TMI Blog2018 (8) TMI 1708X X X X Extracts X X X X X X X X Extracts X X X X ..... : The present Appeal filed by the assessee is against the order of Ld. Commissioner of Income Tax (Appeals)-11, Mumbai, dated 30.01.14 for AY 2010-11 on the grounds mentioned herein below:- GROUND I 1. The Commissioner of Income Tax (Appeals) - 11 ('CIT(A)') erred in confirming the action of the Assistant Commissioner of Income Tax, Central Circle -13, Mumbai ('AU') in making an addition of ₹ 3,42,85,714/- on account of transfer pricing adjustment made on the basis of Share Purchase Agreement ('SPA'/'Agreement'). 2. He further erred in holding that: a. M/s. Kuki Investments ('Kuki') was an 'Associated Enterprises ('AE') of the Appellant within the meaning of section 92A of the Income Tax Act, 1961('the Act'). b. Mr. Raj Kundra ('RK') was a 'relative' of the Appellant within the meaning of section 92A(2)(j). c. Appellant profession was an 'enterprise' within the meaning of section 92F(iii) of the Act separate from the Appellant being an 'enterprise'. 3. The Appellant therefore, prays that the alleged 'international transaction' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of Rajasthan Royals (14 matches = 14 days) in addition to the aforesaid 10 days. 3. The CIT(A) / AO ought to have held that such 14 days were only for 3 working hours per day, being the actual duration of the IPL matches, which the Appellant was required to attend. 4. Accordingly, the number of days worked out by the AO and confirmed by CIT(A) is erroneous. 5. The Appellant, therefore prays that the AO be directed to recompute the transfer pricing addition accordingly. GROUND IV The Appellant craves leave to add to, amend and/or alter all or any of the above grounds of appeal. 2. The brief facts of the case are that the assessee an individual, is resident in India and is mainly engaged in the profession of film acting and has also functioned as a brand ambassador for various products. During the period relevant to AY 2010-11 she had earned income from business and profession, capital gains and other sources. The assessee filed her return of income on 20.09.2010 declaring a total income of ₹ 82,73,481. The return was selected for scrutiny and the assessment order was passed on 31.3.2012 assessing the total income at ₹ 4,25,59,195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) and the Ld. CIT(A) considering the case of both the parties, dismissed the appeal filed by the assessee. While doing so, the Ld. CIT(A) held that the Assessee and Kuki were AEs in view of sec. 92A(1). It was also observed that the Assessee‟s professional activities, which were controlled by her, constituted an 'enterprise' (distinct from Assessee herself as 'enterprise') in view of the term 'enterprise' as defined in sec. 92F(iii), thereby, held that the Assessee and Kuki were AEs in view of sec. 92A(2)(j), as RK controls Kuki and also controls the profession of assessee through assessee, RK‟s relative. Apart from that Ld. CIT(A) further applied sec. 92B(2) to hold that there was a deemed 'international transaction' between the Assessee and JICPL due to the prior agreement, i.e. SPA. Ld. CIT(A) also held that Kuki had benefitted in terms of share purchase consideration to the extent of monetary value of the (brand promotion) services provided by the Assessee to EMSHL and its the then existing shareholders on behalf of Kuki. He then made adjustment to Assessee's income on the basis of ALP. Aggrieved by the order of Ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting his reasons for that of the AO's reasons. In this respect, assessee relied upon the following submissions/judgments /decisions:- i.) The AO may be confined to those reasons recorded to support his assumption of jurisdiction. - Kanga Palkhiwa!a's Commentary at Note 55 at Pg. 2208 of Tenth Edition of The Law and Practice of Income Tax ii.) decision in the case of Hindustan Lever Ltd v. R.B. Wadkar [2004] 268 ITR 332 (Born HC) iii.) decision in the case of CIT v. Jagadhri Electric Supply Industrial Co. [1981] 140 ITR 490 (P H HC) iv.) decision in the case of Equitable Investment Co. (P.) Ltd. v. ITO [1988] 174 ITR 714 (Cal HC) 5. Whereas on the contrary, Ld. DR relied upon the orders passed by the revenue authorities and submitted that the Ld. CIT(A) is not an ordinary Court of appeal such as ITAT or other appellate authorities and has more powers than them. In this respect, reliance was placed upon the judgment of Narrondas Manordass vs. CIT [1957] 31 ITR 909 (Born. HC). Ld. DR also during the course of hearing relied on the decisions of Hon'ble Supreme Court in case of CIT v. McMillan Co. [1958] 33 ITR 182 and CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also submitted that Sec. 92A(2)(J) deems the two 'enterprises' as AEs if one of the enterprises is controlled by an individual and the other 'enterprise' is also controlled by such individual or his relatives. It was submitted in Assessee‟s case, sec. 92A(2)(J) cannot be applied as neither RK nor Kuki cannot said to have controlled the Assessee. It was also submitted that even as per sec. 92F(iii), an 'enterprise' means a 'person', engaged in activities etc. The Assessee's Profession cannot be considered as a person within the meaning of sec. 2(31), separate from her, as the Assessee's profession is not assessable separately from the Assessee. Therefore, the question of Assessee being an AE of Kuki, by holding that RK controlled Kuki and RK's relative, i.e. Assessee, controlled the 'enterprise' of assessee's profession, does not arise. 