09.2011] NDTV Studios Limited merged in NDTV w.e.f. 01.04.2010 Trail 2 Out of ₹ 643.35 crore received, NDTV Networks BV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following facts :- (i) It has been concealed that the parent company of USBV was CA Holding CV Bermuda. There is not even a single reference to the Bermuda parent in the impugned agreement dated 23.05.2008 entered into between the complete chain of parent and all intervening subsidiaries on the one hand and NBCU and USBV on the other hand. (ii) It has been concealed that immediately after introduction of money amounting to ₹ 642.54 crore in NNIH, NNIH declared and paid dividend of ₹ 643.35 crore and this dividend was entirely paid to NDTV Networks BV, in exclusion of the other shareholder USBV, which had brought in the entire money of ₹ 642.54 crore as share premium. Instead, the assessee company created a fagade of investment by USBV though knowing fully well that money was to be introduced in the form of dividend exclusive to NDTV group. (iii) It has been concealed that the actual ownership and control over the money amounting to ₹ 642,54,22,000/- was always with the assessee company only, which introduced this money by creating complex cobweb of sham subsidiaries in Netherlands and UK and later routed this money through sham subsidiaries in Mau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of other additions of ₹ 260,63,06,619/- Tax sought to be evaded : Rs.88,58,83,620/- Penalty proposed u/s 271(1)(c) @ 200% : ₹ 88,58,83,620/- ■ (ii) Total amount of proposed penalty u/s 271(1)(c): ₹ 525,38,85,496/- ... (i) + (ii) 22. Your reply on the merits of the case should reach this office by 22.06.2016, failing which it shall be presumed that you have nothing to state in the matter and the decision in the matter will be taken ex parte and on merits. 97. The ld DR referred in detail the various issues raised in the penalty proceedings wherein the statement of the Director of the company was recorded. 98. We have carefully considered the rival contentions. The short issue involved in this ground is that by agreement dated 23.05.2008 titled as agreement for the subscription of shares in NDTV Networks International B.V. by Universal Studios International B.V. it was agreed that a sum of US$150 million would be a consideration for purchase of shares. Accordingly, 915498 shares were subscribed and therefore, the pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... International Holdings BV (NNIH) in Netherland. In NNIH the 68.6 % holding was of NNBV and 31.4% holding was of USBV of Netherland. The assessee has another company in the name of NDTV BV in the Netherland, which was formed on 28.12.2006 wherein 10% share holding was with NDTV assessee, and 90% holding was of NNIH. The assessee another company which was formed on 30.11.2006 in the name of NDTV Network PLC, UK wherein 90% share holding was owned by NDTV BV and balance 8 percent were held by others as ESOP etc. The NDTV Network PLc was having different share holding in five operating companies in India. The above structure can be pictorially presented as under: India100. From the above corporate structure it is apparent that assessee is in India whereas NNBV, NNIH, and NDTV BV are in Netherland Jurisdiction and NDTV Network PLc In UK . The NNBV was liquated on 25.03.2011, NNIH was merged with NDTV BV on 01.04.2009, NDTV BV was merged with NNBV on 15.10.2010 and NNBV was liquidated on 25.03.2011. from the above structure. It is apparent that three companies in the Netherland Jurisdiction were formed by the assessee and all of them were liquated on 25.03.2011. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds from Bermuda which is also one of the questionable jurisdiction. Based on the above findings recorded in the draft assessment order, in the order of the ld DRP and the final assessment order which resulted into the addition of ₹ 6425422000/-. 103. Now firstly we need to examine what the company in which money is invested is engaged in to, purposes of its formation, its activities, and its life span and jurisdiction. We come to the financial affairs of NDTV Networks International Holding BV (NNIH), the investee company, from the audited accounts produced before us at page No. 652 to 665 of the paper book. The above company was formed in Netherland Jurisdiction on 10.04.2008 and subsequently, it was merged with another group company i.e. NDTV BV on 01.04.2009. Therefore, this company remains in existence for less than a year and the accounts available for the audit were from 10.04.2008 to 31.03.2009. the accounts were audited on 30.04.2009. According to the profit and loss account of the company it earned only interest on fixed deposits of ₹ 13.33 lakhs and has an expenditure of operation and administration of ₹ 6.77 lakhs. As per profit and loss statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chedule 6B of the Act wherein it is mentioned that during the year the company has declared dividend out of its reserve amounting to US$150 million (Rs. 643,35,00,000/-) to NDTV Network BV the holding company only. Meaning thereby that to the entity which has invested ₹ 643 crores and acquired 31.4% of the equity was not paid dividend of single rupee and from that investors sources of money the investee company paid dividend to the company which has just invested ₹ 12 lakhs was paid dividend of ₹ 643.35 crores in the first year of its investment. That to when the company does not have any revenue stream. The only activity this company has carried out is evident from note No. 5 of schedule 6B wherein it is mentioned that during the year the company has invested in NDTV BV being 100% subsidiary of NDTV by subscribing 8820 shares of Euro 100 each equivalent to 90% of the post issue paid up capital of NDTV BV. The value of such investment is ₹ 56562660/- and to finance this acquisition is apparently the company does not have money a loan of ₹ 6,00,33,600/- obtained from the NDTV Network BV the holding company. Therefore, for making an investment in the ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business decision of the company .For this the relevant minutes were produced in paper book no VIII at page no 203 to 256 of the paper book. It is fact that in meeting of the board of directors of NNPLC Mr. Pete Smith and Ms Roma Khanna were appointed as directors of that company. Subsequent to that Mrs. Roma Khanna attended the meeting on 25th August 2008 and in that meeting there were no strategic decision were taken and also the annual accounts for the March 2008 were approved. Naturally in that NBCCU has no role