TaxTMI 
TaxTMI 
2013 (9) TMI 680
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....n of Rs.84,34,39,52,555/- on account of two unreported international transactions and a Draft Assessment Order dated 29th December, 2011, passed by respondent No.3-Assistant Commissioner of Income-tax (hereinafter referred to as the "AO" or "Assessing Officer"). The petitioner has also sought a writ of mandamus directing respondent No.3 - the AO to revise the Draft Assessment Order, after excluding the said transfer price adjustment. Lastly, the petitioner seeks a writ of prohibition, prohibiting the respondents from taking any steps pursuant to the impugned orders. 2. The two unreported transactions are the sale of the call centre business by the petitioner to Hutchison Whampoa Properties (India) Pvt. Ltd. and an alleged assignment of call options by the petitioner to Vodafone International Holdings B.V. The TPO determined the arm's length price of these two unreported transactions suo moto in exercise of powers under sections 92CA(2A) and/or (2B) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). The petitioner has challenged the jurisdiction of the TPO to determine the arm's length price of these transactions on various grounds. The respondents, apart from deny....
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....led by him on the other. An identical agreement also dated 1st March, 2006, was entered into between the petitioner on the one hand and one Analjit Singh and his group of companies on the other. Analjit Singh and Asim Ghosh acquired shares in Telecom Investments India Private Limited, an Indian company with credit support provided by HTIL. TII, in turn, held shares in Hutchison Essar Limited (earlier known as Hutchison Max Telecom Limited (HMTL) and subsequently re-named Vodafone Essar Limited). In consideration of the credit support, the framework agreements were entered into under which a call option was given to the petitioner, a subsidiary of HTIL to buy from the respective group companies, their entire share holdings in TII. The petitioner was also granted a right to subscribe to the shares in respect of the group companies. 6. On 11th February, 2007, a share purchase agreement (hereinafter referred to as the "SPA") was entered into between HTIL and Vodafone International Holdings BV (hereinafter referred to as "VIH BV") under which HTIL agreed to procure the sale of the entire share capital of CGP. Under the agreement HTIL also agreed to procure the assignment of loans owed ....
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....suant thereto. (A) The proceedings pertain to the Assessment Year 2008-09. Under cover of its Chartered Accountant's letter dated 8th January, 2009, the petitioner submitted Form No.3CEB in which it disclosed two international transactions during the assessment year 2008-09. The AO, with the approval of the Commissioner of Income-tax, by a letter dated 25th January, 2010, referred the same to the TPO under section 92CA(1) for the determination of the arm's length price thereof. These disclosed / reported transactions are not the subject matter of this petition. (B) We will set out the relevant provisions of the Act later. Suffice it to note at this stage that on 1st June, 2011, sub-section 2(A) of Section 92CA of the Act came into effect. (C) Hearings were held before the TPO. In the course of the correspondence with the petitioner, the TPO sought various documents and particulars and contended that the petitioner had not disclosed two international transactions viz. the BTA - the transaction relating to the sale of the call centre business by the petitioner to HWP (India) and the assignment of the call options under the new Framework agreements dated 5th July, 2007. It is thes....
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.... petitioner to show cause why it had not disclosed the said unreported international transactions. The petitioner submitted a detailed reply to the show cause notice. Once again, no objection was raised to the jurisdiction of the TPO to consider the unreported international transactions. The petitioner dealt with all the issues raised in the show cause notice on merits. It did contend that the Framework agreements were not international transactions and that there was, therefore, no question of proving any arm's length nature of a transaction and/or any valuation of the rights as no rights were conferred as alleged by the TPO or at all. The petitioner, however, did not contend that respondent No.2 did not have jurisdiction to consider the said transactions on the ground that they were not international transactions. The petitioner, in fact, went a step further and construed the agreements contending that there was no change between the 1st March, 2006 and the 5th July, 2007 Framework agreements. The petitioner also dealt with the show cause notice insofar as it related to the BTA. It answered the allegations in the show cause notice on merits, without contending that respondent No....
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....oto assume jurisdiction pursuant to section 92CA(2A) with respect thereto. The petitioner also dealt with the case on merits, including that the said transactions were not international transactions. 15. On 29th December, 2011, the AO passed a Draft Assessment Order under section 144C of the Act. The AO held that he was bound by the TPO's order and that an AO, under no circumstances, can differ with the TPO. The AO, accordingly, held that he was unable to uphold the assessee's objection with regard to the quantification of the ALP of the sale of the call centre business. The Advocate General, however, contended that the AO had even otherwise, independent of the TPO's order, found the transactions to be international transactions and computed the ALP in respect thereof himself. Mr. Salve denied that the AO had done so. It is clear that the AO has, independent of the TPO's order, on his own come to the same conclusion. However, as we have upheld Mr. Salve's submission that the AO is bound by the order of the TPO on both issues viz. whether the transaction is an international transaction or not and the computation of the ALP in respect thereof it is unnecessary to analyze the draft....
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....the application for interim reliefs, the petitioner would be at liberty to appear before the DRP without prejudice to its rights and contentions including those raised in this Writ Petition. (D) The DRP subsequently passed orders / directions under section 144C(5), inter-alia, upholding the findings of the TPO. The same was recorded in an order dated 8th October, 2012. (E) The matter thereafter appeared before another Division Bench on 8th October, 2012. By an order dated 8th October, 2012, the Division Bench recorded that on 24th September, 2012, it was agreed that the petition would be heard finally at the stage of admission; that on 24th September, 2012, the Court, while adjourning the matter to 5th October, 2012, orally directed that the DRP may continue with the proceeding but that the order, if any, that may be passed shall not be communicated to the petitioner till the next date of hearing; that on 5th October, 2012, the respondent's counsel raised a preliminary objection on the ground that the DRP had already passed an order upholding the decision of the TPO and that the impugned order of the TPO had, therefore, merged in the order of the DRP and that on 5th October, 2012....
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....all centre business pursuant to the BTA by the petitioner to HWP (India) as the same is a domestic transaction and cannot be deemed to be an international transaction. (C) The rewriting of the call options in July, 2007 did not constitute an assignment of options and thus there is no international transaction of the kind alleged. This issue stands settled by the judgment of the Supreme Court in the case of Vodafone International Holdings B.V. v. Union of India & Anr., (2012) 341 ITR 1. 21(A). Apart from contesting these submissions, the Advocate General raised several preliminary objections to the maintainability of the Writ Petition. He firstly contended that the petitioner has alternate remedies under the Act. He also submitted that the petition ought not be entertained as (i) the petitioner had filed objections and had appeared before the DRP; (ii) the petitioner is not entitled to maintain parallel proceedings viz. this Writ Petition and the proceedings before the authorities under the Act and (iii) the impugned order of the TPO and the draft order of the AO had merged in the order of the DRP and the final assessment order of the AO. (B) Incongruous though it may sound, we ....
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....action or specified domestic transaction] in accordance with sub-sections (1) and (2), on the basis of such material or information or document available with him: Provided that an opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the arm's length price should not be so determined on the basis of material or information or document in the possession of the Assessing Officer. (4) Where an arm's length price is determined by the Assessing Officer under sub-section (3), the Assessing Officer may compute the total income of the assessee having regard to the arm's length price so determined: Provided that no deduction under [Section 10-A or Section 10-AA or Section 10-B] or under Chapter VI-A shall be allowed in respect of the amount of income by which the total income of the assessee is enhanced after computation of income under this sub-section: Provided further that where the total income of an associated enterprise is computed under this sub-section on determination of the arm's length price paid to another associated enterprise from which tax has been deducted [o....
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....n comes to the notice of the Transfer Pricing Officer during the course of the proceeding before him, the provisions of this chapter shall apply as if such transaction is an international transaction referred to him under sub-section (1). (2-C) Nothing contained in sub-section (2-B) shall empower the Assessing Officer either to assess or reassess under Section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under Section 154, for any assessment year, proceedings for which have been completed before the 1st day of July, 2012. (3-A) Where a reference was made under sub-section (1) before the 1st day of June, 2007 but the order under sub-section (3) has not been made by the Transfer Pricing Officer before the said date, or a reference under sub-section (1) is made on or after the 1st day of June, 2007, an order under sub-section (3) may be made at any time before sixty days prior to the date on which the period of limitation referred to in Section 153, or as the case may be, in Section 153-B for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be,....
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....as may be prescribed under sub-section (1), within a period of thirty days from the date of receipt of a notice issued in this regard: Provided that the Assessing Officer or the Commissioner (Appeals) may, on an application made by such person, extend the period of thirty days by a further period not exceeding thirty days; 92-E. Report from an accountant to be furnished by persons entering into [international transaction or specified domestic transaction].-Every person who has entered into an [international transaction or specified domestic transaction] during a previous year shall obtain a report from an accountant and furnish such report on or before the specified date in the prescribed form duly signed and verified in the prescribed manner by such accountant and setting forth such particulars as may be prescribed." ......... 144-C - (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the incom....
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....on shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee.] (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. (11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively. (12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. (13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 [or section 153B], the assessment without providi....
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.... introduced by the Finance Act, 2011 with effect from 1st June, 2011. Sub-section (2B) was introduced by the Finance Act, 2012 with retrospective effect from 1st June, 2002. Mr. Salve, on the other hand, submitted that the case ought to be considered without reference to sub-sections (2A) and (2B). He submitted that the present case pertains to the assessment year 2008-2009, whereas sub-section (2A) would apply only prospectively to cases relating to the assessment year 01.04.2012 onwards. According to him, sub-section (2A) does not have retrospective effect. He submitted that the case does not fall within the ambit of sub-section (2B). According to him, sub-section (2B) applies only where an assessee does not file Form 3CEB to wit in cases where the assessee does not disclose any international transaction. 25. The first question, therefore, is whether the TPO had jurisdiction to deal with the said unreported and unreferred transactions viz. the sale of the call centre business under the BTA by the petitioner to HWP (India) and the alleged assignment of the call options by the petitioner by the two Framework agreements dated 5th July, 2007. If the TPO did not have the jurisdictio....
