AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (1) TMI 853
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....4A read with Rule 8D and (v) additions qua the AIR reconciliation. 3. Briefly stated relevant facts of the case, relevant to the AY 2009-10, are that the assessee is engaged in the business of Tours and Travels and had international transactions with AEs ie CNK (Cox and Kings) Singapore, CNK Australia, CNK UK etc. Assessing Officer passed assessment order u/s 143(3) r.w.s 144C(13) of the Act dated 31.12.2013 after considering the TPO‟s order dated 21.11.2012 made u/s 92A(3) of the Act. TPO suggested adjustments to the tune of Rs. 2,80,20,501/- on accounts of interest adjustments, corporate guarantee adjustments and share premium adjustments. After making corporate disallowance / additions, the Assessing Officer determined the assessed income at Rs. 72,84,03,200/- against the return of income of Rs. 69.43 Crs (rounded of). AO considered the relief granted by the DR in respect of the adjustments made to the share premium transaction. Therefore, net addition made by the AO in the assessment is only Rs. 59,06,445/- against the TPO‟s suggested adjustment of Rs. 1,13,10,586/-. Issue wise adjudication is taken in the following paragraphs. 4. The first issue relates to the ad....
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....said AE is not out of any borrowed funds. He relied on the Hon‟ble Bombay High Court judgment in the case of Reliance Utilities and Power Limited 313 ITR 340 for the presumption that the loans are given out of assessee‟s own funds and not out of the borrowed funds. He also objected to the decision of the Revenue Authorities in resorting to levy of notional interest and relied on various binding judgments in favour of the assessee. He was also critical about the rejection of assessee‟s offer of Singapore PLR + 200 basis points ie 2.91% without giving any reason. He also submitted that the loan payment amounting to Singapore Dollars 4.3 lakhs, which was given to AE at Singapore, is the local currency of the country and the repayment of the same would also be done by the AE to the assessee in foreign currency. In such agreed circumstances, thrusting of SBI-PLR is not appropriate in benchmarking the exercise. Further, he also relied on various judgment of the Hon‟ble Bombay High Court in the case of Tata Autocomp Systems Limited (ITA No.1320 of 2012) and judgment of the Delhi High Court in the case of Cotton Natural (India) Pvt Ltd (ITA No.233 of 2014) (Del. HC)....
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....for which the assessee stood as guarantor. Assessee did not charge any commission from CNK Australia. Assessee justified its decision on various grounds ie subsidiary company, commercial expediency, non-international transaction cum quasi-equity etc. Assessee relied on various decisions in this regard. 9. TPO / DRP rejected the above arguments and proceeded to benchmark the said transaction relying on the CRISIL data and worked out the adjustments adopting the differential rating of 4.12%. Discussion given in page 524 of the assessee‟s paper book-III is relevant in this regard. 10. Before us, Ld Counsel for the assessee brought our attention to the contents of paras 4.35 to 4.37 on paper book-III, pages 527 / 528 and submitted, without prejudice, that guarantee commission @ 0.5% is now approved by Hon‟ble Bombay High Court in the case of Everest Kanto Cylinders Ltd (ITA No.1165 of 2013) (Bom. HC). Ld AR also submitted that assessee shall not press on the other arguments, if the transactions of guarantee commission is benchmarked @ 0.5% considering the discussion in the case of Everest Kanto Cylinders Ltd (supra). 11. On the other hand, Ld DR relied heavily on the ord....
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.... of this order, the same are extracted as under:- "5. We have heard both the parties and perused the orders of the Revenue Authorities as well as the cited decision of the Tribunal in the case of MSC Crewing Services P Ltd (supra) and also the judgment of the jurisdictional High Court in the case of Vodafone India Services (P) Ltd (supra). After hearing Ld Representatives of both the parties and on perusal of the said decision of the Tribunal in the case of MSC Crewing Services P Ltd (supra), we find paras 2 and 3 of the Tribunal‟s are relevant in this regard. Considering the significance of the said paras 2 and 3 of the Tribunal‟s order (supra) and for the sake of completeness of this order, the said paras are extracted as under: "2.Effective ground of appeal is about transfer pricing adjustment of Rs. 122.62 crores.During the assessment proceedings the AO found that 1,00,000 shares of the face value of Rs. 10 each were issued by the assessee to MSC Ship Management (Hong Kong) Ltd. of which the assessee was a wholly owned subsidiary, that the assessee had issued in three tranches totalling to 13,37, 553 shares and realised Rs. 3,67,59,192/- (Rs.1,33,75,530/- as sha....