to play. Subsequently, on 7.11.2008 in meeting at London Mr. Pete and Mrs. Roma Khanna both attended where the presentations were made by the board Chairman and no role is played by those Directors. Further, in the minutes dated 27.06.2009 both the directors attended in New Delhi and there was discussion about the funding requirement of loan from NBCU and where it was decided to discuss a short term loan of US$10 million to NDTV Imagine Ltd and intercompany investment were only discussed. On the meeting held on 09.07.2009 there is no details where and when it was held (Page No. 243). However, in those meeting further discussion was with respect to share swap only where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, we are not concerned what are the reasons for transferring money from the original payer through USBV to the assessee group companies and ultimately to the assessee and it is for others to look into, our mandate is restricted to test the chargeability of the above sum in the hands of the assessee as contended by the Revenue. on the basis of above facts we do not reach at a conclusion different from the decision of the ld AO and ld DRP that the investee company did not have any substance and it is merely a ploy adopted for transferring money from one entity to another entity which is the assessee only. 104. Now we look at the profile of the investor company, USBV which are placed at page No. 676 to 718 of the paper book wherein the annual accounts of the company as on 31.12.2008 signed on 25.06.2010 were placed. This company is wholly owned subsidiary of CA holding CV legally seated in Amsterdam, Netherland. It belongs NBCU group which is owned 80% by General Electric company and 20% by Vivendi. This company has participating interest in more than 45 companies ranging from 100% to 95 % and having other participating interest in seven companies. On looking at the sharehol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e GE group. There is no reference of the amount invested in the USBV by GE group for making investments in USBV. No details has been placed by the assessee before us or before lower authorities except stating that the investor company is part of GE group and that group has made investment in this company which is in turn invested in NNIH. There is no reference about the participation of that group in the affairs of the investing company. Therefore in absence of complete structure of investment including the control by the directorship it cannot be established that investor in the company is GE group. In any case credibility and genuineness of the investments cannot be solely determined by the showing names but only by showing the substances of the transactions. Because of our finding while examining the profile of the investee company and investor company. It is apparent that transaction entered into by the parties lack substance and therefore, whoever is the party and howsoever credible it is, heavier burden is cast on them to explain the purpose and rationale of so-called investment. In view of this we are not swayed by the profile of the investor. It is also not an ingredient to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of 26% in NDTV PLC a holding company of the operating company in UK. The face value of the share was 0.01 EURO per share and the premium was ₹ 642 crores. The purpose of this agreement is to facilitate acquisition of shares. To sell the shares being 27695 ordinary shares of face value of 0.01 EURO in the capital owned in the company NDTV BV by the seller USBV for US$ 12527250 (Rs. 58 crores) Date of the execution of the transaction 23.05.2008 23.05.2008 14.10.2009 Whether supported by any valuation report at the time of execution of the agreement justifying the transaction value No No There was no valuation report obtained but a mail dated October 2, 2009 at 1.12 PM on Friday from Mr. Smith Pete , President of NBC International address to Shri KVL Narayan Rao, Shri Vikram Chandra, Shri IP Bajpayee and CC to Tomkins Juliang of NBC Universal, Syed Tarikh of NBC Universal and Warde Anne, NBC Universal with subject matter as fw: NDTV response . The above is placed at page No. 1264, 1265 of the paper book. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm, there were no acquisition or any efforts put for such acquisition were demonstrated, the dividend policy was violated by distributing ₹ 643.35 crores. The exit agreement was only containing the provisions for reversing all the documents which were executed at the time of share purchase agreement. Whether it is strategic partnership or a financial partnership On the reading of the agreement and looking at the conduct of the parties in pursuance of these agreements it is clear that except the financial transaction which are under challenge there is no other activities demonstrated before us for the growth or development of the business. Therefore, the real fact that emerges is that it is the financial transaction which was the only important aspect of these agreements 107. The parties have entered into several agreements having plethora of conditions, however, on looking into the conduct of the party it clearly emerges to our mind that these agreements were merely created/ executed for executing the financial transaction. The form of the transaction on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961, in the matter of corporate taxation, is founded on the principle of the independence of companies and other entities subject to Income-tax. Companies and other entities are viewed as economic entities with legal independence vis-a-vis their shareholders/ participants. It is fairly well accepted that a subsidiary and its parent are totally distinct taxpayers. Consequently, the entities subject to Income-tax are taxed on profits derived by them on standalone basis, irrespective of their actual degree of economic independence and regardless of whether profits are reserved or distributed to the shareholders/participants. Furthermore, shareholders/participants, that are subject to (personal or corporate) Income- tax, are generally taxed on profits derived in consideration of their shareholding/participations, such as capital gains. Nowadays, it is fairly well settled that for tax treaty purposes a subsidiary and its parent are also totally separate and distinct taxpayers. 