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...., therefore, merely a procedural provision and, accordingly, operates retrospectively. 27. Two questions arise with regard to section 92CA(2A). The first question is whether the provisions of sub-section (2A) are substantive or merely procedural. This, in turn, raises a question as to whether sub-section (2A) confers fresh jurisdiction upon or expands the jurisdiction of the TPO. Secondly, assuming that sub-section (2A) is substantive, whether it applies to proceedings pending as on 1st June, 2011. We have answered both the questions in the affirmative. Accordingly, we have held that the TPO had jurisdiction under sub-section (2A) as the proceedings were admittedly pending before him on 1st June, 2011. 28. Sub-section (2A) undoubtedly confers fresh jurisdiction upon and extends the jurisdiction of the TPO. Prior thereto, the TPO was not entitled to deal with or consider international transactions which came to his notice without the same being referred to him by the AO. Prior to sub-section (2A) being introduced with effect from 1st June, 2011, the TPO was entitled to determine the arm's length price in relation to an international transaction only upon the same being referred t....
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....ce himself and makes the assessment order and where the AO makes the assessment order in cases where the TPO determines the arm's length price. The difference in the two schemes also indicate that the provisions of section 92CA(2A) are substantive. (A) Under section 92(1) the AO is bound to compute any income arising from an international transaction having regard to the arm's length price. There is no compulsion on him to refer the computation of the arm's length price in relation to an international transaction to the TPO. Section 92CA(1) merely entitles him to do so with the previous approval of the Commissioner. Where the AO determines the arm's length price himself in accordance with the provisions of Chapter X and in particular Section 92C thereof he may compute the assessee's total income having regard to the arm's length price determined by him. This is clear from section 92C(4) which provides that where an arm's length price is determined by an AO under sub-section (3), the AO may compute the total income of the assessee having regard to the arm's length price so determined. In the event of this procedure being followed, the remedy of an assessee aggrieved by the assessm....
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.... will consider the ambit of sub-sections (5) to (8) and (10) later while considering the powers of the DRP. The DRP is entitled under sub-section (5) to issue directions for the guidance of the AO to enable him to complete the assessment, but only after considering the aspects referred to in clauses (a) to (g) which include the draft order, the objections filed by the assessee, the evidence furnished by the assessee, the report, if any, of the AO, Valuation Officer, TPO or any other authority, the records relating to the draft order, the evidence and the result of any enquiry made. Under sub-section (8), the DRP may confirm, reduce or enhance the variations proposed in the draft order. Sub-section (10) provides that every direction issued by the DRP shall be binding on the AO. Finally, under sub-section (13), the AO is bound to complete the assessment in conformity with the directions received by him under sub-section (5) from the DRP without providing any further opportunity of being heard to the assessee. 33. It is clear, therefore, that the entire procedure is different where on the one hand, the assessment is completed by the AO without an order of the TPO and on the other han....
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....C 614. It is necessary, however, to first deal with the judgment of the Supreme Court in The Workmen of M/s.Firestone Tyre & Rubber Company of India (Pvt.) Ltd. v. The Management & Ors. (1973) 1 SCC 813, which was relied upon in Bharat Singh's case. 38. In The Workmen of M/s. Firestone Tyre & Rubber Company of India (Pvt.) Ltd. v. The Management & Ors. (1973) 1 SCC 813, the question that arose for consideration was whether section 11-A of the Industrial Disputes Act applied to industrial disputes which had already been referred for adjudication and were pending as on 15th December, 1971. Section 11-A was introduced by an amendment to the Industrial Disputes Act and came into force with effect from 15th December, 1971. Section 11-A reads as under :- "11-A. Powers of Labour Courts, Tribunals and National Tribunals to give appropriate relief in case of discharge of dismissal of workmen. - Where an industrial dispute relating to the discharge or dismissal of a workman has been referred to a Labour Court, Tribunal or National Tribunal for adjudication and, in the course of the adjudication proceedings, the Labour Court, Tribunal or National Tribunal, as the case may be, is satisfied t....
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....xpressions relate to past or future events, have to be gathered from the context in which they appear as well as the scheme of the particular legislation. ............... 65. We have already expressed our view regarding the interpretation of Section 11-A. We have held that the previous law, according to the decisions of this Court, in cases where a proper domestic enquiry had been held, was that the Tribunal had no jurisdiction to interfere with the finding of misconduct except under certain circumstances. The position further was that the Tribunal had no jurisdiction to interfere with the punishment imposed by an employer both in cases where the misconduct is established in a proper domestic enquiry as also in cases where the Tribunal finds such misconduct proved on the basis of evidence adduced before it. These limitations on the powers of the Tribunals were recognised by this Court mainly on the basis that the power to take disciplinary action and impose punishment was part of the managerial functions. That means that the law, as laid down by this Court over a period of years, had recognised certain managerial rights in an employer. We have pointed out that this position has n....
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....d i.e. after 15th December, 1971 as there obviously could not be a proceeding under the section prior to it's introduction. 39. The question before us, therefore, is whether the scheme of the Act and the context of the amendments make the provisions of sub-section (2A) operate in respect of proceedings prior to 1st June, 2011 i.e. the date from effect with which it was introduced. 40. In Bharat Singh v. Management of New Delhi Tuberculosis Centre, New Delhi & Ors. (1986) 2 SCC 614, the question that fell for consideration was whether section 17-B of the Industrial Disputes Act applied to awards passed prior to 21st August, 1984 i.e. the date on which section 17-B came into force. Section 17-B reads as under :- "17-B. Payment of full wages to workman pending proceedings in higher courts.-Where in any case a Labour Court, Tribunal or National Tribunal by its award directs reinstatement of any workman and the employer prefers any proceedings against such award in a High Court or the Supreme Court, the employer shall be liable to pay such workman, during the period of pendency of such proceedings in the High Court or the Supreme Court, full wages last drawn by him, inclusive of any ....
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....the long drawn out process caused by the methods employed by the management. This section, in other words, gives a mandate to the courts to award wages if the conditions in the section are satisfied. 11. In interpretation of statutes, courts have steered clear of the rigid stand of looking into the words of the section alone but have attempted to make the object of the enactment effective and to render its benefits into the person in whose favour it is made. The legislators are entrusted with the task of only making laws. Interpretation has to come from the courts. Section 17-B on its terms does not say that it would bind awards passed before the date when it came into force. The respondents' contention is that a section which imposes an obligation for the first time, cannot be made retrospective. Such sections should always be considered prospective. In our view, if this submission is accepted, we will be defeating the very purpose for which this section has been enacted. It is here that the court has to evolve the concept of purposive interpretation which has found acceptance whenever a progressive social beneficial legislation is under review. We share the view that where the w....
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....t it cannot operate retrospectively. Before Section 17-B was introduced there was no bar for courts for awarding wages. Of course the workmen had no right to claim it. This section recognizes such a right. To construe it in a manner detrimental to workmen would be to defeat its object. 41. It is true that in paragraph 16, the Supreme Court noted that section 17-B did not confer a new jurisdiction but codified a right available to the workmen to get back wages when certain given conditions were satisfied. It is, however, important to note that the Supreme Court held in paragraph 16 that a conferment of a new jurisdiction can take effect only prospectively "except when a contrary intention appears on the face of the statute". In other words, it is not an absolute rule that where a provision confers a new jurisdiction it can take effect only prospectively. Further, although it is not conclusive, it is permissible to look at the objects and reasons to find out the purpose of the amendment. The Supreme Court also held that where the intention of the Legislature is not clear from the words or where two constructions are possible, it is the Court's duty to discern its intention in the co....
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.... section 92C stating that the same will take effect from 1st April, 2012. While the absence of such a provision in clause (B) which relates to section 92CA is not determinative of the question as to whether it is retrospective or not, it certainly is a factor to be taken into consideration. Although it does not by itself establish, it supports the Advocate General's submission that the amendments to section 92CA apply to proceedings which were pending before the TPO on 1st June, 2011. Section 14 of The Finance Act, 2011, inserted sub-section (2A) in section 92CA with effect from 1st day of June, 2011. 44. The phrase "during the course of the proceedings" in section 92CA(2A) does not restrict the source to be the material already on record. The phrase refers to the point of time as is evident from the use of the word "during" and not the word "from". The words used in sub-section (2A) are not "from the proceedings before him". 45. If we are right in our interpretation, the TPO certainly had jurisdiction to consider the said unreported and unreferred international transactions as the proceedings were pending before him on 1st June, 2011. This is evident from only a few facts. 46. ....
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.... The words "an international transaction" belie the petitioner's submission. The requirement is not the failure of the assessee to furnish the report under section 92E, but to furnish the report under section 92E in respect of "an" international transaction. In other words, the section also includes cases where the assessee has filed Form 3CEB pursuant to section 92E but does not include therein "an international transaction" or international transactions and such transaction or transactions come to the notice of the TPO. The words "an" and "such" are crucial in determining the ambit of sub-section (2B). Were it otherwise, the section would have been worded entirely differently. It would have included generally international transactions in cases where the assessee had failed to furnish a report at all under section 92E. 51. Where an assessee furnishes a report under section 92E in respect of some international transactions but not in respect of others, then if the unreported international transaction comes to the notice of the TPO during the course of the proceedings before him, the provisions of Chapter X of the Act will apply to those unreported transactions as if "they had bee....
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.... is rejected. We do not find the reliance upon the judgment in J.K. Synthetics Ltd. v. Commercial Tax Officer (1994) 4 SCC 276 to be of any assistance to the petitioner in this regard. Sub-section (2B) of section 92CA includes cases where an assessee has filed a report under section 92E in Form 3CEB read with Rule 10, but has not included an international transaction therein. The TPO has power and jurisdiction under sub-section (2B) to deal with international transactions not mentioned in the report. 54. The Finance Bill 2012, by itself does not indicate why sub-section (2B) was introduced. The learned Advocate General submitted that it was only clarificatory and possibly to overcome the decision of the Delhi High Court in CIT v. Amedeus (India) Pvt. Ltd., in the event of it being wrongly construed as having held that sub-section (2A) cannot be given retrospective effect. 55. We, however, do find a material difference between the two sub-sections. A TPO exercises suo moto power under sub-sections (2A) or (2B). The plain language of the two sub-sections require proceedings to be pending before the TPO. This is clear from the words "during the course of proceedings pending before ....
