TaxTMI 
TaxTMI 
2014 (7) TMI 674
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....Rs. 58,26,34,273/- for assessment years 2007-08 and 2008-09 respectively. These assessments made for both the years under consideration were subsequently reopened by the A.O. u/s 147 of the Act and after recording the following identical reason, notices u/s 148 of the Act were issued by the A.O. to the assessee on 11-11-2010:- "The assessee had invested in shares of Allcargo Belgium NV - an associated Enterprise and had paid the share application money as follows: On 19.05.2006 - Rs. 11,65,00,000/- On 22.06.2006 - Rs. 46,18,94,150/- TOTAL - Rs. 57,83,94,150/- This share application money was reportedly converted into shares on 08.06.2007. The Associated Enterprise held the said amount for an unusually long duration of time without allotting the shares in lieu there-of, which could have been done by them without any problem or difficulty. The nature of this amount for the intermittent period, i.e. from 19.05.2006/22.06.2006 till 08.06.2007, was therefore akin to a loan. In the case of M/s. Perot Systems TSI, the ITAT, Delhi has held as under: 'i). The argument that the loans where in reality not loans but quasi-capital cannot be accepted because the agreements show....
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....the notices issued by the A.O. u/s 148 of the Act, a letter dated 8-12-2010 was filed by the assessee stating therein that the returns originally filed on 30-10-2009 may be considered as the returns filed in response to the notices issued u/s 148 of the Act for both the years under consideration. During the course of reassessment proceedings, the assessee was called upon by the A.O. to explain why the amount invested by it as share application money with its AE lying unutilized for a long duration should not be treated as loan beyond a period of 60 days and why TP adjustment should not be made on account of interest chargeable on these amounts treated as loan for a period beyond 60 days. In reply, the following explanation was offered by the assessee to justify the delay in allotment of shares by its AE against the share application money:- "7. M/s. Allcargo India was holding 49.99% shares of MIs. ECUHOLD which was incorporated in Belgium In the year 1997 and the balance 50.01% shares of MIs. ECUHOLD were held by M/s. RMK. 8. On 10e January, 2006 a Letter of intent was executed between Allcargo India and the shareholders of RMI( to purchase 100% shares of RMI( from the existing s....
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....y of share application money for allotment of shares, with the understanding that the shares of Allcargo Belgium shall be allotted to Allcargo India only if the deal for purchase of 100% shares of RMI< (whereby purchase 50.01% shares of ECUHOLD) materialises. If the transaction doesn't materialise, the subscription money was to be returned back to Allcargo India by Allcargo Belgium. 15. Accordingly, Allcargo India remitted total 6.305 million Euros on 16.06.2006 to Allcargo Belgium towards the share application money. With this payment the share application money paid by Allcargo India was 9.455 million Euros (3.15 + 6.305). 16. Before releasing the aforesaid payment of 6.305 million to the shareholders of RMK, parties further renegotiated the deal and reduced the consideration from 10.205 million Euros to 9.95 million Euros (including 3.15 million Euros already remitted to RMK for repaying the loan of Fortis/TNG). The revised consideration of 9.95 million Euros was to be paid in the following manners: a) 3,150,000 Euros (already paid before execution of Amended 101) for repaying the loan of Fortis/TNG. b) 6,050,000 Euros to the five shareholders of RMK simultaneously on transf....
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.... passed u/s 92CA(3) of the Act, he held that the share application money paid by the assessee to its AE was in the nature of loan given by it to the said AE and the same therefore actually represented the international transactions between the assessee and it s AE of giving loan free of cost. Accordingly, the amount invested by the assessee as share application money with its AE lying unutilized for a period beyond 60 days was treated by the A.O. as a loan and as suggested by the TPO in his order, the TP adjustment of Rs. 3,01,47,078/- and Rs. 89,18,933/- was made by the A.O. in assessment years 2007-08 and 2008-09 on account of interest calculated @ 3% above the LIBOR rate 5.277% in the assessments completed u/s 143(3) r.w.s. 147 of the Act vide orders dated 31-12-2010. 5. Against the orders passed by the A.O. u/s 143(3) r.w.s. 147 of the Act, appeals were preferred by the assessee before the ld. CIT(A) challenging the validity of the said assessments as well as disputing the additions made therein on account of TP adjustments. After considering the submissions made on behalf of the assessee as well as the material available on record, the ld. CIT(A) did not find merit in the con....
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.... the assessee vide para No. 47 of its order which reads as under:- "47. We find that in the present case the TPO has not disputed that the impugned transactions were in the nature of payments for share application money, and thus, of capital contributions. The TPO has not made any adjustment with regard to the ALP of the capital contribution. He has, however, treated these transactions partly as of an interest free loan, for the period between the dates of payment till the date on which shares were actually allotted, and partly as capital contribution, i.e. after the subscribed shares were allotted by the subsidiaries in which capital contributions were made. No doubt, if these transactions are treated as in the nature of lending or borrowing, the transactions can be subjected to ALP adjustments, and the ALP so computed can be the basis of computing taxable business profits of the assessee, but the core issue before us is whether such a deeming fiction is envisaged under the scheme of the transfer pricing legislation or on the facts of this case. We do not find so. We do not find any provision in law enabling such deeming fiction. What is before us is a transaction of capital subs....