67. It is generally accepted that the group parent company is involved in giving principal guidance to group companies by providing general policy guidelines to group subsidiaries. However, the fact that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the House of Lords in Salomon v. A. Salomon and Co. Ltd. [1897] AC 22 that opened the door to the formation of a corporate group. If a one man corporation could be incorporated, then it would follow that one corporation could be a subsidiary of another. This legal principle is the basis of holding structures. It is a common practice in international law, which is the basis of international taxation, for foreign investors to invest in Indian companies through an interposed foreign holding or operating company, such as Cayman Islands or Mauritius based company for both tax and business purposes. In doing so, foreign investors are able to avoid the lengthy approval and registration processes required for a direct transfer (i.e., without a foreign holding or operating company) of an equity interest in a foreign invested Indian company. However, taxation of such holding structures very often gives rise to issues such as double taxation, tax deferrals and tax avoidance. In this case, we are concerned with the concept of GAAR. In this case, we are not concerned with treaty-shopping but with the anti-avoidance rules. The concept of GAAR is not new to India since India already has a judic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the view that every strategic foreign direct investment coming to India, as an investment destination, should be seen in a holistic manner. While doing so, the Revenue/courts should keep in mind the following factors : the concept of participation in investment, the duration of time during which the holding structure exists ; the period of business operations in India ; the generation of taxable revenues in India ; the timing of the exit ; the continuity of business on such exit. In short, the onus will be on the Revenue to identify the scheme and its dominant purpose. The corporate business purpose of a transaction is evidence of the fact that the impugned transaction is not undertaken as a colourable or artificial device. The stronger the evidence of a device, the stronger the corporate business purpose must exist to overcome the evidence of a device. 108. In the present case, according to us it is a clear cut case of abuse of organization form/ legal form and without reasonable business purpose and therefore, no fault can be found with the order of the ld Assessing Officer/ ld DRP in charging to tax ₹ 642 crores by re-characterizing the conditions according to its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money trail stares so glaringly on the various complex structures created by the assessee that without proving any substance one cannot reach to any other conclusion but to the conclusion that series of the transaction entered into by the assessee were to transfer ₹ 642 crores from the investor company or the owner of the investor company to the assessee. 110. It is interesting to note that certain emails were gathered by revenue through enquiry during the course of penalty proceedings by examination of some person. Such exchange of mails was recorded at para No. 6.5 of the show cause notice issued by the ld Assessing Officer u/s 271(1)(c) of the Act. These emails were given to the ld Assessing Officer by one Mr. Sanjay Dutt, who was examined u/s 131 of the Act by the ld AO. These mails are pertaining to the transaction where Mr. Sanjay Dutt is one of the recipients. The other recipients are purportedly the highest officers of the company including the chairman. When these mails were confronted to the assessee the reply was submitted by the assessee vide letter undated but submitted to the Assessing Officer on 02.11.2016. In that letter at para No. 15(c) the seven email co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. The above request has been made in the interest of justice and equity and to be considered favourably. 111. On reading the reply of the assessee, it is apparent that emails are not denied that the executives of the assessee are recipient, sender, and part of the correspondence. The assessee has strategically avoided to comment on the content of the email by simply stating that AO must establish the genuineness, authenticity and source (GAS) of the said document so that assessee could make specific submission and originals of the above may also be made available for verification. Had these mails were inappropriate/ false evidence assessee would have denied them vehemently. Instead, the assessee has asked LD AO to establish the genuineness, authenticity, and sources of the evidence without denying it. According to us, there is no occasion to establish the genuineness, authenticity, and sources of the evidences unless assessee denies them. It shows that assessee is trying to avoid answers to these evidences. We cannot fall prey to such an attitude of the assessee and therefore in absence of any denial by the assessee the above evidence are presumed to be true. Now we discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TV and NBCU successfully closed their strategic partnership in the NDTV subsidiary NDTV Networks. For a consideration of US $150 million, NBCU now has an indirect and effective stake of 26 % in NDTV Networks PLC. This effective 26 % stake is held through a proportionate stake in the holding company of NDTV Networks PLC NBCU has the option in three years to increase their stake in the Networks PLC's holding company to 50%. The NBCU option to increase their stake will be at FMV (Fair Market Value) at the time the option is exercised. It has been agreed that management control will always remain with NDTV Ltd. As a consequence of this successful closing of the partnership with NBCU, the parent company NDTV Ltd now has funds of US $150 which gives it the flexibility to use for any opportunities in the future including acquisitions, expansion in the news space, or in the beyond- news space as and when they arise. The NDTV - NBCU strategic, partnership in the Networks businesses is a coming together of two leading professional media organizations with similar ethics and goals and promises to be a major force in the media scene in India. (v) Mail dated 22.05.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h it is not anyway)... But we do need to clarify that the money is not in Networks [Emphasis supplied] 112. From contains of the mail, the addressee and recipients of the mail it is quite apparent that whole structuring is an eye wash with the only intention to bring 150Mn USD to NDTV ( assessee) without there being and liability to pay it back. This what is achieved by the assessee by creating all these agreements, subsidiary in different jurisdictions etc. We are not inclined or to waste our time on the discussion of these emails because they are so obvious and glaring to show the intention of the parties. 