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....-section (2B), however, entitles the TPO to consider only unreported international transactions i.e. international transactions not referred in Form 3CEB irrespective of whether or not the Form 3CEB was filed reporting other international transactions. Thus, this retrospective effect of sub-section (2B) is only in respect of certain international transactions viz. unreported transactions and to reported transactions not referred by the AO to the TPO. Secondly, whereas sub-section (2A) applies only to proceedings before the TPO on 1st June, 2011, sub-section (2B) operates with retrospective effect from 1st June, 2002. 58. There is no possibility of conflict of assessment between the AO and the TPO for under section 92CA(3A), the TPO must make his order under section 92CA(3) sixty days before the period of limitation for making an order of assessment etc. The AO must make the assessment in conformity with the TPO's order. 59. This brings us to the judgment of the Delhi High Court in CIT v. Amedeus (India) Pvt. Ltd. (2011) 203 Taxman 602 on which considerable reliance was placed by Mr. Salve. (A) We are in respectful agreement with the judgment in CIT v. Amedeus (supra) insofar as....
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.... Officer to compute any income arising from an international transaction having regard to the arm's length price. He may determine the arm's length price of an international transaction himself or, if he feels that it is necessary or expedient so to do, he may seek the approval of the Commissioner and, therefore, refer the computation of the arm's length price in respect of an international transaction to the Transfer Pricing Officer. This makes it clear that it is the Assessing Officer who has to determine, first of all, whether a transaction is an international transaction under section 92B of the said Act. Secondly, if it is an international transaction in his view, he has to proceed to determine the arm's length price in terms of section 92C of the said Act. However, if for any reason, he feels that it is necessary or expedient so to do, he may seek the approval of the Commissioner and then refer the computation of the arm's length price in relation to the said international transaction to the Transfer Pricing Officer. The role of the Transfer Pricing Officer, as indicated in section 92CA, is restricted to determining the arm's length price in relation to the international tran....
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....oviso. The amendment changes this position and imposes a substantive liability on such a dealer. It is also one which confers jurisdiction on an officer in a particular State to levy a tax which he otherwise cannot. It is thus a substantive provision. That apart, even the question whether a charge to tax can be imposed in one State or another is not a mere question of venue. It may have an impact on the rate of tax in certain cases and it also regulates the rights inter se of States to levy taxes on such inter-state sales. It is, therefore, difficult to accept the contention that the amendment should be treated as purely procedural and hence necessarily retrospective." ............. 20. Similarly, in the case before us, we find that there is nothing in the statute to indicate that sub-section (2A) was introduced in a manner so as to operate with retrospective effect. Sub-section (2A) expands the jurisdiction of the Transfer Pricing Officer by empowering him to determine the arm's length price of any international transaction other than an international transaction referred to him by the Assessing Officer under sub-section (1) of section 92CA. This is clearly an expansion of the j....
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..... Thus, in the case before us, the TPO had jurisdiction to consider suo moto the two unreported and unreferred transactions under sub-section (2A) as well as under sub-section (2B) of section 92CA. In the result, therefore, the contention that the TPO had no jurisdiction to consider the said international transactions is rejected. MAINTAINABILITY OF THE WRIT PETITION : 62. The Advocate General submitted that the petition ought not to be entertained for four reasons. Firstly, the petitioner has an equally efficacious alternate remedies. Secondly, the petitioner filed objections and appeared before the DRP. Thirdly, the petitioner is not entitled to maintain parallel proceedings viz. this Writ Petition as well as those before the authorities under the Act. Lastly, the orders impugned in this petition of the TPO and the draft order have merged in the order of the DRP and the final assessment order of the AO. Alternate Remedy : 63. The Advocate General submitted that against the order of a TPO, the assessee's first alternate remedy is before the AO. Thereafter, the assessee is entitled to challenge the draft order before the DRP or to allow the AO to complete the assessment in conf....
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.... transaction and to determine the arm's length price thereof under section 92C(1) and (3). He is not bound to refer the computation of the arm's length price in relation to an international transaction under section 92CA(1) to the TPO. He may determine these questions himself. Where the AO determines the arm's length price of an international transaction himself and proceeds to complete the assessment without the intervention of the TPO, either on a reference under section 92CA(1) or suo moto under sub-sections (2A) and (2B) of section 92CA, no complications arise. The exercise of power by the AO on the one hand and the TPO under sections 92C and 92CA on the other are a different matter and of considerable general importance. 67. The AO may, in exercise of his discretion under section 92CA and with the previous approval of the Commissioner, refer the computation of the arm's length price in relation to an international transaction under section 92C to the TPO. In such a case, the TPO would be bound to determine the arm's length price in respect of the said transaction. In doing so, the TPO would not be entitled to reconsider the question as to whether the transaction is an intern....
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....s not entitled to go even into the question as to whether the TPO rightly determined or considered the same to be an international transaction. Sub-section (4) of section 92CA stipulates that on receipt of the order of the TPO under sub-section (3) the AO "shall proceed to compute the total income" of the assessee "in conformity with" the arm's length price determined by the TPO. The provision is mandatory. The words "in conformity with" leave no room for doubt. The word conformity is synonymous to the words "compliance" and "obedience". The AO cannot deviate from the TPO's order. For an AO to hold that the transaction dealt with by the TPO was not an international transaction would not only be a deviation from but an annulment of the TPO's order. The AO is bound to compute the total income in conformity with the TPO's order in all respects, including accepting the transaction to be an international transaction as determined by the TPO and the computation of the arm's length price thereof. In this regard we are, with respect, unable to agree with the judgment of the Gujarat High Court in Veer Gems (supra), including that the order of reference under section 92CA(1) is only ad-hoc. ....
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....national transaction. 73. A view to the contrary would, in fact, be contrary to the legislative intent of expediting the proceedings regarding the determination of the arm's length price of international transactions. The determination of the question as to whether a transaction is an international transaction or not would then go through an additional stage in the litigation before the tax authorities viz. before the TPO as well as before the AO. This was not the legislative intent. 74 (A). There may be a situation where the Commissioner refuses approval to the AO to refer a transaction to the TPO after coming to the conclusion that it is not an international transaction, but the TPO deals with it as an international transaction in exercise of powers under section 92CA(2A) or (3A). Even in such cases, the TPO's order must prevail in view of the clear, mandatory terms of section 92CA(4) requiring the AO to make the assessment in conformity with the TPO's order. (B) This may sound contradictory to or inconsistent with what we said earlier viz. that where a reference under section 92CA(1) is made by the AO after obtaining the Commissioner's approval, the TPO cannot consider whethe....
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....r, the assessee has two options. He may file objections before the DRP under section 144C(2) against any variation in the income or loss return whether relating to transfer pricing or otherwise made in the draft assessment order. In other words, in such a case the assessee would be entitled to challenge the entire draft assessment order before the DRP. The other option is for the assessee not to file any objections before the DRP or the AO within thirty days of receipt of the draft assessment order. In that event, the AO would pass the final assessment order and the assessee would be entitled to file an appeal against it only before the CIT (Appeals). 80(A). We record the statement of the Advocate General that even in such a case i.e. where an assessee does not file objections under sub-section (2) and waits for the final assessment order, it will not be contended that he accepts the draft assessment order, depriving him of the right to file an appeal under section 253 before the CIT (Appeals) and thereafter, if necessary, before the ITAT. We intend recording the statement of the Advocate General tendered by him in a tabular form as well as the further statement made by him expl....
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....an erroneous construction of the law, we proceed to consider the same ourselves independently. 81. The statement, according to us, in any event, enunciates the correct position in law as we will now demonstrate. 82. Mr. Salve submitted that the DRP is entitled under section 144C only to "confirm, reduce or enhance" the variations proposed in the draft order. These words, according to him, relate and are germane only to the quantification of the arm's length price. The DRP is, therefore, not entitled to consider whether or not the transactions are international transactions. We are unable to agree. 83. The error in the submission arises on account of reading sub-section (8) of section 144C in isolation. It is necessary to consider section 144C as a whole as well as to read it with sections 92C(4) and 92CA(4). 84. Under section 92CA(4), where an arm's length price is determined by the TPO under section 92C(3), the AO must compute the total income of the assessee in conformity with the arm's length price so determined. It is important to note that what the AO computes is the "total income of the assessee", albeit in conformity with the arm's length price determined by the TPO. In ....
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....pect of a part thereof. In other words, once an assessee opts to file objections before the DRP he cannot restrict the same only insofar as it relates to the international transactions. A view to the contrary would render the entire assessment proceedings unworkable. The assessee cannot possibly have a part of the assessment order decided by the DRP and a part of it decided in an appeal before the CIT (Appeals). There is, in any event, no provision for the same in the Act. 87. Moreover, the DRP has wide jurisdiction as is evident, inter-alia, from sub-section (8) of section 144-C. The DRP is required to issue directions under sub-section (5) after considering a variety of matters mentioned in sub-section (6) of section 144-C. Firstly, clause (a) of sub-section (6) does not restrict the DRP's consideration to any particular aspect or aspects of the draft order. Clause (b) of sub-section (2) of section 144-C does not restrict the nature of the objections that can be filed before the DRP. Similarly, clause (b) of sub-section (6) of section 144-C does not restrict the DRP's consideration to any particular type of the objections. It merely refers to "objections filed by the assessee".....
