TaxTMI 
TaxTMI 
2014 (12) TMI 1204
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....made by the AO pursuant to the directions of DRP is bad-in- law and without jurisdiction and, hence, ought to be deleted. iii) The AO/DRP/TPO failed to appreciate that: (a) as no income had arisen to the Appellant as a result of issue of shares, transfer pricing provisions were not applicable to the Appellant; (b) none of the provisions in the Act deem the instant transfer pricing adjustment to be income; (c) Transfer pricing provisions do not apply to capital receipts such as share premium. iv) The AO/TPO/DRP erred in splitting up the single transaction of issue of shares into two separate transactions viz. (i) issue of shares into two separate transactions viz. (i) issue of equity shares and (ii) grant of financial assistance. AO/TPO/DRP failed to appreciate that: a) There is no provision in the Act which permits such splitting up of a transaction of issue of equity shares into a transaction of issue equity and advancing a loan; b) GAAR provisions which permit recharacterisation of transaction in specific circumstances were not in force during the assessment year under consideration. v) Without prejudice to the above, on the facts and in the circumstances of the cas....
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....as the proper method for valuation of the shares. xii) AO/TPO/DRP erred in incorrectly applying the DCF method for valuation of the shares and, as a result, significantly overvaluing the fair value of the shares. xiii) The appellant prays that; a. The entire transfer pricing adjustment of Rs. 122.62 crore be deleted. b. Without prejudice, the adjustment be appropriately reduced. ITA No.1739/M/2014: The AO has filed following grounds of appeal against the order of the DRP: "1.Whether on the facts and circumstances of the case and in law, the Hon'ble DRP erred in directing the TP/Assessing Officer to charge interest at the rate of return from fixed deposits by adding mark up of 30% for risk factors without appreciating the fact that the TPO had adopted well accepted yield method based on BBB(-) rated Corporate Bond from CRISIL Ltd. to benchmark interest rate on a deemed loan/receivables from the AE." 2. The appellant prays that the order of the DRP on the above ground be set aside and that of the AO be restored." 3. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary." Assessee-company engaged in the business of recru....
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....s decided in favour of the assessee by the said judgment of the Hon'ble jurisdictional High Court. We have heard the rival submissions and perused the material before us. We find that identical issue had arisen in the case of VISPL(supra).Briefly stated in the case of VISPLit was found that it was a wholly owned subsidiary of a non-resident company, Vodafone Tele- Services(India)Holdings Limited(VTIHL). It required funds for its telecommunication services project in India from it holding company i.e. from VTIHL during the AY.2009-10.On 21.08. 2008,the assessee issued 2,89,224 equity shares of the face value of Rs. 10/- each on a premium 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....
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....eived on issue of share capital including the premium is undoubtedly on capital account. Share premium have been made taxable by a legal fiction under Section 56(2)(viib) of the Act and the same is enumerated as Income in Section 2(24)(xvi) of the Act. However, what is bought into the ambit of income is the premium received from a resident in excess of the fair market value of the shares. In this case what is being sought to be taxed is capital not received from a non-resident i.e. premium allegedly not received on application of ALP. Therefore, absent express legislation, 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 capita....