TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Tribunal rules capital over revenue receipt for AY 2005-06, supports transfer pricing adjustments</h1> <h3>Dy. CIT, Circle 6(1), New Delhi Versus M/s. Messe Dusseldorf India P. Ltd.</h3> Dy. CIT, Circle 6(1), New Delhi Versus M/s. Messe Dusseldorf India P. Ltd. - TMI Issues:1. Classification of received amount as capital receipt or revenue receipt.2. Transfer pricing adjustment based on TPO's order.Analysis:1. The appeal involved a dispute regarding the classification of the received amount of Rs.34,511,880 by the assessee company as a capital receipt or a revenue receipt for the AY 2005-06. The AO contended that the receipt was in the revenue field, leading to an addition of Rs.1,10,55,815 as per the TPO's order. The assessee argued that the amount was received for restoration of its capital structure and net worth, crucial for the company's revival. The AO's decision was challenged before the CIT(A), who partially granted relief. The Revenue further appealed, disputing the CIT(A)'s order on the grounds that the addition on account of reserves and surplus was wrongly deleted, and the TPO's order under section 92CA(3) was incorrectly disregarded.2. The Tribunal analyzed the submissions made by both parties. The Revenue argued that the amount was a revenue receipt as it was used for the company's current business operations. They highlighted documents indicating that the financial assistance was for recoupment of accumulated losses, not erosion of net worth. On the other hand, the assessee contended that the amount was received from the parent company for erosion of net worth, citing relevant case laws and documents. The Tribunal examined the purpose of the financial assistance and the RBI's approval, which confirmed the funds were for 'restoration of the erosion in the capital of the company.' Relying on the legal position established by the Delhi High Court and Supreme Court in similar cases, the Tribunal upheld the CIT(A)'s findings that the amount constituted a capital receipt.3. Regarding the transfer pricing adjustment issue, the Tribunal noted that the CIT(A) accepted the TPO's method and comparables, except for one company unrelated to the assessee's business. The Tribunal agreed with the exclusion of this comparable and upheld the direction to exclude domestic transactions while computing adjustments based on the arm's length price of international transactions. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decisions on both issues.In conclusion, the Tribunal upheld the CIT(A)'s findings that the received amount was a capital receipt and supported the adjustments made in the transfer pricing analysis, leading to the dismissal of the Revenue's appeal.
TaxTMI 