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....RP route under section 144C or the normal route of filing an appeal to the CIT (Appeals). The DRP is entitled to consider whether the transaction of which the arm's length price was computed by the TPO is an international transaction or not. Section 144C(2)(b) does not restrict the nature of objections that an assessee is entitled to raise before the DRP. If the DRP finds that the transaction was not in fact an international transaction, it must issue the necessary consequential directions to the AO to assess the same as a domestic transaction. To this end the DRP can even invoke powers under section 144C(7)(b) viz. cause any further enquiry to be made by the AO and report the result to it. 91. If the DRP finds that the transaction the arm's length price of which the TPO computed, was not an international transaction, the proceedings before it would not stand terminated or be rendered void or non est for the DRP's jurisdiction arises not on account of the transaction being an international transaction but on account of the intervention of the TPO - the TPO having determined the arm's length price of a transaction on the basis that it was an international transaction. 92. A view t....
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....etitioner, therefore, has an alternate remedy of challenging all aspects of such a matter either before the DRP or before the CIT (Appeals). The alternate remedy is, therefore, clearly there. In fact, from the order of the DRP or the CIT, the petitioner is entitled to file a further appeal before the ITAT. These appellate authorities are entitled to go into all questions of law and of fact. It is not suggested that either the CIT or the ITAT cannot consider the question as to whether a transaction is an international transaction or not. 95. We did not understand Mr. Salve to contend that the Income Tax Appellate Tribunal or the CIT does not have jurisdiction to decide all questions that arise in the assessment proceedings including regarding the jurisdiction of the TPO. It is, therefore, not necessary to refer to the judgment of the Supreme Court in Chandra Kumar v. Union of India & Ors. AIR 1997 SC 1125, paragraphs 90 and 93 whereof were relied upon by the learned Advocate General. 96. The question then is whether the petitioner ought to be relegated to the alternate remedies or whether despite the availability of alternate remedies, this Writ Petition ought to be entertained. T....
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....before the TPO before whom eight hearings took place. The TPO thereafter passed his order. The petitioner thereafter filed the Writ Petition challenging the validity of the approval granted by the Commissioner to the AO to make a reference to the TPO and the order of the TPO. The Division Bench of this Court by its judgment dated 23rd December, 2012, declined to entertain the Writ Petition observing :- "11............... At this stage, we are of the considered view that it would be inappropriate for this Court to exercise its writ jurisdiction under Article 226 of the Constitution to entertain a Petition challenging the validity of the reference made by the Assessing Officer to the Transfer Pricing Officer on 9 October 2009 and the underlying approval of the Commissioner dated 30 September 2009, both of which have been issued over two years ago. The Petitioner, in any case had notice before the Transfer Pricing Officer as far back as on 3 March 2010 and participated in those proceedings. Under the statutory provisions, to which a reference is made earlier, a comprehensive remedy is available to the Petitioner before the Assessing Officer frames an order of Assessment. A draft orde....
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....der of assessment, and the impugned orders of assessment can only be challenged by the mode prescribed by the Act and not by a petition under Article 226 of the Constitution. It is now well recognised that where a right of liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of. This rule was stated with great clarity by Willes, J. in Wolverhampton New Waterworks Co. v. Hawkesford in the following passage : There are three classes of cases in which a liability may be established founded upon statute. . . . But there is a third class, viz. where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it . . . the remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class. The form given by the statute must be adopted and adhered to. The rule laid down in this passage was approved by the House of Lords in Neville v. London Express Newspapers Ltd. And has been reaffirmed by the Privy Council in Attorney-General of Trinidad and Tobag....
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....ternate remedy of an appeal against the final order which was yet to be passed by the Wealth Tax Officer. The Wealth Tax Officer was bound to make the assessment in conformity with the report of the valuation officer. The learned Judge dismissed the Writ Petition. Paragraphs 9 and 10 of the judgment relied upon by the learned Advocate General read as under :- "9. Sub-s. (6) of s. 16A says that on receipt of the order under sub-s. (3) or sub-s. (5) from the Valuation Officer, the AO shall, so far as the valuation of the asset in question is concerned, proceed to complete the assessment in conformity with the estimate of the Valuation Officer. Chapter VI of the Act deals with appeals, revisions and references. Sec. 23(1)(ha) says that subject to the provision of sub-s. (1A), any person objecting to any order of the Valuation Officer under s. 35 having the effect of enhancing the valuation of any asset or refusing to allow the claim made by the assessee under s. 35 may appeal to the Dy. CIT(A) against the assessment or order, as the case may be, in the prescribed form and verified in the prescribed manner. 10. From the above, it is evident that no provision has been made under the A....
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....late authority. Therefore, in my view, there is an efficacious alternative remedy to the writ petitioner by way of an appeal against the final order of assessment in which the writ petitioners can very well challenge the valuation report as well as the valuation order of the Valuation Officer. That being the position, I am of the view that there is an efficacious alternative remedy by way of an appeal under s. 23 of the Act and, therefore, the writ Court cannot be approached at this stage. Section 144-C of the Income-tax Act does not permit the DRP to set aside any proposed variation in the draft assessment order or to issues any direction under section (5) thereof for further enquiry and passing of the assessment order. In other words, the DRP cannot set aside a variation and remand the matter for the passing of a fresh draft assessment order. Under the Wealth-tax Act the appellate authority has the power to do so. That, however, makes no difference. We are in respectful agreement with the judgment and would adopt it in cases relating to transfer pricing. 101. Before dealing with the authorities relied upon by Mr. Salve, it is necessary to distinguish his three main contentions.....
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....t leaves on its decision an indelible stamp of infirmity or vice which cannot be obliterated or cured on appeal or revision. If an inferior Court or tribunal of first instance acts wholly without jurisdiction or patently in excess of jurisdiction or manifestly conducts the proceedings before it in a manner which is contrary to the rules of natural justice and all accepted rules of procedure and which offends the superior court's sense of fair play the superior Court may, we think, quite properly exercise its power to issue the prerogative writ of certiorari to correct the error of the Court or tribunal of first instance, even if an appeal to another inferior Court or tribunal was available and recourse was not had to it or if recourse was had to it, it confirmed what ex facie was a nullity for reasons aforementioned. This would be so all the more if the tribunals holding the original trial and the tribunals hearing the appeal or revision were merely departmental tribunals composed of persons belonging to the departmental hierarchy without adequate legal training and background and whole glaring lapses occasionally come to our notice. The superior Court will ordinarily decline to in....
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....bunal or in the High Court. The Supreme Court, however, held that the High Courts have power to issue in a fit case, an order prohibiting an executive authority from acting without jurisdiction. The Supreme Court further held that where action is taken without jurisdiction and the same subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts will issue appropriate orders or directions to prevent such consequences (Pg. 258). The Advocate General submitted that in Calcutta Discount Company, the Supreme Court had expressly observed that the petitioner before it had come to the Court at the earliest opportunity, immediately upon the receipt of the notice under section 34. On the other hand, the petitioner in the case before us had, in fact, participated before the TPO without raising any objection as to his jurisdiction. That is correct. The petitioner had, in fact, supplied the material and participated in every respect before the TPO. The TPO has even passed the order. 104. Although the TPO has made his order without any objection by the petitioner as to his jurisdiction, we would have entertained this petition, had we come to the....
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....iction if the assessee approaches it at the earliest and in any event before the TPO makes the report. This would only be to save the assessee and the Revenue incurring unnecessary expenses and a waste of time on account of the proceedings before the TPO which are demonstrably without jurisdiction. 106. The position, however, would be entirely different once the TPOs passes the order. This is for the reason that the DRP, in any event, would have the jurisdiction to rectify the error and issue the necessary directions to the AO to complete the assessment in accordance with law. The assessment proceedings are not rendered futile or void on account of the TPO lacking inherent jurisdiction. In such cases, where the proceedings before the TPO have concluded, absent anything else warranting the invocation of the writ jurisdiction, a Writ Petition ought not to be entertained and the parties must be relegated to their remedies under the Act. 107. In the present case, therefore, absent anything else, there is no warrant for exercise of writ jurisdiction for the petitioner has not only an equally but a more efficacious remedy by filing the objections before the DRP. The DRP would be entitl....
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.... is filed is shown to have no jurisdiction or had purported to usurp jurisdiction without any legal foundation. 111. The judgment of a Division Bench of the Delhi High Court in Maruti Suzuki (India) Limited v. Addl. CIT/TPO, 2010 (328) ITR 210 is not relevant in the present case. The Division Bench set aside the order of the TPO and remanded the matter to him to determine the arm's length price in terms of section 92C and in the light of the observations made in the judgment. The Division Bench held that as the TPO had made the adjustments to the petitioner's income based on no evidence, it amounted to an error of law by him. 112. In the result, absent anything else, this petition ought to be dismissed reserving liberty to the petitioner to pursue the alternative remedies. And with this we proceed to consider the other preliminary objections raised by the Advocate General. Effect on maintainability of the Writ Petition on account of the petitioner having filed objections and having appeared before the DRP. 113. The Advocate General also contended that in the present case, a draft assessment order had been made by the AO, the petitioner had filed objections to the same before t....
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....contrary, in fact, fetters the discretion of a Court exercising jurisdiction under Article 226 which ought not be the case. If a litigant is compelled to elect between a writ petition and the alternate remedy and he choses the former, it casts an unnecessary burden upon the Court to entertain the Writ Petition even though it may be inclined to exercise its discretion by relegating the party to the alternate remedy for no Court desires to leave a litigant without a remedy on merits. 116. In this regard, Mr. Salve's reliance upon the judgment of a learned single Judge of this Court in Orkay Mills Ltd. v. M.S. Bindra 1998 (33) ELT 48 (Bom.) is well founded. It was contended on behalf of the respondent that the Court ought not to entertain the Writ Petition as the petitioner had preferred a statutory appeal before the Tribunal after filing the petition. Reliance was placed on behalf of the respondent on the judgment of the Supreme Court in Titaghur Paper Mills Co. Ltd. & Anr. v. State of Orissa & Anr. [1983] 2 SCC 433. The learned Judge rejected the contention holding that in the appeal, the petitioner had expressly stated that it had lodged the same without prejudice to the Writ Peti....