113. It is also important at this moment to mention that the subsidiary structure created by the assessee and investor in Netherland. The creation of a subsidiary in a particular jurisdiction has to have a business case. It is a matter of common knowledge that Netherland was classified as one of the low tax jurisdiction. Netherland at that particular time had too generous tax exemption of dividend received, no beneficial owner test for withholding tax on dividends, not putting details of trust on public record, does not require company accounts or beneficial ownershi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny money etc which is not recorded in the books of account if any maintained by him and the assessee offers no explanation about the nature and source of the acquisition of the money or the explanation offered by him is not in the opinion of the ld Assessing Officer satisfactory then such money may be deemed to be the income of the assessee for that financial year. In the present case, the assessee is found to be the owner of the money by the ld Assessing Officer which has been received by the subsidiary in offshore jurisdiction and which has travelled to the coffers of the assessee. The explanations offered by the assessee with respect to the ownership of such sum was not satisfactorily explained according to the Assessing Officer and therefore, such some has rightly been deemed to be the income of the assessee. Furthermore the argument of the ld AR that money is received by the subsidiary company of the assessee and not by the assessee himself is also devoid of any merit because of the reason that provision of section 69A does not make any distinction but merely says that the assessee is found to be an owner in that case it can be charged to tax in the hands of the assessee. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fshore jurisdiction have come back into the coffers of the assessee without any obligation of repayment. Further, in that particular case there were contradictory claims of the revenue that assessee was a conduit company and still some addition in that particular company was made holding it to be undisclosed income of the assessee. There was also no close connection between the investors as well as the company. In the present case there is no allegation that assessee is a paper company , in fact it is in business but the only allegation is that assessee is found to be an owner of ₹ 642 crores invested by a third party in foreign jurisdiction without any substance in the transaction and therefore, revenue charged it into the hands of the assessee. Further, in that particular case all the investors were regularly assessed to income tax and some of them appeared before the assessing officer also. However, in the present case no evidences has been laid by the assessee about the taxability of these companies and no efforts have been made to produce the investor before the revenue authorities. Regarding the most forceful argument of the ld AR was that repurchase of the shares later ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer register would suffice. The creditworthiness of the creditor can be proved by producing the bank statement then the assessee has discharged the onus. He therefore, submitted that in the present case the complete details as mentioned in the decision has been submitted by the assessee and therefore, the onus has been discharged. We have carefully considered this decision and we have no hesitation in rejecting the reliance because of the reasons that in the present these details were made available before the ld DRP and then ld Assessing Officer carried on enquiry in remand proceedings. During the course of hearing before us the revenue has produced the money trail as well as certain emails, which were not at all denied by the assessee. Therefore in our view the assessee has submitted scanty details and also tried to hide certain facts by not denying or owning the emails exchanged. Further it is too naive to accept in the facts and circumstances of the case that any transaction carried out through banking channel should be believed as genuine. In fact the money mostly rout through banking channels only and for these transactions only various sections in the income tax act are inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oan was also pursuant to loan agreement dated 10.11.2008 between Universal Studio International BV, NDTV, NNPLC and NDTV networks BV. Assessee further submitted the confirmation of the loan, however, as the loan confirmation did not have the bank certificates along with the confirmation therefore, the AO was of the view that assessee has failed to discharge its onus of proving the identity and creditworthiness of the lender and genuineness of the transaction. The ld AO was also of the view that the copies of the documents furnished by the assessee were only photocopies. The ld DRP on consideration of the issue found that out of ₹ 365.25 crores ₹ 110.50 crores is due to the restatement of the original amount pertaining to FY 200-08. It was also noted by the ld DRP no disallowance was made in AY 2008-09 and therefore, the disallowance/ addition to the extent of ₹ 110.5 crores cannot be made. However, the ld DRP held that above loan was advanced without interest and the reason for it was not explained. The ld DRP was of the view that the amount involved is quite large and further as per the agreement the interest free credit facility was to be granted on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lain on the issue as under :- 2.3 During the year, the assessee company, through its guarantees, raised an amount of ₹ 365,25,00,000/- as unsecured loans through its subsidiary NNPLC. Please furnish the complete details along with documentary evidence regarding the source thereof, viz. the identity of the payers, the creditworthiness of the payers and the genuineness of the transactions. ... 