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TMI Blog2022 (12) TMI 696X X X X Extracts X X X X X X X X Extracts X X X X ..... ort of Metal Halide Lamps. The assessee company claimed to have paid commission to the extent of Rs.23,21,665/-. The AO during the course of assessment proceedings asked the assessee to submit the details of expenses relating to commission paid like agreement, proof of services rendered by the parties to whom commission is paid along with bills and vouchers. The assessee did not submit any evidence except the break-up of commission paid and hence, the AO disallowed the entire commission. Aggrieved, assessee preferred appeal before CIT(A). The assessee before CIT(A) submitted the details of commission paid i.e., agreement, payment of commission through banking channels, deduction of TDS on this commission, identity of the parties to whom commission paid, invoices and computation of commission based on the said invoices. The CIT(A) called for 'Remand report' from the AO but the AO did not submit any report. Accordingly, the CIT(A) accepted the explanation of the assessee and deleted the disallowance of commission of Rs.23,21,665/-. Aggrieved, now Revenue is in appeal before the Tribunal. 4. We have heard rival contentions and gone through facts and circumstances of the case. We note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 77A of the Companies Act and even it would not attract provisions of section 2(22)(b) of the Act. The CIT(A) noted that the assessee has filed the compliance report u/s.77A of the Companies Act and necessary Form 23 before ROC on 20.04.2011 itself. Accordingly, the CIT(A) deleted the addition. Aggrieved, now Revenue is in appeal before the Tribunal. 7. Before us, the ld. Senior DR first narrated the facts that during the year, the assessee company bought its own share from its parent company. The market value, applying Rule 11UA of such shares purchased was found to be Rs. 115.59 whereas the assessee company purchased it for Rs.89/- per share. The AO invoked the provisions of section 56(2)(viia) and treated the difference in price as deemed income under the head 'Other Sources'. In appeal, the CIT(A) held that the provisions of section 56(2)(viia) does not get attracted in buyback of shares and also accepted the arguments of the assessee that, on account of buyback of its share, it had not received any 'property'. The ld. Senior DR submitted that on applicability of section 56(2)(viia) with respect to buyback of shares, the sub-clause (viia) does not differenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricing officer has not bothered to factor any adjustment to this transaction since it is a reverse transfer pricing by which an Indian entity has been indirectly profited and the provisions of transfer pricing are not applicable where the Indian entity is benefited with indirect profit, be it a present or future profit. The assessee company thus obtained an asset to sell such bought back shares to any other third party for book value which is invariable higher than the value for which it received the same. 8. On the other hand, the ld.counsel for the assessee relied on the decision of Co-ordinate Bench of Mumbai Tribunal in the case of Vora Financial Services (P.) Ltd., vs. ACIT, [2018] 171 ITD 646 (Mumbai), wherein it is held that the provisions of section 56(2)(viib) of the Act are applicable only in cases where shares become property in the hands of recipient and shares shall become property of recipient only if it is shares of any other company. The ld.counsel for the assessee relied on para 30 to 32 of the order of the Tribunal. He argued that the buy-back of shares would only amount to reduction/redemption of the existing share capital and the Assessee receiving shares as co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is clear that the same can be invoked only where the assessee receives a property for an inadequate consideration and in the present case before us, the assessee company only brought back its own shares from its shareholder and there is reduction of share capital by such buyback and hence, this would not tantamount to purchase or acquire of any property as envisaged u/s.56(2)(viia) of the Act. As argued by ld. Senior DR, that by receiving the shares of its own i.e., buyback for a consideration less than the book value, the assessee has earned hidden asset from the parent company by giving up its right to obtain the true value of its shares transferred, we do not agree because the provisions of section 2(22)(d) r.w.s.115O of the Act would not apply in the hands of the assessee, since the shareholders have received the money in lieu of buyback of shares by assessee of the parent company. According to us, said provision would not apply in the hands of the assessee who has brought back this shares and in any eventuality, the very provision of section 2(22)(d) of the Act also craved out exception i.e., "dividend". In our view, the assessee has not received any property being shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a company in which public are substantially interested) either for inadequate consideration or without consideration where the recipient is a firm or a company (not being a company in which public are substantially interested)." 31. A combined reading of the provisions of sec. 56(2)(viia) and the memorandum explaining the provisions would show that the provisions of sec. 56(2)(viia) would be attracted when "a firm or company (not being a company in which public are substantially interested)" receives a "property, being shares in a company (not being a company in which public are substantially interested)". Therefore, it follows the shares should become "property" of recipient company and in that case, it should be shares of any other company and could not be its own shares. Because own shares cannot be become property of the recipient company. 32. Accordingly we are of the view that the provisions of sec. 56(2)(viia) should be applicable only in cases where the receipt of shares become property in the hands of recipient and the shares shall become property of the recipient only if it is "shares of any other company". In the instant case, the assessee herein has purchased its o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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