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....ause the DRP passed its order and the AO has now passed the final assessment order. This was also pursuant to the orders of this Court and without prejudice to the petitioner's rights. Parallel Proceedings : 120. The Advocate General submitted that the Writ Petition ought to be dismissed on the ground that the petitioner is not entitled to maintain parallel proceedings viz. the present Writ Petition and the proceedings before the authorities under the Act. As we noted earlier, the proceedings have reached upto the stage of the final assessment order of the AO. In support of his submission, the Advocate General relied upon the following judgments. 121. In K.S. Rashid & Son v. Income-tax Investigation Commission & Ors., [1954] SCR 738 - AIR 1954 SC 207, the High Court relied upon the ordinary rule of construction that where a Legislature has passed a new statute giving a new remedy, that remedy is the only one that could be pursued. That was a case under the Taxation of Income (Investigation Commission) Act, 1947. That Act provided an alternate remedy against an order of the Investigating Commission by applying to the Commissioner of Income-tax to refer to the High Court any quest....
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.... the same question which is the subject-matter of the writ petition. In our opinion, the appellant cannot pursue two parallel remedies in respect of the same matter at the same time." [emphasis supplied] The judgment does not support the Advocate General's submission that even if the alternate remedy is availed of after the filing of the Writ Petition without prejudice to the petition, the Writ Petition ought not to be entertained. That would depend on the facts and circumstances of the case. There is nothing to indicate that the appellant before the Supreme Court had availed of the alternate remedy without prejudice to its rights and contentions. Further, that was not a case where the petitioner was expressly permitted by the Court to avail of the alternate remedy without prejudice to the Writ Petition. The judgment merely indicates an exercise of discretion by the Supreme Court in the facts of that case. It does not bar a Writ Petition merely on the ground that the petitioner has availed of an alternate remedy. Moreover, the petitioner in that case was not compelled to avail of the alternate remedy on account of the bar of limitation. There is nothing in the judgment that indic....
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.... the AO had made a reference to the TPO and following the determination of the arm's length price by the TPO, the AO issued a draft assessment order to which the petitioner raised objections before the DRP. The DRP determined the same and the AO passed a final assessment order. The petitioner had challenged the order passed by the Dispute Resolution Panel. The Division Bench dismissed the Writ Petition holding had the petitioner had the remedy of an appeal against the order of the DRP in which all the issues could be raised before the ITAT. This judgment is also distinguishable from the facts in the case before us on the grounds indicated earlier. Effect on maintainability of the Writ Petition on account of the merger of the impugned orders of the DRP and the final assessment order of the AO. 126. The Advocate General submitted that the TPOs order stands merged in the draft assessment order and/or the order of the DRP and/or the the final assessment order. Similarly, the draft assessment order stands merged in the DRPs order and in the final assessment order. By challenging the TPOs order and the AOs draft assessment order, the petitioner is in effect challenging the DRPs order ....
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.... alone which subsists and is operative in law and is capable of enforcement. In other words the original decision of Respondent 4 dated the March 11, 1960 no longer subsists for it has merged in the appellate decision of the State Government and unless the appellant is able to establish that the appellate decision of the State Government is defective in law the appellant will not be entitled to the grant of any relief. There can be no doubt that if an appeal is provided by a statutory rule against an order passed by a tribunal the decision of the Appellate Authority is the operative decision in law if the Appellate Authority modifies or reverses it. In law the position would be just the same even if the appellate decision merely confirms the decision of the Tribunal. As a result of the confirmation or affirmance of the decision of the Tribunal by the Appellate Authority the original decision merges in the appellate decision and it is the appellate decision alone which is subsisting and is operative and capable of enforcement. (See the . decisions of this Court in CIT v. Amritlal Bhagilal & Co., and Madan Gopal Rungta v. Secretary to the Government of Orissa)." 128. The Advocate Ge....
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....cts of a particular case. 130. In this case, we do not decline to exercise jurisdiction because the impugned order of the TPO and the draft order of the AO have merged in the order of the DRP and the final assessment order of the AO respectively. The orders were passed in proceedings the petitioner pursued without prejudice to its rights and pursuant to the orders of this Court. We decline to interfere in view of the fact that the TPO's lack of jurisdiction does not render the further proceedings void as in certain other cases. Take, for instance, a case where the first court or authority lacked subject matter jurisdiction to decide a question and on account thereof, the proceedings are null and void ab initio and throughout. The appellate authority would also lack inherent jurisdiction over the subject matter of the proceedings. The appellate forum can in such cases only declare the entire proceedings to be non-est for want of subject matter jurisdiction and, therefore, bring them to an end. The appellate authority would have jurisdiction to decide the issue of jurisdiction alone. The findings of the appellate forum on merits would be non-est in such cases. In such cases, compell....
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....framework agreements dated 5th July, 2007. 133. The Advocate General firstly submitted that the TPO has jurisdiction to decide whether or not a transaction is an international transaction. Once it is held that the TPO has jurisdiction under section 92CA (2A) and (2B), it must follow that he has the jurisdiction to decide whether a transaction is an international transaction or not. That is so. However, as Mr. Salve rightly submitted, while dealing with the petitioner's contentions in respect of the said two transactions, we must keep in mind the observations in paragraph 11 of the State of Uttar Pradesh v. Mohd. Nooh set out earlier and the following observations of the Supreme Court in Raza Textiles Limited v. Income Tax Officer, [1973] 87 ITR 539 = [1973] 1 SCC 633, "The Appellate Bench appears to have been under the impression that the Income Tax Officer was the sole Judge of the fact whether the firm in question was resident or non-resident. This conclusion in, our opinion, is wholly wrong. No authority, much less a quasi-judicial authority, can confer jurisdiction on itself by deciding a jurisdictional fact wrongly. The question whether the Jurisdictional fact has been righ....
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....business pursuant to the BTA by the petitioner to HWP (India) as the same is a domestic transaction and cannot be deemed to be an international transaction. 135. We had referred to the SPA dated 11th February, 2007, the MOU dated 25th April, 2007 and the BTA dated 8th May, 2007. The relevant provisions of the SPA dated 11th February, 2007, are as follows :- "WHEREAS: (A) CGP is an indirect wholly-owned subsidiary of the Vendor. CGP owns, directly or indirectly, companies which control the Company Interests. (B) The Vendor has agreed to procure the sale of, and the Purchaser has agreed to purchase, the entire issued share capital of CGP on the terms and conditions set out in this Agreement. The Vendor has further agreed to procure the assignment of, and the Purchaser has agreed to accept an assignment of, the Loans on the terms and conditions set out in this Agreement and the Loan Assignments. 1. DEFINITIONS AND INTERPRETATION 1.1 In this Agreement, the following words and expressions have the meanings set opposite them: ............... Accounts Wider Group means the Wider Group (but excluding GSPL with respect to the Call Centre Business), HT India, Centrino, ND Callus and....
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....ees to procure the sale of, and the Purchaser agrees to purchase, the Share free from all Encumbrances and together with all rights attaching or accruing to them at the date hereof (including the right to receive all dividends or distributions declared, made or paid on or after the date hereof). 2.2 Upon and subject to the terms and conditions of this Agreement, the Vendor hereby agrees to procure the assignment of, and the Purchaser agrees to accept an assignment of, the Loans free from all Encumbrances and together with all rights attaching or accruing to them at Completion. 6.2 (a) Without prejudice to the generality of Clause 6.1(a), prior to Completion and until termination of this Agreement in accordance with its terms the Vendor shall procure that: (i) the Group Companies shall provide the Purchaser with monthly performance statements materially in the form in which they are currently prepared within 10 Business Days of the relevant month end, and shall inform the Purchaser if different accounting practices or policies have been applied in collating a monthly profit statement (as compared with the preceding monthly profit statement). The Parties agree that such statements....
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.... of the relevant Group Company; (j) the GSPL Transfer Agreement duly executed by the parties thereto. 8.13 If the provisions of Clauses 8.2 to 8.11 are not fully complied with by the Vendor or the Purchaser by or on the date set for Completion, the Purchaser (in the case of non-compliance by the Vendor) or the Vendor (in the case of non-compliance by the Purchaser) shall be entitled (in addition to and without prejudice to all other rights and remedies available to the terminating party, including the right to claim damages) by written notice to the other party served on such date: (a) to elect to terminate this Agreement (other than Clauses 15 and 22 to 31) without liability on the part of the terminating party; (b) to effect Completion so far as practicable having regard to the defaults which have occurred; or (c) to fix a new date for Completion (not being more than 3 Business Days after the agreed date for Completion), in which case the foregoing provisions of this Clause 8 shall apply to Completion as so deferred provided that such deferral may only occur once. .............. 10. POST-COMPLETION UNDERTAKING 10.1 Following Completion, the Purchaser will procure that GS....
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....be taken for the winding-up or dissolution of GSPL; and..... .............. 16.1 At any time after the date hereof each party shall, promptly upon being required to do so by the other party (the requesting party), and at the requesting party's expense, do or procure that there shall be done all such acts and things and execute or procure the execution of all such documents and instruments in a form reasonably satisfactory to the requesting party as the requesting party may from time to time reasonably require (before or after Completion) in order to give full effect to this Agreement and the Transaction Documents and to secure to the requesting party the full benefit of the rights, powers and remedies conferred upon the requesting party in this Agreement and the Transaction Documents. ............... 27.THIRD PARTY RIGHTS Pursuant to Section 1(2) of the Contracts (Rights of Third Parties) Act 1999 (the Contracts Act), the parties intend that a person who is not a party to this Agreement has no right under the Contracts Act to enforce any term of this Agreement but this does not affect any right or remedy of a third party which exists or is available apart from the Contracts Ac....