2.4.3 In response, vide letter dated 26.11.2013, the assessee contended that during the year under consideration, there was an increase of ₹ 110.50 crores in the amount of unsecured loans in the Balance Sheet of NNPLC, which represented an increase due to currency fluctuation. The assessee further stated that during the previous A Y 2008-09, it had raised loans amounting to ₹ 399 crores by way of Step Up Coupon Bonds and the enquiry regarding the source and genuineness thereof had already been completed during the course of assessment proceedings for AY 2008-09. It was claimed that complete evidence regarding the same had been filed before the AO during the said assessment proceedings and the AO had also obtained information from HMRC through FT TR. Vide further repl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings. 2.2.4 In this regard, please also refer to letter filed by you on 29.11.2013, wherein you have stated that the increase of ₹ 110.50 crores in the Step Up Coupon Bonds is merely the reinstatement of foreign currency liability. In this regard, please furnish the relevant copies of accounts along with complete book entries made in Journal, Ledger, etc. in respect of the said increase reflected in the accounts. Also furnish copies of accounts regarding interest paid to the said investors during the year. 2.2.5 Regarding the balance addition of ₹ 254.75 crores in the unsecured loans, you have claimed that the relevant documents have been filed during the assessment proceedings. Perusal of the assessment record reveals that there are no such documents on record. Accordingly, you are given an opportunity to now file these documents, which are claimed to have been filed by you earlier. 2.2.6 In the absence of the discharge of onus by you in respect of the above transactions of raising unsecured loans, in the light of facts of the case discussed in the foregoing paras of this letter read with letter dated 27.11.2013, please explain and substantiate your positio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by NDTV through its subsidiary NNPLC2.1.1 The Hon ble DRP vide letter no. 262 dated 28.10.2013 had directed further enquiries to be made regarding the unsecured loans amounting to ₹ 365.25 crores allegedly received by NDTV through its subsidiary NDTV Network Pic ( NNPLC ) and the tax implication thereof. 2.1.2 Vide this office s letter no. 1705 dated 11.11.2013, the assessee was asked to explain on the issue as under :- -2.3 During the year, the assessee company, through its guarantees, raised an amount of ₹ 365,25,00,000/- as unsecured loans through its subsidiary NNPLC. Please furnish the complete details along with documentary evidence regarding the source thereof, viz. the identity of the payers, the creditworthiness of the payers and the genuineness of the transactions. ... 2.1.3 In response, vide letter dated 26.11.2013, the assessee contended as under :- -5. Furnish the details in connection with assessee company, through guarantees, raising an amount of ₹ 362,25,000/- as unsecured loans through its subsidiary NNPLC and show cause why the penal provisions and other consequence may not be invoked for this default 5.1 At the outset, it is subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. AY 08-09, the complete enquiry was made by AO of NDTV in respect of issuance of bonds by NNPLC. In this regard that the reference was also made to FT TR and the information was called from HMRC, UK. The assessment for AY 08-09 was completed and the addition of guarantee fee under section 92C of the Act was made. The reason for said addition was based on premise that NDTV had provided an undertaking to give guarantee to Bondholders during the period of bond holders agreement, thus, it ought to have charged guarantee fee, being an international transaction under the section 92B of the Act, from NDTV Networks Plc. The similar addition of Guarantee fee was also made in AY 09-10 by TPO. Further, the complete list of the subscribers of bonds, subscription agreement and other relevant details were duly filed during the course of the assessment of AY 08-09. The above bond amount is duly confirmed by NNPLC to HMRC, UK on the requisition of FT TR. Further, the complete information with respect to raising of bonds were duly filed before Investigation officer and DIT (Intl) during the course of assessment and was also disclosed in the Audited Accounts of the NDTV for A Y 2008-09 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business activities. NNIH was a holding company and NNPLC was incorporated to promote the interests of NNIH and other group companies. NNPLC did not have any business activities. It had no fixed assets and there was no rent paid. Apart from incorporation in UK, NNPLC had no presence in UK. The address of NNPLC in UK was that of the Company Secretary dealing with its tax matters. The Directors of NNPLC were Indian and the audit report of NNPLC was signed at Gurgaon in India. The authorized share capital of NNPLC was only about ₹ 47 lacs. 2.1.6 In response, the assessee vide its letter dated 29.11.2013 replied as under :- 1.13 Without prejudice to our submission, i.e. the transaction in question is genuine transaction and has been done through banking channel and in accordance with shares subscription agreement, therefore no adverse inference could be drawn in any manner, your attention is also drawn to the recent amendment of Finance Act, 2012 wherein the legislature has inserted section 56(vii)(b) wherein they have intended to tax the amount of share premium received in excess of the Fair Market Value as other source of income. The said provision (as amendment) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x laws i.e. filing of its tax returns, WHT returns, etc. 3. Furnishing of evidence in relation to reinstatement of forex liability amounting to ₹ 110.5 Crores As earlier submitted, the increase of ₹ 110.5 Crores in the Step up Coupon Bonds at year end in books of NNPLC is merely the reinstatement of foreign currency liability in accordance with Accounting Standards. It is most respectfully submitted that no fresh loan whatsoever was raised by NNPLC in respect of the Step up Coupon Bonds. The amount so increased in debited to Currency Translation Reserve in the books of accounts of NNPLC (Please refer to Schedule - 2 Reserves Surplus).In respect of your specific query with respect of the evidence of such reinstatement, please find attached the complete details of the quarterly reinstatement as Annexure -1 to this submission. In respect of the evidence of the exchange rates applied in the above computation, the quarterly rates as available are annexed as Annexure -2 of this submission. 2.1.7 Further, vide this office letter dated 05.12.2013, the assessee was confronted as under :- 2.2 Regarding the raising of ₹ 365.25 crores as unsecured loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease furnish the relevant copies of accounts along with complete book entries made in Journal, Ledger, etc. in respect of the said increase reflected in the accounts. Also furnish copies of accounts regarding interest paid to the said investors during the year. 2.2.5 Regarding the balance addition of ₹ 254.75 crores in the unsecured loans, you have claimed that the relevant documents have been filed during the assessment proceedings. Perusal of the assessment record reveals that there are no such documents on record. Accordingly, you are given an opportunity to now file these documents, which are claimed to have been filed by you earlier. 