9911796707
TMI Blog2023 (11) TMI 994X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the case and in law, a) the Ld. AO erred in exceeding jurisdiction in not following the order dated January 30, 2021 passed by Learned Assistant Commissioner of Income-tax, Transfer Pricing, DC/ ACIT TP Delhi 3(1)(2) ("Ld. TPO") under section 92CA of the Act, and thereby contravening the provisions of section 92CA (4) of the Act and available judicial precedents. b) the learned Dispute Resolution Panel ("Ld. DRP") erred in stating that the Ld. AO is not precluded from re-examining/ re-evaluating the international transactions wherein certain facts have not been brought to the notice of Ld. TPO during the course of transfer pricing proceedings without pointing out/ substantiating the facts which were not available with the Ld. TPO and ignoring that information/ facts relied upon by the Ld. AO pertains to the subsequent year. 4. On the facts and circumstances of the case and in law, the Ld. AO erred in not abiding by the following binding directions of Ld. DRP and not undertaking any independent verification: a) to independently verify the claim of the Appellant that the entire value of Wormhole Technology (Singapore) Private Limited (Wormhole' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Equity Shares of Orbgen from third-party shareholders, 8. On the facts and circumstances of the case and in law, the Ld. AO erred in levying interest under section 234B of the Act. 9. On the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 270A of the Act, mechanically on the additions/ disallowance made." 2. Briefly stated facts are that for A.Y. 2017-18 the assessee filed its return of income on 31.11.2017 declaring NIL income. The case was selected for complete scrutiny and statutory notice u/s 143(2) of the Act was issued. The basis of selection for scrutiny assessment, as per AO, was high value of international transactions other than issue of shares (T.P. Risk Parameter) as per Form 3CEB amounting to Rs. 1,82,40,89,439/-. During the assessment proceedings the case was referred to the Transfer Pricing Officer ("TPO), who vide order dated 30.01.2021 u/s 92CA(3) of the act did not draw any adverse inference in respect of armed length price ("ALP"). The assessee computed taxable income/(loss) at Rs. 4,69,740/-. 2.1 It is pertinent to note here that against the draft assessment order passed by the AO, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this regard are not tenable. However, the AO shall verify the claim of the assessee that the entire value of Wormhole Singapore is not relatable to its investments in Orbgen India and accordingly such value relating to other investments shall be excluded in the determination of full value of consideration. The capital gain shall be computed in accordance with the provisions of section 48 of the Act. Grounds 4 to 15 are disposed of as above." 2.2 Thereafter, the AO proceeded to finalize the assessment and computed taxable income of the assessee company at Rs. 16,69,27,557/- by making addition on account of short term capital gain amounting to Rs. Rs. 16,69,27,557/-. The addition was made in respect of capital gain calculated by the AO, thereby adopting a different sale consideration at Rs. 123,22,34,504/- as against Rs. 106,53,06,947/- declared by the assessee. 3. Apropos to the grounds of appeal, learned counsel for the assessee vehemently argued that the action of the Assessing Authority is illegal against the settled principles of law. He submitted that the AO exceeded his jurisdiction by not following the finding of the TPO as well as the direction of the learned DRP. He con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puted capital gain of INR 16,69,27,557: (Amount in INR) Particulars As per ROI (converted into INR) As per Final Order Remarks Sales consideration 103,52,71,530 1,23,22,34,505 a) Assessee determined FMV on DCF method supported by report of CA. b) Ld. AO arbitrarily made calculation on the basis of sale of shares of Wormhole in the next FY (i.e. FY 2017-18). c) DRP directed the Ld. AO to verify that the entire value of Wormhole is not relatable to its investment in Orbgen. (refer para 3,5 at page 178 of paper book). However, the Ld. AO does not follow the aforesaid DRP directions. Cost Acquisition 103,52,71,530 106,53,06,947 a) The DRP deleted the proposed adjustment in the cost of acquisition proposed by the Ld. AO in the draft order. Expense borne on purchase (Stamp duty) 469,736 0 a) The Ld.AO has not allowed the cost of stamp duty while computing the capital gain. Capital Gain/Loss (469,736) 16,69,27,557 Capital gain calculated by the Ld. AO in the final assessment order (refer page 198 and 199 of paper-book) 8. The DRP through its directions dated June 21, 2022, accepted the COA disclosed by the Assessee and direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final assessment order and computed