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....ed to the SPA and the BTA and construed sections 92B and 92F. This is what he held regarding the BTA. In the present case, there was an agreement between the AE (associated enterprise) of the assessee meaning thereby VIH BV and the AE of HWP (India), meaning thereby HTIL. This was obviously a reference to the SPA. The BTA entered into between the petitioner and HWP (India) was to give effect to the SPA between VIH BV and HTIL i.e. the AEs of the two contracting parties viz. the petitioner and HWP (India). This was an arrangement and an understanding in respect whereof the said parties acted in concert. The petitioner and HWP (India) are parties to the SPA as affiliates of VIH BV and HTIL although the SPA had been signed only by the two AEs. Based on these facts, it is clear that there is a prior agreement viz. the SPA, between the two AEs (VIH BV and HTIL) and other affiliates i.e. the petitioner/assessee and HWP (India). These four entities were parties to the SPA. The relevant transaction is the BTA for the sale of the call centre business by the petitioner to HWP (India) although there was no direct agreement between VIH BV and HWP (India). Applying the doctrine of lifting the ....
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....,797/-. After noting that the sale consideration shown was only Rs.64 crores, he determined the shortfall to be Rs.23,50,20,43,185/- and, accordingly, made an adjustment in that sum in respect of the sale of the call centre business by the petitioner to HWP (India). 138. Before going further, it is necessary to set out sections 92-A and 92-B. By the Finance Act, 2002 w.e.f. 1st April, 2002 the words "For the purposes of sub-section (1)" were added at the beginning of sub-section 2 of section 92-A. Section 92-A and section 92-B of the Act, so far as they are relevant, are as under :- "92-A. Meaning of associated enterprise.- (1) For the purposes of this section and Sections 92, 92-B, 92-C, 92-D, 92-E and 92-F, "associated enterprise" in relation to another enterprise, means an enterprise - (a) which participates, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise; or (b) in respect of which one or more persons who participate, directly or indirectly or through one or more intermediaries, in its management or control or capital, are the same persons who participate, directly or indirectly, or through one ....
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....rks, licences, franchises, customer list, marketing channel, brand, commercial secret, know-how, industrial property right, exterior design or practical and new design or any other business or commercial rights of similar nature;" 139. Section 92-B(2) requires firstly, the existence of two associated enterprises and a third party. Secondly, the transaction in sub-section (2) of section 92-B - the relevant transaction - should be between the enterprise and a person other than an associated enterprise (third party). Thirdly, there should exist a prior agreement in relation to the relevant transaction or the terms of the relevant transaction should be determined in substance between the third party and the associated enterprise. Fourthly, the prior agreement should be between the other associated enterprise and the third party. Fifthly, one of the associated enterprises must be a non-resident. The fifth condition is apparent from the words in sub-section (2) "for the purposes of sub-section (1)". Sub-section (1) in turn operates in respect of international transactions between associated enterprises either or both of whom are non-residents. 140. The prior agreement must be "in rela....
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....an Indian company, but also HTIL, which is a non-resident. The "associated enterprise" is VIH BV, also a non-resident. The SPA dated 11th February, 2007 is the prior agreement in relation to the relevant transaction viz. the BTA dated 8th May, 2007. 142. This is how the Advocate General sought to explain the TPO's observations "therefore in this case the consideration of Rs.64.00 crores has moved from seller to buyer". VIH BV purchased the share of CGP Investment Holdings Company, which was ultimately the holding company in respect of 51.96% of the equity share capital of Hutchison Essar Limited (subsequently named Vodafone Essar Limited) at a price of about US$ 11.08 billion. VIH BV however, was not interested in retaining the call centre business of the petitioner and had agreed therefore, to sell the same to HTIL or its affiliate/nominee, for which it had to receive the consideration. The sum of US$ 11.08 billion was presumably arrived at after reducing the value of the equity interest in the Hutchison Essar Limited by an amount payable by HTIL to VIH BV in respect of the call centre business. The TPO therefore, considered the seller to be VIH BV and the buyer to be HTIL. Under....
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....ance by the TPO upon the doctrine of substance over form and lifting of corporate veil had been negatived by the Supreme Court in Vodafone International Holding BV v. Union of India and another (2012) 3 ITR 1. 146. We will first consider the Advocate General's contention that HWP (India) is a party to the SPA as part of the vendor group i.e. Hutchison group and even otherwise. He submitted that the obligations of the SPA in respect of the transaction involving the sale of the call centre business would accrue to and be binding upon HWP (India). We do not find this case to be wholly inarguable or improbable. If this contention is ultimately upheld, it may well follow that the SPA at least in so far as it is relevant to the BTA/sale of the call centre business was between VIH BV and HWP (India). That then would be the prior agreement in relation to the BTA and/ or MOU. And the associated enterprise - VIH BV - is a non resident. 147. The provisions of the SPA prima-facie foreshadowed the sale of the call centre business by the petitioner to an affiliate of the vendor i.e. HTIL. The SPA has several provisions relating to and in connection with the sale of the call centre business. S....
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....ereby an arbitration agreement entered into by a company being one within a group of companies can bind its non-signatory affiliates or sister or parent concerns if the circumstances demonstrate that the mutual intention of all the parties was to bind both the signatories and the non- signatory affiliates. It was held that this principle would apply provided the transactions were with the group of companies and there was a clear intention of the parties to bind the signatory as well as the non-signatory parties. Intention of the parties was held to be an essential ingredient. Moreover, this doctrine would apply in exceptional cases. In the context of the present agreements, it is also interesting to note the observations to the effect that the transaction should be of a compoiste nature where the performance of the mother agreement may not be feasible without the aid, execution and pefroamance of the supplementary or ancilliary agreements for achieving the common object and collectively having a bearing on the dispute. The Supreme Court expressed a word of caution that pleas to this effect would be examined carefully and by definite reference to the language of the contract and the....
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....e met. 155. For the purposes of section 92-B, it is not necessary that the associated enterprise of the enterprise and the third party are signatories to the prior agreements. Indeed, section 92-B(2) does not mandate such an agreement to be only in writing. The prior agreement could also be oral. Whether an agreement was entered into or not in that event would be a question of fact. It would be an adjudicatory and not a jurisdictional fact. 156. In view of this, it is difficult in a writ petition to reject outright the respondents' contention that the SPA constitutes an agreement between the Hutchison group including HWP (India) at least so far as the sale of the call centre is concerned and the Vodafone group. 157. It is necessary, however, not for us but for the the authorities under the Act to consider finally, conclusively on merits whether HWP (India) can be said to be a party to the SPA in relation to the BTA and/or the MOU, which deal with the sale of the call centre business or that the terms of the relevant transaction i.e. BTA were in relation to the SPA or were determined in substance between such other person viz. HWP (India) and the petitioner's associated enterpris....
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....he GSPL Transfer Agreement by GSPL following completion. Such indemnities posit or, in any event, are likely to posit a transaction/agreement. 162. Clause 13 provided for what was to be done qua the GSPL Transfer Agreement following completion. It provided for various safe-guards to be procured by the purchaser until such time as the call centre disposal and all matters contemplated by GSPL Transfer Agreement shall have been completed. It is, for instance, provided that till such time,there would be no change in the Board of Directors or in the authorized and issued share capital of the petitioner, nor any transfer or disposal of any share capital in the petitioner or any interest therein. Nor was there to be any creation, allotment, issue or grant of any option to subscribe for any share capital in the petitioner. 163. It is not possible to come to the conclusion in this petition that the BTA/sale of the call centre business was not in relation to the SPA insofar as it concerned the sale of the call centre business. 164. The fourth question is whether the SPA was prior in point of time to the BTA/the sale of the call centre business. 165. Mr. Salve submitted that the requireme....
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....words would mean on completion of the sale and purchase of the CGP share. It is arguable therefore, that what follows in clause 8.8 is upon the completion of the sale of the CGP share. Clause 8.8(j) provides that on completion the vendor i.e. HTIL shall deliver or procure the delivery to the purchaser i.e. VIH BV of the GSPL Transfer Agreement. Clause 1.1 defines GSPL Transfer Agreement to be entered into between the petitioner and an affiliate of HWL (Hutchison Whampoa Limited) relating to the call centre business i.e. BTA. Thus prima-facie it appears that the BTA was to be delivered by HTIL to VIH BV or as it may direct in writing on completion i.e. on completion of the sale of the CGP share. 169. The fact that clause 8.8.(c ) required the delivery of the duly executed transfer in respect of the share in favour VIH BV or its nominee together with relative share certificate would not be conclusive of the matter. The physical delivery of the share is not necessary for the sale and purchase thereof to be completed. The physical delivery of a share can follow completion of a transaction of the sale and purchase thereof. Indeed the same could be said by the petitioner of the BTA/GSPL....
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.... the AO submitted a copy of a MOU purported to have been signed on 25th April, 2007. He contended that the terms of the two drafts of the MOU were different. More important for the purpose of this petition, is the respondents' contention that the MOU was in fact signed only on or after or on or about 25th October, 2011 when it was first submitted to the TPO and that a copy of the MOU tendered along with the petitioner's submissions before the AO purportedly dated 25th April, 2007 was ante dated. In support of this contention, he submitted that if in fact the petitioner and HWP (India) were part of the same group, there was no need for an MOU to be signed prior to the BTA. 173. Whether the MOU was ante-dated or not is a question of fact which must be decided by the authorities/Tribunal under the Act. 174. Even assuming that the MOU was not ante dated and was executed prior to the SPA, the petitioner does not have an open and shut case. The matter wound not end there. The terms and conditions of the MOU require serious consideration. The most important question is whether the MOU constituted an agreement at all or whether it was only an agreement to enter into an agreement, which i....