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....remium of Rs. 8,509/- per share to VTIHL.This resulted in the assessee receiving a total consideration of Rs. 246.38 crores from the holding company on issue of shares between August and November 2008.The fair market value of the issue of equity shares at Rs. 8,519/-per share was determined by it in accordance with the methodology prescribed by the Government of India. According to the AO and Transfer Pricing Officer (TPO), the assessee ought to have valued each equity share at Rs. 53,775/- as against the aforesaid valuation done under the Capital Issues (Control) Act, 1947 at Rs. 8,519/- and on that basis shortfall in premium to the extent of Rs. 45,256/- per share resulted into total shortfall of Rs. 1308.91 crores. Both the AO and the TPO on application of the Transfer Pricing provisions of the Act held that this amount of Rs. 1308.91 crores was income. As a consequence of the above, said amount of Rs. 1308.91 crores was required to be treated as deemed loan given by the assessee to VTIHL and periodical interest thereon was to be charged to tax as interest income of Rs. 88.35 crores in the AY.2009-10.According to the assessee, the Act did not tax inflow of capital into the count....
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.... no amount received, accrued or arising on capital account transaction can be subjected to tax as Income. This is settled by the decision of this Court in Cadell Weaving Mill Co. vs. CIT 249 ITR 265 was upheld by the Apex Court in CIT vs. D.P. Sandu Bros. Chember (P) Ltd. 273 ITR 1. This Court has in Cadell Weaving Mills Co. (supra) inter alia, observed as under:- " It is well settled that all receipts are not taxable under the Income tax Act. Section 2(24) defines "income". It is no doubt an inclusive definition. However, a capital receipt is not income under section 2(24) unless it is chargable to tax as capital gains under Section 45. It is for this reason that under section 2(24)(vi) that the Legislature has expressly stated, inter alia, that income shall include any capital gains chargeable under section 45. Under Section 2(24)(vi), the Legislature has not included all capital gains as income. It is only capital gains chargeable under Section 45 which has been treated as income under Section 2(24). If the argument of the Department is accepted then all capital gains whether chargeable under section 45 of not, would come within the definition of the word "income" under section ....
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.... the appeal of the assessee in its favour, so, the ground of appeal filed by the AO is decided against him." 6. Considering the above as well as the undisputed issue of the capital nature of the transaction in question, we are of the opinion that the adjustments made by the TPO are outside the scope of the TP provisions. We accordingly allow the issue raised by the assessee in its favour. Thus, the grounds raised by the assessee are allowed." 15. From the above it is very clear that adjustment made on account of 'share premium' and 'interest' charged on account of 'under charged premium amount' does not attract the TP provisions. Considering the same as well as respectfully following the above decision of the Tribunal, we allow this issue in favour of the assessee. Accordingly, relevant grounds raised by the assessee in this regard are allowed. 16. Fourth issue relates to disallowance of Rs. 65,64,655/- made u/s 14A read with Rule 8D of the IT Rules, 1962. In this regard, it is the case of the assessee that the assessee has not earned any dividend income or exempt income during the year and therefore, the said provisions of section 14A of the Act do not attract. If fact, the sa....
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....peal before the Tribunal. Before us, Ld Counsel for the assessee reiterated the submissions made before the lower authorities and submitted that though the assessee offered to tax more tour sales than what they appeal in the AIR statement AO wanted reconciliation of the tour sales vis-a-vis reflected in the books of account. Considering the nature and size of the assessee‟s business, it is very difficult for the assessee to reconcile the tour sales merely on the basis of the extracts of the AIR statement. Further, he relied on the decisions of the Tribunal in the case of M/s. ANS Law Associates vs. ACIT (ITA No.5181/M/2012 and another decision in the case of Aegis Limited in ITA No.1213/M/2014, which are relevant for the proposition that the additions made only on the basis of AIR information are not sustainable. In any case, the onus is on the AO to prove that the assessee had not reported any transaction and is in receipt of income from a particular source. 18. After hearing both the parties and on perusal of the factual matrix of the case as well as on perusal of the decisions cited by the Ld AR, we are of the opinion that the onus is on the Assessing Officer to inform th....