a revised capital gain of INR 16,69,27,557. OUR CONTENTIONS Ld. AO exceeded its jurisdiction by not following the order of Ld. TPO [Ground 3(a) of our appeal] TPO order-refer para 3.1 to para 5 on page 138 of Paper-book 1. As per the provision of section 92CA(4), that the order passed by the Ld. TPO has a binding effect and the assessing officer is bound to incorporate the order of Ld. AO on as-is-basis and compute total income of the assessee in conformity with the ALP determined by the Ld. TPO. The said principle is duly supported by following judgments: * Cushman & Wakefield India Pvt. (ITA No.3933/Del/2010)- Delhi ITAT [refer para 39 at page no. 16 of the case law compilation). Later on, duly affirmed by Delhi High Court in case of Cushman And Wakefield India Pvt (ITA 475/2012)/ [2014] 46 taxmann.com 317 (Delhi) [refer para 42 at page 35 of the case law compilation]; Vodafone India Service (P.) Ltd. [2013] (37 taxmann.com 250)- Bombay High Court [refer para(s) 69 to 75 at pg no. 75 and 76 of the case law compilation]; and Carraro India Private Limited ([2019] 104 taxmann.com 166/(ITA No 1260/PUN/ 2018)- Pune ITAT} [refer para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok also substantiate it holds other assets amounting to USD 2,993,060 and accordingly, it cannot be assumed that Wormhole derives 100% value from its investment in Orbgen. Therefore, the calculation made by the Ld.AO needs to be re-calculated based on the DRP directions by reducing the value of other assets. 4. Ld. AO substituted the value of sale consideration without giving reference to any provision/section of the Act (Ground 6(a) of our appeal). 4.1. During the subject year, the Act embodies no substitution of sale consideration provisions. Section SOCA of the Act which provides power to substitute full value of consideration with the FMV was inserted by Finance Act. 2017 e. 1.4.2018 (AY 2018-19) and has no application to the subject FY 5. Ld. AO erred in not providing relief for expenses of INR 489,969 borne by the Appellant in relation to stamp duty on the acquisition of shares [Ground 7 of our appeal] 5.1. The Appellant's claim of expenses borne at the time of the acquisition of shares was not granted by the Ld.AO while computing capital gains in the final assessment order. As per the principle laid down by various judgments any cost incurred to acquire an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Coordinate Bench in the case of Cushman & Wakefield (P.) Ltd. v. ACIT rendered in ITA No. 3933/Del/2010 (order dated 18.11.2011), observing as under: "38. It is clear from the above explanation that the provisions of transfer pricing are applicable as well to expenses and outgoing in an international transaction. The impugned amount represent the outgo of the assessee or the expense of the assessee for earning income with reference to the real property transactions in the shape of lea16 etc. It cannot be disputed by the revenue that the impugned transaction is international transaction falling within the scope of transfer pricing regulations as the Assessing Officer himself has referred this transaction to the TPO on the ground that it is an international transaction entered into by the assessee with its associate enterprises, the arm's length price of which was to be determined by the TPO, If it is so, then, the post amended provisions of Section 92CA(4) will be applicable and arm's length price determined by the TPO is binding upon the Assessing Officer. It has already been mentioned that all the six transactions entered into by the assessee are referred in the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve something indirectly which cannot be achieved directly by resorting to the provisions of article 142 of the Constitution, which empowers the court to pass any order in a case in order to do 'complete justice." (pp. 477 and 478 of the report)" 5.1 The aforesaid finding of the Coordinate Bench has been affirmed by the Hon'ble Jurisdictional High Court of Delhi vide order dated 23.05.2014 rendered in IT Appeal no. 475 of 2012 [2014] 46 taxmann.com 317 (Delhi), inter alia, by observing as under: "In view of the above discussion and analysis of the statutory provisions, two issues on the merits of the AO's assessment assume importance. Firstly, having regard to the TPO's stamp of approval to the fees charged for the stated (though still not proven) referral transactions, the AO was bound to accept that finding, it is, post 2007, binding." 5.2 Therefore, looking to the facts of the present case, where TPO has not proposed any adjustment and valuation has been adopted by the AO without verifying the true and correct facts qua the assets, we are unable to sustain such erroneous finding both on legality and facts. The grounds raised by the assessee are allowed. 6. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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