2.2.6In the absence of the discharge of onus by you in respect of the above transactions of raising unsecured loans, in the light of facts of the case discussed in the foregoing paras of this letter read with letter dated 27.11.2013, please explain and substantiate your position. 2.1.8 The assessee filed reply dated 09.12.2013 stating as under 2. Regarding the raising of ₹ 365.25 Crores as unsecured loans In this regard and as earlier submitted, the amount in question in not related to the books of accounts (standalone) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough its guarantees raised an amount of ₹ 365,25,00,000/- as unsecured loans through its subsidiary M/s NDTV Networks Plc. At the present stage the assessee has not discharged its primary onus regarding receipt of this amount by way of unsecured loan and therefore is liable to be proceeded against under the provisions of section 68 and 69A of I T Act, 1961. However, the assessee has not been afforded the reasonable opportunity to discharge its primary onus for the simple reason that the relevant and material information was furnished by the assessee only on 30.03.2013 and there was simply no time humanly available to afford such an opportunity to draw a balance between the interest of public revenue and the rights of the assessee, for the present the adverse inference against the assessee is not being drawn and appropriate remedial measures will be taken in due course. 2.1.11 Accordingly, vide this office s letter no. 961 dated 29.08.2013 as forwarded vide CIT, Delhi-V, New Delhi s letter no. 1269 dated 03/09.09.2013, the Honble DRP was requested to consider causing further enquiries to be made in the case u/s 144C(7) of the Act. The Hon ble DRP vide letter no. 262 date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was incorporated in December, 2006. Thus, being 100% subsidiary, NNPLC was conceived and controlled by NDTV. Although NNPLC cannot be said to be an agent or mere extension of NDTV solely on the ground of its being 100% subsidiary of NTDV, the facts regarding the control exercised by NDTV over the affairs of NNPLC are discussed below. 2.1.18 NNPLC was incorporated on 30.11.2006 with a meager capital of about ₹ 40 lacs only and was liquidated on 20.10.2011. The stated purpose of NNPLC was to create new business areas for NDTV as well as to unlock value of existing operations and skills, however, NNPLC did not carry on any business activities on its own. In between its incorporation and liquidation, the activities of NNPLC as the role of NDTV therein, are summarized below :- Financial Year Activities Role of NDTV 2007-08 USD 100 million were raised through Step Up Coupon Convertible Bonds. NNPLC had only a meager capital of ₹ 40 lacs and did not have any business activities, any fixed assets, any place of business except a postal address in UK, was a new entrant withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersal Inc., in its subsidiary NDTV Networks Plc. Though the shares purportedly subscribed, not purchased, by NBCU were those of NNIH and not of NNPLC, the 2nd in vertical subsidiary of NNIH, yet it can be seen that the emphasis is on NNPLC and there is no reference to NNIH or NDTV BV. It is further pertinent to mention that the repurchase, occurring barely after 18 months, was for about ₹ 58 crores only as against the purchase for ₹ 642.54 crores. There is no rationale in this transaction no commercial purpose or economic substance, other than to create a loss of ₹ 584 crores for NBCU and introduction of own unaccounted money for NDTV. (ii) NNPLC repurchased US$ 100 Million Step up Coupon Convertible Bonds issued by it earlier. (ii) The final transaction before the liquidation of NNPLC was the purported repurchase of Step Up Coupon Convertible Bonds. However, the price of the coupons reflected at ₹ 399 crores as on 31.03.2008 and at ₹ 509.50 crores as on 31.03.2009 (the difference of ₹ 110.50 crores stated to be on account of currency fluctuation) would further escalate at the time of rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Convertible Bonds by ₹ 110.50 crores in the Balance Sheet of NNPLC from ₹ 399 crores to ₹ 509.50 crores, which is stated to be on account of currency translation. Further, NDTV has introduced unsecured loans amounting to ₹ 254.75 crores from NDTV BV in the books of NNPLC. The tax implications of this issue are the subject matter of the present report, which necessitated the lifting of corporate veil first, as discussed in the preceding paras of this report. 2.2 Regarding enhancement of liability on account of Step Up Coupon Convertible Bonds by ₹ 110.50 crores 2.2.1 As discussed above, USD 100 million were reflected to have been raised through Step Up Coupon Convertible Bonds during FY 2007-08. As stated in para 2.1.2 of this report, vide this office s letter no. 1705 dated 11.11.2013, the assessee was asked to explain on this issue, and in response, vide letter dated 26.11.2013, the assessee stated that the source of investment in Bonds was duly verified by the AO during the assessment proceedings for A Y 2008-09 and also through information obtained from UK tax authorities through FT TR. It was contended that complete details regarding inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule to Balance Sheet as on 31.03.2009. When asked vide this office s letter no. 1705 dated 11.11.2013, the assessee replied that the unsecured loan amounting to ₹ 254.75 crores had been raised from NNPLC s intermediate holding company NDTV Networks BV and the relevant details had been filed during the course of assessment proceedings for AY 2008-09. 2.3.2 Vide letter dated 05.12.2013, it was intimated to the assessee that on perusal of assessment record for AY 2008-09, no such documents were found. Accordingly, the assessee was given an opportunity to now file these documents, which were being claimed to have been filed by it earlier. The assessee was also intimated that it had not discharged the onus cast upon it in respect of the above transactions of raising unsecured loans. 