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....s alleged by the petitioner, the period of 90 days was to expire around 25th July, 2007 i.e. much after the transfer of the CGP share, which even according to the petitioner, took place on 8th May, 2007. Clause 6(b) makes this clearer. It demonstrates HWP (India)'s intention to conclude the negotiations within the "exclusivity period" i.e. 90 days from the date of the MOU. The payment of the sum of Rs.64.00 crores, as clause 6 itself indicates, was only a Good Faith Payment. It wasn't payment pursuant to a concluded agreement. 177. It is difficult in a writ petition to express any view conclusively in respect of these allegations. It is a matter which must be decided by the fact finding authorities under the Act. 178. It was also contended by Mr. Salve that the BTA was independently negotiated by the petitioner and HWP (India). The same, he said, is substantiated by the fact that in the draft BTA, the consideration was of Rs.33.75 crores, whereas the consideration under the final BTA was Rs.64.00 crores. There were also other substantial differences which have been ignored by the TPO and the AO. 179. As we held earlier, section 92B(2) would apply even if there is a modification ....
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.... stand on a higher footing than evidentiary admissions, and are binding on the party that makes them and constitutes a waiver of proof. We presume that to be so. The Advocate General submitted that in view of the pleadings, the petitioner is not entitled to contend that at the time of the transaction HWP (India) and the petitioner were part of the same group or associate enterprises. 183. It is not necessary for us to conclusively decide whether these averments constitute an admission or not. The petitioner may well be entitled to contend that the documents i.e. the petition and the objections before the AO must be read as a whole. If for instance, these grounds were only in the alternative or on a demurer, the averments may not constitute an admission. Further, it would be open to the petitioner to explain the admissions. Having said that however, the fact remains that this is an issue which can and must be decided by the authorities under the Act. They are not purely jurisdictional issues. We see no reason to invoke our extra-ordinary writ jurisdiction and decide such involved issues. 184. From the record as it stands, it cannot be said with any degree of certainty either in fa....
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.... apply to the sale of the call centre business, as the transaction was between the two associated enterprises, HWP(India) also being a part of the Hutchison group. The provision in clause 13(c) of the SPA relied upon this regard was that until the call centre disposal and all matters contemplated under the BTA were completed, there was to be no change in the members of the Board of Directors of the petitioner. 189. Clause 13(c) by itself does not answer the question whether the sale of the CGP share took place before the disposal of the call centre. The respondents' contention that the sale of the call centre business took place after the sale of the CGP share is not improbable even on the plain language of clause 13(c). The words "The Purchaser shall procure that until such time as the Call Centre Disposal" would indicate that the call centre had not been disposed of at least on the date of the SPA i.e. 11th February, 2007. 190. Even assuming that the directors of the Hutchison group continued on the Board of Directors of the petitioner, it is a moot point whether after the sale of the CGP share to VIH BV, the petitioner could be said to be an associate enterprise of any member ....
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....tors. In a year of transition, a company can, therefore, be an associated enterprise of more than one company. In the present case, during the previous year, the petitioner was an associated enterprise of HTIL as well as VIH BV. Mr. Salve submitted that in view of section 92-A read with section 92-B, it matters not whether the BTA was signed before or after the petitioner became a part of the Vodafone group. Even if it was signed after the petitioner became a part of the Vodafone group, it would make no difference because during the previous year 2008-2009 that is during the period 1st April, 2008 to 31st March, 2009, admittedly the petitioner at some stage was an associated enterprise of HWP (India). Thus, it would make no difference whether or not the sale of the CGP share preceded the sale of the call centre business. The petitioner would for the purpose of sections 92-A and 92-B be an associated enterprise of Hutchison group including HTIL and HWP (India). 193. This submission is however, of no assistance to the petitioner's case. Section 92-B(2) merely requires the existence of an enterprise referred to therein to have an associated enterprises. Thus if during a particular ....
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....of companies held 23.97% and 38.78% shares in the Telecom Investment (India) Pvt. Ltd. (TII). The TII in turn held the shares in Hutchison Essar Limited. As a result thereof, Asim Ghosh and Analjit Singh held 4.68% and 7.577% respectively in Hutchison Essar Limited. 197(A). The agreement dated 1st March, 2006, titled "Centrino Framework Agreement" was entered into between the petitioner, one Asim Ghosh and three companies controlled by him viz. Goldspot Mercantile Company Private Limited, Plustech Mercantile Company Private Limited and Centrino Trading Company Private Limited. The relevant provisions thereof read as under : "1.1 Definitions "Affiliate" when used with reference to any corporate entity shall mean another company controlled by, controlling or under common control with that entity, where "control" means either (i) the ownership, either directly or indirectly, of more than fifty percent (50%) of the voting shares or comparable interests in such entity or other company, as the case may be, or (ii) the right to elect the majority of the directors of such entity or other company, as the case may be, where such rights may be exercised without the consent of any third par....
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....fined in clause 1 to mean 8th May, 2007. Clauses 4, 4.1(b) and 4.4(a), (b) and (d) of the new Framework Agreement read as under :- "4. Subscription and transfer of shares 4.1 Restrictions on subscription or transfer ............. (b) Any Transfer of Shares in AG Mercantile by AG to any of AG's spouse or adult children shall be subject to the prior consent of Vodafone, such consent not to be unreasonably withheld provided that AG's aggregate indirect interest in the issued equity share capital of HEL through the direct holding of shares in AG Mercantile shall at all times be at least 51% of Nadal's issued share capital. ............. 4.4 Call Option (a) GSPL shall have the right (the "Call Option") at any time to : (i) purchase or require that any wholly owned subsidiary of Vodafone Group Plc purchase, at its sole discretion, any or all of the AG Mercantile Shares held by AG at any time, and from time to time; and (ii) require that any other Nominated Person not referred to in Clause 4.4(a)(i) above purchase all, but not part only, of the AG Mercantile Share held by AG at any time, and from time to time, such AG Mercantile Shares being referred to as the "Call Shares", in a....
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....ones entered into between the petitioner and the said Analjit Singh and the group of companies controlled by him. He dealt with the matter as follows: Under the 2006 FW Agreements, the call options could only be exercised by the assessee - the petitioner. Vodafone Group Plc was an additional party in the 2007 FW Agreements ; the petitioner continued to be a party to the 2007 FW Agreements, as it was an affiliate of Vodafone by the time it was entered into. Prior thereto, it was a 100% subsidiary of Hutchison Telecom Services India Holding Limited. Vodafone acquired the 15% option to buy HEL shares through the said Analjit Singh, Asim Ghosh and another entity. The TPO rejected the petitioner's contention that all the FW Agreements gave call options only to the petitioner and that there were no assignments and there were accordingly no international transactions in respect thereof. The TPO held that the petitioner was a 100% subsidiary of VIH BV and that the FW Agreements were international transactions between the petitioner and VIH BV. As per clause 4.2(a) of the 2006 FW Agreements, the options to subscribe to the shares were with the petitioner or its nominee and that HTIL, which....
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....ecember, 2011 observed that he was bound to assess the income in conformity with the ALP determined by the TPO and proceeded to deal with the assessee's objections. The AO independently came to the conclusion that there was an assignment of call options to Vodafone Group Plc. After noting the arm's length price determined by the TPO of Rs.6178,88,26,177/- and taking the cost of acquisition of Rs.73,44,15,000/-, the AO computed the short term capital gain to be Rs.6105,44,11,177/-. The AO has also initiated penalty proceedings under section271(1)(c) for furnishing inaccurate particulars and concealing the taxable income. 201. It would be convenient to refer to Mr. Salve's analysis of the judgment of the Supreme Court in Vodafone International B.V. v. UOI, [2012] 341 ITR, 1, after noting the observations in the judgment itself. As the judgment of the Supreme Court was the main plank on which the challenge is based, we will refer to it in considerable detail. (A) It is necessary first to note the dispute and the proceedings in the Vodafone case. The Assistant Director of Income Tax (International Taxation) had issued a notice dated 19th September, 2007 to VIH BV under section 201(1)....
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....ips then were). "56. To explain the GSPL route briefly, it may be mentioned that on February 11, 2007, the AG group of companies held 23.97 per cent. in TII, AS group of companies held 38.78 per cent. in TII whereas SMMS held 54.21 per cent. in Omega. Consequently, holding of AG in HEL through TII stood at 4.68 per cent. whereas holding of AS in HEL through TII stood at 7.577 per cent. and holding of SMMS in HEL through Omega stood at 2.77 per cent. which adds up to 15.03 per cent. in HEL. These holdings of AG, AS and SMMS came under the option route. In this connection, it may be mentioned that GSPL is an Indian company indirectly owned by CGP. It held call options and subscription options to be exercised in future under circumstances spelt out in TII and IDFC framework agreements (keeping in mind the sectoral cap of 74 per cent.). ............ 76. Under the Hutchison structure, the business was carried on by the Indian companies under the control of their board of directors, though HTIL, as the group holding company of a set of companies, which controlled 42 per cent. plus 10 per cent. (pro rata) shares, did influence or was in a position to persuade the working of such board ....
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....ind two relevant concepts, viz., participative and protective rights. As stated, this is a case of HTIL exercising its exit right under the holding structure and continuance of the telecom business operations in India by VIH by acquisition of shares. In the Hutchison structure, exit was also provided for Essar, Centrino, NDC and SMMS through exercise of put option/TARs, subject to sectoral cap being relaxed in future. These exit rights in Essar, Centrino, NDC and SMMS (IDFC) indicate that these companies were independent companies. Essar was a partner in HEL whereas Centrino, NDC and SMMS controlled 15 per cent. of shares of HEL (minority). A minority investor has what is called as a "participative" right, which is a subset of "protective rights". These participative rights, given to a minority shareholder, enable the minority to overcome the presumption of consolidation of operations or assets by the controlling shareholder. These participative rights in certain instances restrict the powers of the shareholder with majority voting interest to control the operations or assets of the investee. At the same time, even the minority is entitled to exit. This "exit right" comes under "pr....
