TMI Blog2022 (12) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... placed before us clearly show what all the assets and liabilities to be transferred by the assessee to its AE as per BTA. Since what all the assets and liabilities to be transferred by the assessee are clearly reflected in the Addendum to BTA the TPO/DRP are not justified in assuming that the assessee has transferred the entire assets and liabilities to its AE under BTA as slump sale completely ignoring the evidences on record and making some observations on assumptions. Assessee has clearly demonstrated with evidences that it has transferred only part of the assets to its AE under BTA read with Addendum to BTA and, therefore, there is no reason as to why the Addendum should not be considered and acted upon. Therefore, taking the totality of facts and circumstances into consideration, we direct the TPO to take cognizance of the Addendum the exhibits forming part of BTA and the other evidences and calculate the value of only those assets transferred by the assessee and exclude the assets which were retained, for the purpose of determining the ALP. TP Adjustment under the head Income from business or profession instead of income from capital gains - HELD THAT:- We are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained by the Appellant post the transfer of business undertaking to the AE. 2.4 In incorrectly adjusting the value of the subjected transaction by not allowing the deduction for the assets and liabilities not transferred by the Appellant and instead equating the value of the assets and liabilities transferred with the total value of the business as determined in the valuation report. Ground 3: Incorrect computation of total tax demand under section 156 of the Act Without prejudice to the above, the learned AO erred in computing the final tax demand by incorrectly adding the transfer pricing adjustment amounting to INR 15,55,31,595 to the Income from Business or Profession instead of Income from Capital Gains. Ground 4: Initiation of penalty proceedings under section 270A of the Act On the facts and circumstances of the case, the learned AO erred in initiating penalty proceedings under section 270A of the Act for the transfer pricing adjustment made in the final assessment order. 2. Ground no. 1 2 relates to upward adjustment of Rs.15,55,31,595/- made by the Assessing Officer in determining the Arm s Length Price (ALP) of the International Trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets and liability taken over as on 31.01.2016. 5. With regard to transaction pertaining to sale of business undertaking by the assessee to its AE Saxo AS it was stated that a business transfer agreement was entered between assessee and Saxo AS on 29.02.2016, however, the actual transfer of assets was undertaken on 01.04.2016. Copy of the agreement was furnished before the TPO. The assessee further stated that the valuation of the said transaction was undertaken by the independent valuer using Discounted Cash Flow (DCF) Method as mentioned in the valuation report as on 31.01.2016. The assessee also furnished copy of valuation report before the TPO. The assessee also contended that DCF is the most appropriate and judicially accepted method for valuation in cases with similar facts. The assessee also furnished the net asset value of assets and liabilities taken over by its AE as on 31.01.2016. The TPO on examining the details furnished by the assessee observed that assessee has submitted only copy of agreement and the exhibit which was mentioned as part of agreement was not furnished. The TPO observed that as per the valuation provided by the assessee based on NAV Method the net as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k AS w.e.f. 01.04.2016. A remand report was called for by the DRP from the TPO and the TPO in the remand report stated that the assessee s contention that some of the assets/liabilities were not part of business transfer has not been mentioned in the Business Transfer Agreement. In the remand report TPO also observed that assessee itself submitted that its entire business undertaking including fixed assets was sold to Saxo AS w.e.f. 01.04.2016. 7. Considering the remand report and also the submissions of the assessee the DRP was of the view that as per clause (19) of the Business Transfer Agreement, Exhibit 1.1, all the assets and liabilities were to be transferred and this clause was also referred to in Addendum to Business Transfer Agreement dated 07.05.2016. The DRP was of the view that the Addendum only gives the value of the assets and liabilities transferred by the assessee to Saxo AS under various heads and there is no narrative as to why the entire asset have not been transferred and why specific assets have been retained when the Business Transfer Agreement refers to entire assets. The DRP finds no reason to interfere with the finding of the AO/TPO. 8. Before us the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was duly submitted before the DRP wherein it has been clearly mentioned that the assets and liabilities not transferred were primarily in the nature of cash/receivables which the Assessee wished to retain for certain business contingencies, such as i.e., ongoing service tax litigation, potential liability, etc. 9. The third finding of the Ld. DRP that Assessee itself stated that entire assets were transferred is again erroneous because the statement made by the Appellant has been taken completely out of context and singled out to allege that the Appellant itself has admitted that the entire undertaking has been transferred (at pg 43-44 of Appeal set, para 4.13 read with pg 45, para 4..24) while all that the Appellant in its statement reproduced in para 4.13 states is that since the valuation was obtained under DCF method which takes into account the future projections from the business as a whole, there was no requirement to do a valuation again. This by no stretch means that the entire undertaking has been sold. 10. Ld. Counsel further submits that in its case, there was no possibility of any such finding by the authorities because Appellant had filed submissions prior to 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pg 109 of PB). ii. A management certificate in this regard listing the assets and liabilities retained back by the Appellant was also filed before the Ld. TPO/AO during the assessment proceedings vide submission dated 17 Aug 2020 in response to a specific request by the Ld. TPO/AO. (@pg 184- 186 of PB) iii. Audited financials of the Appellant for year ending 31 Mar 2017 were also filed before the Ld. TPO/AO (@pg 82 of PB, point 3) and a mere perusal of the financials made it clear (@pg 447 of PB) that the entire undertaking was not transferred and Appellant had retained back assets and liabilities. iv. A reconciliation of the adjusted consideration was provided to the Ld. TPO vide letter dated 09 Mar 2020 in response to a specific request from the TPO during hearing dated 03 Mar 2020. (@pg 129 read with pg 183 of PB) v. Further, the exhibits only gave the list of assets and liabilities as on 31 Jan 2016. The same did not give any details about the assets and liabilities which were retained. Irrespective, the same were submitted before the DRP as additional evidence. (@pg 198-201 and 347- 381 of PB) 13. After having the above evidence, the only question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the entire undertaking has been transferred and accordingly has considered the aforesaid valuation of INR 31,39,11,962/- for the entire undertaking. The dispute arises only because both the Ld. TPO as well as the Ld. DRP firstly has perversely disregarded the assets and liabilities which were not actually transferred to Saxo AS but were duly retained by the Appellant giving complete prominence to the BTA as well as the initial valuation report which was carried out for the entire undertaking. 14.3 It is submitted that the following assets and liabilities (values as on 31.03.2016) were retained by the Appellant as per the Management Certificate: Particulars Amount (In INR) Amount (In INR) Assets not transferred: Cash and cash equivalents 9,86,96,254 Net tax receivables (net of provision/tax payable) 58,25,699 Security deposits 2,58,65,309 Tangible assets ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f its contention that assessee has placed various documents in the form of Addendum to BTA, etc. to demonstrate that part of the assets only were transferred to its AE. 17. On perusal of the order of the TPO, we noticed that the contention of the assessee was rejected as neither the Addendum to BTA nor the exhibits forming part of Business Transfer Agreement (BTA) were filed before the TPO. We also noticed that even though the Addendum to BTA and exhibits forming part of BTA were filed before the Ld. DRP the Ld. DRP finds no reason to interfere with the order of the TPO which in our view is not correct. The Addendum to BTA which was placed before us clearly show what all the assets and liabilities to be transferred by the assessee to its AE as per BTA. Therefore, since what all the assets and liabilities to be transferred by the assessee are clearly reflected in the Addendum to BTA the TPO/DRP are not justified in assuming that the assessee has transferred the entire assets and liabilities to its AE under BTA as slump sale completely ignoring the evidences on record and making some observations on assumptions. The assessee has clearly demonstrated with evidences that it has tran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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