2.3.3 In response, the assesse filed reply dated 09.12.2013 stating that with respect to the unsecured loans amounting to ₹ 254.75 crores, the source thereof was loan form NDTV Networks BV and the amount was duly disclosed in the books of NNPLC and NDTV Networks BV and the copies of the financials statements of both the above subsidiaries were filed before the Ld. AO during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The report is submitted for kind perusal and consideration. 9.5 After considering the above facts, the Honble DRP vide its directions dated 31.12.2013 issued u/s 144C(5) of the Act held that out of ₹ 365.25 crores reflected as increase in liabilities, an amount of ₹ 110.50 crores was due to restatement of the original amount pertaining to the transaction occurring in FY 2007-08 relevant to AY 2008-09. Regarding the balance amount of ₹ 254.75 crores, the DRP held that the assessee failed to discharge its onus of proving the genuineness of the transaction. The observations of the DRP are reproduced below -5.17. AO has brought to the notice of the DRP through his letter dated 20.08.2013 forwarded by the Addl. CIT, Range-13, New Delhi that an amount of ₹ 365.25 crores was raised by the assessee company which needed further examination. The relevant part of the letter of the AO is as under: 10. Another issue involved in the case is that during the year, the assessee company, through its guarantees, raised an amount of ₹ 365,25,00,000/- as unsecured loans through its subsidiary NNPLC. As the information was stated to be furnished by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant period. 2.4.4 Vide this office's letter dated 05.12.2013, the assessee was confronted as under :- 2.2 Regarding the raising ofRs. 365.25 crores as unsecured loans 2.2.1 Regarding the raising of an amount of ₹ 365,25,00,000/- as unsecured loans through your subsidiary NNPLC, vide letter dated 11.11.2013, you were requested to furnish the complete details along with documentary evidence regarding the source thereof, viz. the identity of the payers, the creditworthiness of the payers and the genuineness of the transactions. You have stated in your reply filed on 26.11.2013 that sum of ₹ 254.75 crores was raised by NNPLC from its immediate subsidiary NDTV Networks BV. Another addition of ₹ 110.5 crores is stated to be on account of currency translation. However, no evidence has been filed by you in support of your assertions. 2.2.2 In your above reply, you have also alleged as under :- Further, the complete list ofthe subscribers ofbonds, subscription agreement and other relevant details were duly filed during the course of the assessment of AY 08-09.The above bond amount isduly confirmed by NNPLC to HMRC, UK onthe requisit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the total addition of ₹ 365.25 crores appearing in the Balance Sheet of NNPLC, an amount of ₹ 110.50 crores was on account of adjustment of fluctuation in exchange rate of currency and regarding the balance amount of ₹ 254.75 crores, the assessee stated that this was the unsecured loan obtained from NDTV BV. However, no confirmation was filed nor this office was afforded any verification regarding the creditworthiness of the lender or the genuineness of the transaction. In the absence of these, the assessee has not discharged its onus u/s 68 and there is no alternative but to propose that the amount of ₹ 254.75 crores may be added to the assessee's taxable income for the year under consideration. Further, it is pertinent to mention that although the assessee claimed that the complete list of the subscribers of bonds, subscription agreement and other relevant details were duly filed during the course of the assessment of AY 08-09 , yet no such details were found in the assessment records, which was specifically confronted to the assessee and yet, the assessee has failed to substantiate its claim. 5.19. The copy of the remand report was given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant time. The details were also stated to have been furnished before Investigation officer and DIT (Intl) during enquiries by these officers. 2.2.2 Vide this office letter dated 05.12.2013, the assessee was informed that no such documents were found in the assessment record for AY 2008-09. The assessee vide letter dated 09.12.2013 stated that it was again filing copy of the submission dated 08.02.2012 filed in the course of assessment of AY 2008-09 before AO, which consisted of the complete list of the subscribers to bonds, subscription agreement and other relevant details and documents enclosed as Annexure B. Copies of submissions dated 28.05.2012, 31.05.2012, 11.06.2012 and 20.07.2012 stated to have been filed before the then AO and copies of submissions dated 18.02.2011, 03.03.2011, 08.03.2011, 29.03.2011 and 30.03.2011 stated to have been filed before the Investigation Officer and DIT were also claimed to have been enclosed as Annexure C1-C5. 2.2.3 However, perusal of the documents enclosed by the assessee reveals that in response to requisition to prove the identity of the investors, their creditworthiness and genuineness of the transactions, the assessee has file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2013 11.03.2013. The copies of the said submissions were claimed to be duly enclosed as Annexure El E2 of the reply dated 09.12.2013. 2.3.4 I have perused the assessee's letters dated 27.02.2013 (running into 10 pages) 11.03.2013 (running into 2 pages) marked as Annexure El and Annexure E2 respectively. At the outset, it is submitted that there is no reference to the impugned issue of unsecured loans amounting to ₹ 254.75 crores raised during the year. The contents of the referred letters address certain queries raised by the AO and query regarding unsecured loans is not one of such queries. The bare letters are not even supported by any Annexures mentioned ion the said letters. 2.3.5 Under the circumstances, when the attached annexure- less letters do not contain any reference to query regarding unsecured loans nor attempt to address such query, therefore, filing of such letters does not serve any purpose 2.3.6 It is pertinent to mention that during the course of hearing before the Hon'ble DRPon 23.12.2013, the assessee has filed a reply on the issue. It has been stated by the assesseethat the Impugned unsecured loan has been raised pursuant to Loan A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be granted on the basis of a duly completed utilization request, where as no such utilization request or basis for seeking the above credit facility has been produced by the assessee before the AO or before the DRP. We are therefore in agreement with the AO's finding that the onus of proving the genuineness of the loan transaction has not been discharged by the assessee. The AO is, therefore, directed to make addition of ₹ 254.75 crores. 