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....not correct. The shareholders of ITNL (renamed as Omega) were Array through HTIL Mauritius and SMMS (an Indian company). The original investors through SMMS (IDFC), an infrastructure holding company, held 54.21 per cent. of the share capital of Omega ; that, under the 2006 framework agreement, the original investors were given put option by GSPL (an Indian company under Hutchison Teleservices (India) Holdings Ltd. (Ms)) requiring GSPL to buy the equity share capital of SMMS ; that on completion of acquisition on May 8, 2007, there was a change in control of HTIL Mauritius which held 45.79 per cent. in Omega and that changes also took place on June 5, 2007, within the group of original investors with the exit of IDFC and SSKI. In view of the said changes in the parties, a revised framework agreement was executed on June 6, 2007, which again had call and put option. Under the said agreement dated June 6, 2007, the investors once again agreed to grant call option to GSPL to buy the shares of SMMS and to enter into a shareholders agreement to regulate the affairs of Omega. It is important to note that even in the fresh agreement the call option remained with GSPL and that the said agre....
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....or control. In the present case, till date GSPL has not exercised its rights under the framework agreement 2006 because of the sectoral cap of 74 per cent. which in turn restricts the right to vote. Therefore, the transaction in the present case provides for a triggering event, viz., relaxation of the sectoral cap. Till such date, HTIL/VIH cannot be said to have a control over 15 per cent. stakes in HEL. It is for this reason that even the FIPB gave its approval to the transaction by saying that VIH was acquiring or has acquired effective shareholding of 51.96 per cent. in HEL. ............ 86. Applying the "nature and character of the transaction" test, the High Court came to the conclusion that the transfer of the CGP share was not adequate in itself to achieve the object of consummating the transaction between HTIL and VIH. That, intrinsic to the transaction was a transfer of other "rights and entitlements" which rights and entitlements constituted in themselves "capital assets" within the meaning of section 2(14) of the Income-tax Act, 1961. According to the High Court, VIH acquired the CGP share with other rights and entitlements whereas, according to the appellant, whatever....
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....tancy support, customer base, brand licences, etc. On facts, we are of the view that the High Court, in the present case, ought to have examined the entire transaction holistically. VIH has rightly contended that the transaction in question should be looked at as an entire package. The items mentioned hereinabove, like, control premium, non-compete agreement, consultancy support, customer base, brand licences, operating licences, etc., were all an integral part of the holding subsidiary structure which existed for almost 13 years, generating huge revenues, as indicated above. Merely because at the time of exit capital gains tax becomes not payable or exigible to tax would not make the entire "share sale" (investment) a sham or a tax avoidant. The High Court has failed to appreciate that the payment of US$ 11.08 bn was for purchase of the entire investment made by HTIL in India. The payment was for the entire package. The parties to the transaction have not agreed upon a separate price for the CGP share and for what the High Court calls as "other rights and entitlements" (including options, right to non-compete, control premium, customer base, etc.). Thus, it was not open to the Rev....
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....3GSPL has call option as well as the obligation of the put option. Rights and obligations which flow out of call and put options have already been explained by us in the earlier part of the judgment. Call and put options are contractual rights and do not sound in property and hence they cannot be, in the absence of a statutory stipulation, considered as capital assets. Even assuming so, they are in favour of 3GSPL and continue to be so even after entry of Vodafone. 236. We have extensively dealt with the terms of the various FWAs, SHAs and term sheets and in none of those agreements HTIL or Vodafone figure as parties. SHAs between Mauritian entities (which were shareholders of the Indian operating companies) and other shareholders in some of the other operating companies in India held shares in HEL related to the management of the subsidiaries of AS, AG and IDFC and did not relate to the management of the affairs of HEL and HTIL was not a party to those agreements, and hence there was no question of assigning or relinquishing any right to Vodafone. 237. IDFC FWA of August, 2006, also conferred upon 3 GSPL only call option rights and a right to nominate a buyer if investors decide....
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....nt for the transfer of CGP share. FWAs with AG and AS did not constitute transaction documents or give rise to a transfer of an asset, so also the IDFC FWA. All those FWAs contain some adjustments with regard to certain existing rights, however, the options, the extent of rights in relation to options, the price etc. all continue to remain in place as they stood. Even if they had not been so entered into, all those agreements would have remained in place because they were in favour of 3GSPL, subsidiary of CGP. ............ 243. The High Court has ignored the vital fact that as far as the put options are concerned there were preexisting agreements between the beneficiaries and counter parties and fresh agreements were also on similar lines. Further, the High Court has ignored the fact that the term sheet agreement with Essar had nothing to do with the transfer of CGP, which was a separate transaction which came about on account of independent settlement between Essar and Hutch group, for a separate consideration, unrelated to the consideration of CGP share. The High Court committed an error in holding that there were some rights vested in HTIL under SHA dated July 5, 2003, which i....
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.... was only one of form and not of substance. Only the language of clauses 4.4 and 4.9 in the 2006 and 2007 FW Agreements differ. He submitted that clause 4.9 of the 2006 FW Agreements entitled the petitioner to assign the call options to any of its affiliates. The definition of affiliate in those agreements would include holding companies and subsidiaries. The same did not constitute an assignment or a transaction. The findings of the TPO to the contrary are without jurisdiction, perverse and contrary to law. Accordingly, the finding that there was an assignment of the call options is without jurisdiction, perverse and contrary to law. Further, the finding that VIH BV became a party to the 2007 Framework agreements is patently incorrect. VIH BV was only a confirming party to the agreement and, accordingly, neither assumed any liability nor was conferred any rights thereunder. The finding of the TPO that the petitioner is not the owner of the options; that its associated enterprise viz. VIH BV became the owner of the options amounted to holding that the options vested initially in HTIL under the 2006 FW Agreements and then in favour of VIH BV under the 2007 FW Agreements. This argume....
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.... the value was transferred in some manner. The respondents had not established that there was a transfer of the value. Lastly, he submitted that some of the Advocate General's submissions were contrary to the basis of the impugned orders. Relying upon the judgment of the Supreme Court in Mohinder Singh Gill & Anr. v. The Chief Election Commissioner, New Delhi & Ors. [1978] 1 SCC 405, he submitted that adjudicative orders have to be sustained for reasons stated in the order and not for reasons discovered in defence to proceedings for judicial review thereof. 205. The judgment of the Supreme Court was delivered on 20th January, 2012, after the order of the TPO and the draft order of the AO dated 31st October, 2011 and 29th December, 2011, respectively. When the impugned orders were passed, the judgment of the Division Bench of this Court held the field. It would undoubtedly now be necessary for any Court or Tribunal to construe the Framework agreements in the light of the judgment of the Supreme Court as it over-ruled the judgment of this Court. There can be no doubt about that. The judgment of the Supreme Court would have to be construed in several respects, including the effect ....
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....ework agreements were individually set out or analyzed by the Supreme Court or not. In any event, clause 4.4 was specifically referred to. The construction of the provisions per se without anything more and in the absence of anything else is a question of law and a decision in respect thereof would be binding on all Courts, Tribunals and authorities. 208. Nor are we inclined to accept the Advocate General's submission that the observations in paragraph 88 of the Vodafone judgment that the "call and part options were not transferred vide the SPA dated February 11, 2007 or any other document whatsoever" were observations on facts in issue and are, therefore, neither ratio nor obiter and not binding in subsequent proceedings even between the same parties. We are not entitled to restrict the ambit of the words of the Supreme Court "any other document" to mean a document prior to the transfer of the CGP share on 8th May, 2007. The words "any other document" would certainly include the 2007 Framework agreements which were so elaborately dealt with in the judgment. If there is an ambiguity, it is for the parties to have the same clarified by the Supreme Court. 209. The judgment of the S....
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....partment from doing so. Whether it has done so or not is one of the issues which would be required to be determined by the ITAT. The other question, and equally important, would be whether the department is now entitled to rely upon any other facts, circumstances or documents in support of their contentions. These issues can certainly also be considered by the ITAT. Whether or not to permit a party - assessee or the department - to rely upon any other facts, circumstances or documents will also be a question which may arise before the Tribunal. The machinery having been put in motion, we see no reason to invoke our extra-ordinary jurisdiction to short-circuit the same. 212. There has been an important development after the judgment of the Supreme Court. The Finance Act of 2012 amended the definition of "transaction" contained in section 2(47) by introducing an explanation thereto. Section 2(47), as amended, reads as under : "2. Definitions ............ (47) "transfer", in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law ; o....
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.... opening words, "For the removal of doubts it is hereby clarified that ......", indicate it is a clarificatory amendment. Secondly, it is an inclusive definition as is evident from the words " "transfer" includes ...... ". Thirdly, the amendment is with retrospective effect from 1st April, 1962. Fourthly, the Finance Act 2012 which introduced, inter-alia, the amendment to section 2(47) and section 92CA(2B) is a validating act in view of section 119 thereof. 215. Explanation 2 to section 247 broadly has four elements. (i) Disposal or parting with or creating any interest in an asset. (ii) The asset or any interest in the asset. (iii) The disposing of or parting with the asset or creating any interest therein may be : (a) Direct or indirect. (b) Absolute or conditional. (c) Voluntary or involuntarily. (d) By amendment or otherwise. (iv) A non-obstante provision regarding the nature of a transfer. If an act, arrangement, transaction etc. constitutes a transfer as defined in the section it would be so notwithstanding the transfer of rights having been categorised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or in....
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.... Court would remain entirely unaffected for the Supreme Court must be deemed to have considered the term as per its true ambit, as always intended by the Parliament. On the other hand, it may be equally open to the Revenue to contend that certain ingredients of a transfer were not considered by the Revenue itself in the proceedings relating to Vodafone's case on account of the Revenue itself not having appreciated or realized the actual ambit of the term "transfer" which are now clarified by the amendment. Even assuming that the Revenue cannot re-open the Vodafone case, it cannot be barred from relying upon the true ambit of the term "transfer" in future cases, including the proceedings in respect of the petitioner. Thus, even assuming that the judgment of the Supreme Court remains unaffected by the clarificatory amendment, the Revenue would be entitled hereafter in other cases, at least, to appreciate, analyze and construe the transactions relating to call options, including the Framework agreements in a proper perspective which it may not have done earlier. 220. These are important issues. There is no justification for withdrawing the proceedings from the channel provided by the....