8. On the other hand, Ld. DR relied upon the orders passed by revenue authorities and submitted that assessee and Kuki were AE‟s u/s. 92A(2)(J) as: a) the Assessee's husband, RK, controlled Kuki. b) the Assessee is an individual and as such a 'person' within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction' if there exists a prior agreement in relation to the relevant transaction between one of the non-AE and the AE of an assessee. The Ld. CIT(A) considered the two non-AEs as the Assessee and JICPL and held a deemed international transaction without establishing as to with which AE of the Assessee had a prior agreement with JICPL. It was also argued that Sec. 92B(2) of the Act cannot be applied to hold that transaction between Assessee and JICPL was an 'international transaction' as: a) Neither any of the parties to the SPA (i.e. prior agreement) was an AE of the Assessee; b) Nor JICPL entered into a prior agreement with the AE of the Assessee (JICPL was not a party to the SPA); and as such the pre-requisite of a prior agreement between a non-AE with the AE of an assessee is not fulfilled. 12. On the contrary, Ld. DR relied upon the orders of Ld. CIT(A). 13. After having considered the submission of both the parties, we find that Section 92B(2) of the Act cannot be applied to hold that transaction between assessee and JICPL was an International transaction‟ as neither any of the parties to the SPA were an AE of the assessee nor J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction', the provisions of sec. 92(1) cannot be applied and as such an adjustment on the basis of ALP cannot be made. It was also submitted that if at all it is held that there was a 'price' and therefore there existed a 'transaction', then in that eventuality, since the services were provided to JICPL, the alleged transaction was between the Assessee and JICPL, both being residents, then in that eventuality even otherwise the alleged transaction cannot be considered as an international transaction 16. On the other hand, Ld. DR relied upon the orders passed by Ld. CIT(A) and also on the decision of Hon'ble Special Bench of Kolkata ITAT in case of Instrumentarium Corporation Ltd. [2016] 179 TTJ 665, to submit that, since no fee was charged by the Assessee, the price was Zero and as such the ALP has to be substituted with the same. During the course of hearing, the Ld. DR had also relied on the decision of Hon'ble Delhi Tribunal in case of BMW India Pvt. Ltd. v. DOT [2017] ITA No. 1406/Del/2015, wherein, after considering Maruti Suzuki's case, determination of ALP was upheld. He also relied on the decision of Hon'ble Mumbai Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case the Hon'ble Special Bench did not consider Maruti Suzuki's decision (supra) and to that extent was per-incuriam. iii. In Sabre Asia's case (supra), the counsel of the assessee had conceded the contention that the transaction of interest free loan is subjected to transfer pricing adjustments and as such the contentions raised by the Assessee before the Hon'ble Bench was not considered in that case. 18. As far as the objection of assessee with regard to the applicability of chapter 10, when no income has arisen is concerned. In this respect, the Ld. AR submitted that Chapter X pre-supposes existence of 'income' and lays down machinery provisions to compute ALP of such income, if it arises from an 'international transaction'. Sec. 92 is not an independent charging section to bring in a new head of income or to charge tax on income which is otherwise not chargeable under the Act. Accordingly, since no income had accrued to or received by the Assessee u/s. 5, no notional income can be brought to tax u/s. 92. In this regard, Ld. AR relied upon the following judgments:- i. Dana Corporation [2010] 321 ITR 178 (AAR) - Pg. 192 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii. Praxair Pacific Ltd [2010] 326 ITR 276 (AAR) - Pg. 279 and 286 iv. Deere Co [2011] 337 ITR 277 (AAR) - Pg. 280 284 v. Venenburg Group B.V [2007] 289 ITR 464 (AAR) - Para 15 at Pg. 472 vi. Goodyear Tire Rubber Co. [2011] 334 ITR 69 (AAR) - Para 10 at Pg. 78 vii. Vodafone India Services (P.) Ltd. v. Union of India [2013] 361 ITR 531 (Born HC) - Para 32 at Pg. 564 viii. Vodafone India Services (P.) Ltd. v. Union of India [2014] 368 ITR 1 (Born HC) - Para 24 (Pg. 30), 40 (Pg. 37-38) ix. Vodafone India Services (P.) Ltd. v. Union of India [2015] 369 ITR 511 (Born HC) - Para 8 at Pg. 515 x. Vodafone India Services (P.) Ltd. v. CIT [2016] 385 ITR 169 (Born HC) - Pg. 312 and 320 And keeping in view of our above finding, we allow these grounds and direct the AO to deleted the additions. 21. Since we have already deleted the additions by above reasoned order, therefore there is no need to adjudicate other grounds on merits in view of our above findings as the same become infructous. 22. In the net result, the appeal filed by the assessee stands allowed. Order pronounced in the open court on 21st August, 2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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