Tribunal partially allows appeal, directs deletion of transfer pricing adjustment & modifies disallowance under Section 14A.

The Tribunal allowed the appeal partly, directing the deletion of the transfer pricing adjustment and modifying the disallowance under Section 14A. The order was pronounced in the open court on 25th June 2019.

---

---

Issues Involved:
1. Transfer Pricing Adjustment based on Share Purchase Agreement (SPA)
2. Determination of Associated Enterprises (AE) under Section 92A
3. Classification of "International Transaction" under Section 92C
4. Computation of Arm's Length Price (ALP) using Comparable Uncontrolled Price (CUP) method
5. Disallowance under Section 14A read with Rule 8D

Detailed Analysis:

Issue 1: Transfer Pricing Adjustment based on Share Purchase Agreement (SPA)
The appellant contested the addition of Rs. 5.40 crores made by the Assistant Commissioner of Income Tax (AO) based on a transfer pricing adjustment derived from a Share Purchase Agreement (SPA). The appellant argued that the SPA was executed on 02.02.2009, and therefore, any transfer pricing adjustment should have been made in AY 2009-10, not AY 2011-12. The Tribunal found that the appellant's case for AY 2010-11 had already been decided in their favor by the Tribunal, which concluded that the AO's jurisdictional defect could not be cured by the CIT(A). Consequently, the Tribunal directed the deletion of the impugned transfer pricing adjustment for AY 2011-12, making Grounds II to IV infructuous.

Issue 2: Determination of Associated Enterprises (AE) under Section 92A
The appellant challenged the AO's determination that M/s. Kuki Investments (Kuki) was an AE of the appellant under Section 92A of the Income Tax Act. The Tribunal noted that the CIT(A) did not uphold the AO's finding that the appellant and EMSHL were AEs, and the revenue did not challenge this. The Tribunal concluded that Section 92A(1) and 92A(2) must both be fulfilled to establish an AE relationship. The Tribunal found that the appellant's profession could not be considered a separate "enterprise" under Section 92F(iii), and thus, the appellant and Kuki were not AEs.

Issue 3: Classification of "International Transaction" under Section 92C
The appellant argued that agreeing to be associated with the Rajasthan Royals (RR) franchise did not amount to an "international transaction" under Section 92C. The Tribunal agreed, noting that the transaction between the appellant and Jaipur IPL Cricket Private Limited (JICPL) could not be considered an international transaction as neither party to the SPA was an AE of the appellant, and JICPL did not enter into a prior agreement with the AE of the appellant.

Issue 4: Computation of Arm's Length Price (ALP) using Comparable Uncontrolled Price (CUP) method
The appellant contested the computation of ALP by considering the agreement with Star India Private Limited and applying the CUP method. The Tribunal found that the AO's determination of ALP at Rs. 540 Lacs based on a comparable price with M/s Star India Pvt Ltd. was not justified as the appellant did not receive any consideration for the services rendered to JICPL. The Tribunal directed the deletion of the transfer pricing adjustment, making this ground infructuous.

Issue 5: Disallowance under Section 14A read with Rule 8D
The AO disallowed Rs. 3.21 Lacs under Section 14A read with Rule 8D, attributing it to the appellant's exempt dividend income. The Tribunal directed the AO to consider only those investments that actually yielded exempt income during the year, in line with the Delhi Tribunal's decision in ACIT Vs. Vireet Investment (P.) Ltd.

Conclusion:
The Tribunal allowed the appeal partly, directing the deletion of the transfer pricing adjustment and modifying the disallowance under Section 14A. The order was pronounced in the open court on 25th June 2019.

---