TMI Blog2020 (7) TMI 822X X X X Extracts X X X X X X X X Extracts X X X X ..... en rejected. Thus, we deem it appropriate to restore the issue back to the file of TPO for fresh adjudication and for determination of ALP of intra-group services by applying most appropriate method specified in section 92C of the Act. Ground No.1 of the appeal is thus, allowed for statistical purposes. Adjustment in respect of reimbursement of expenses - Since we have restored ground No.1 to the TPO, we deem it appropriate to restore ground No.2 of the appeal as well, to the TPO for de-novo adjudication after affording reasonable opportunity of hearing to the assessee. Adjustment made in respect of loans extended by the assessee to domestic group companies, held as deemed International Transaction - HELD THAT:- A bare perusal of the meaning of international transaction defined in section 92B (1) would show that a transaction would fall within the ambit of international transaction if, either or both the associated enterprises are nonresident. In the present case none of the AEs i.e. neither the assessee nor the domestic group companies with which the assessee had entered into transaction are non-residents. All the companies are domestic entities and are subject to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated Enterprises (AEs). The international transactions entered into by the assessee during financial year 2011-12 are as under:- S.No. Nature of International Transaction Amount (Rs.) 1. Payment of licence fees 17,63,132 2. Usage fees 13,76,708 3. Reimbursement of expenses 13,58,922 4. Buy back of equity shares 1,50,81,250 5. Regional Headquarter charges 43,20,433 6. Media / Advertisement cost 31,217 7. Brokerage/ commission 84,700 The Transfer Pricing Officer (TPO) in proceedings under section 92CA of the Act made adjustment to the tune of Rs.2,64,83,673/- qua International Transactions. The adjustment made by TPO inter-alia includes, adjustment in respect of intra-group services and the transactions entered into by the assessee with its domestic AEs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntered into transactions with its domestic AEs, this fact has been accepted by the TPO in his order. The TPO treated the domestic transactions as deemed International Transaction only for the reason that the holding company of assessee and the domestic AEs is based in Mauritius. The ld. Authorized Representative of the assessee submitted that the reason for treating the domestic transactions as deemed International Transaction is without any basis and on wrong interpretation of the legal provisions. The ld. Authorized Representative of the assessee contended that even if substantial shareholding in domestic companies are held by a foreign entity, the transaction cannot be termed as deemed International Transaction. In support of his contention the ld.Authorized Representative of the assessee placed reliance on the following decisions:- i. CIT vs. Kodak India P. Ltd., 288 CTR 46 (Bom) ii. Research Data Services India Pvt. Ltd. vs. ITO, in ITA No. 1842/Mum/2017, for A.Y 2012-13 decided on 16/10/2019. 4. Per contra, Shri Uodal Raj Singh, representing the Department vehemently defended the assessment order and the directions of the DRP. The ld. Departmental Representativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal is against adjustment made in respect of loans extended by the assesse to domestic group companies, held as deemed International Transaction . It is an undisputed fact that the assessee had entered into transactions for extending loans and providing services to the group entities based in India. Before proceeding further, it would be relevant to refer to the meaning of international transaction as defined under the Act. The expression International Transaction has been defined in section 92B of the Act. The provisions of the section as they were applicable in AY 2012-13 are reproduced herein below:- Section 92B (1) For the purposes of this section and sections 92, 92C, 92D and 92E, international transaction means a transaction between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises, and shall include a mutual agreement or arrangement between two or more associated enterprises for the allocation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case, the authorities below have failed to take note of the fact that the transactions in question are within domestic entities only. No overseas entity is involved in the transaction. Unless the conditions set out in subsection (1) are satisfied, the provisions of subsection (2) cannot be invoked. The authorities below in the present case have erred in invoking deeming fiction solely on the premise that since shareholders of overseas holding company are holding shares of the assesse and AEs, in substance the transaction between the assesse and the domestic group entities would fall within the ambit of deemed international transaction . Deeming provisions cannot be invoked by expanding the latitude of expressions used in the section. The authorities below have failed to take into consideration the fact that all group entities are companies incorporated in India having separate legal existence. Except for common shareholding, no material has been relied on by the TPO/DRP to substantiate that the transaction between the entities was influenced by the overseas holding company. 10. In the case of CIT vs. Kodak India (P) Ltd. (supra), the assesse had sold its imaging bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Apex Court and the Hon ble Bombay High Court on the issue of time limit for pronouncement of orders by the Tribunal and the circumstances leading to lockdown held:- 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only inconsonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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