9.6 In view of the above detailed facts and circumstances of the case and in compliance with the directions of the Honble DRP as reproduced above, it is held that the assessee has failed to discharge its onus of proving the genuineness of the transaction of raising unsecured loan through its subsidiary NDTV Networks Pic and hence, the amount of ₹ 254.75 crores representing the amount of such unsecured loan is added to the assessee taxable income u/s 68 of the Act. 9.7 As I am satisfied that on this issue, the assessee has concealed the particulars of its income within the meaning of section 271(1)(c) of the Act, therefore, penalty proceedings are separately initiated. 121. The ld AR further submitted that copies of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the some subsidiaries. He was also the CEO of the company. During the course of his examination, he was asked question No. 34 wherein the details of funds raised and retained of the foreign subsidiaries was asked. He replied that most of the funds came to the Indian subsidiaries particularly NDTV Imagine through NNPLC. According to him this included a loan of US$ 50 million, which came to NNPLC as a loan from NDTV BV and was in fact was out of subscription money received from NBCU. In view of this statement of the Director of company who was at the helm of the affairs we do not have any option but to set aside this ground of cross objection back to the file of the ld Assessing Officer with a direction to make a proper enquiry with respect to the loan of US$50 million. The ld Assessing Officer is further directed to carry enquiry also with respect to the fact that whether this loan amount was also out of subscription sum received from NBCU and is part of the total consideration of ₹ 642 crore to avoid any duplication of addition in the interest of justice. The assessee is also directed to submit the complete explanation with respect to the above loan with exhaustive evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsequently, in the final assessment order vide para No. 5.2 at page No. 38 recorded the reasons and retained the disallowance. 128. The ld AR further placed before us his written submission at para NO. 38 to submit that no disallowance can be made as under:- 38 GROUND NO. 6 to 6.1 OF GROUNDS OF APPEAL : DISALLOWANCE OF ₹ 78.40.990/- OF CLAIM OF DEDUCTION U/S 14A OF THE ACT 38.1 The Appellant is a listed company in Bombay Stock Exchange (BSE) / National Stock exchange (NSE). In the course of its business of news broadcasting it had made investments in its subsidiaries in India as well as outside India. In addition to the same, the company had also made investment in share capital of other Indian companies. The details of such companies are reproduced at page 95 of the appeal set wherein the appellant disclosed the year of investment as well as the dividend received during the year. For the sake of ease of reference, the details are reproduced in a tabulated manner below 129. The Id DR submitted that AO has recorded his satisfaction about the assessee s calculation and therefore his conclusion would not be rejected. For this, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x B)/ C ₹ 66,88,490/-* A= Intt. Other than interest included in clause (i) B= average value of investment in Balance sheet on the 1st day and last day of previous year, income from which does not or shall not form part of the total income C= average of total assets in Balance sheet on the 1st day and last day of previous year 3 An amount equal to 1A% of average value of investment in Balance sheet on the 1st day and last day of previous year, income from which does not or shall not form part of the total income ₹ 11,52,500/-* Expenditure incurred in relation to exempt income ₹ 78,40,990/- * As computed in draft assessment order and reproduced in para 5 above. 5.2 On this issue, it is observed that no managerial expenses in respect of investment made by the assessee in group companies and other companies have been reflected or disallowed and offered for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ₹ 78,40,990/- * As computed in draft assessment order and reproduced in para 5 above. 131. In view of the above of the ld Assessing Officer that the assessee has not been disallowed any expenditure and further the Nil expenditure could not have been incurred in relation to exempt income because of common infrastructure and expenditure. Therefore, relying on the decision of the Hon'ble Delhi High Court in Indiabulls Financial Services Ltd Vs. DCIT(supra) the disallowance is required to be made u/s 14A of the Act. Further, the income of the dividend income from the foreign subsidiary is not exempt. Therefore, that investment must not be included while working disallowance u/s 14A. further, if the assessee has tax-free funds available more than the amount of investment then no disallowance with respect to the interest expenditure can be made of the nexus is not proved by the Assessing Officer. in view of all these facts in the interest of justice we set aside the issue of disallowance u/s 14A back to the file of the ld AO with a direction to recomputed disallowance after giving assessee a reasonable opportunity of hearing. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the order of the Special Bench. 137. We have carefully considered the request of both the parties, which is fair and proper. As the matter is pending before the special bench it would also not be proper for us to decide the issue now. in view of this we set aside this ground of cross objection of the assessee to the file of the ld TPO with a direction to decide the issue after the decision of the Special Bench of tribunal. In the result ground No. 14 of the CO is allowed with above direction. 138. Ground No. 15, 16 and 17 are with respect of charging of interest u/s 234B and 234D of the Act, withdrawal of interest u/s 244A of the Act and initiation of penalty proceedings u/s 271(1)(c) of the Act respectively. 139. Both the parties agreed before us that all the three above grounds of the cross objection are consequential to the determination of income of the assessee. Therefore, these grounds may be dismissed. 140. We have carefully considered the rival contentions and we agree with the agreement of the parties that above three grounds of cross objection are consequential in nature. Therefore, we dismiss them. 141. In the result, cross objection filed by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
