2014 (11) TMI 1052

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....te Resolution Panel ( for short "DRP") under Section 144C(5) of the Act. The impugned orders have held that the issue of equity shares and the issue of Compulsory Convertible Debentures (CCD) convertible into four equity shares each to its non-resident Associated Enterprises (AE) gives rise to income from International Transactions and is chargeable to tax under the Act. 2. This Petition deals with the A.Y. 2009-10. 3. The Petitioner on 24 September 2009 had filed return of his income for the A.Y. 2009-10 declaring a loss of Rs. 8.49 crores. Along with its return of income the Petitioner had also filed Form No.3CEB under Section 92E of the Act declaring that during the A.Y. 2009-10, 8,89,997 equity shares of Rs. 10/- each at a premium of ....

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....rds the computation of ALP of the issue price of equity shares and CCDs. On 30 January 2013, TPO passed an order without dealing with the Petitioner's objections that no income arises on issue of equity shares and CCDs so as to attract Chapter X of the Act. The impugned order merely dealt with the computation of ALP on issue of equity shares and CCDs and determined an adjustment on issue of equity shares of Rs. 946.50 crores and Rs. 1039.31 crores on issue of CCDs holding the aforesaid amounts as being short received from the AE and consequently treating the same as deemed loan and charging the same to interest aggregating to Rs. 239 crores. 6. Consequent to the above, on 26 March 2014, a draft assessment order was passed by the Assess....

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....apply Chapter X of the Act would be arising of Income under the Act out of an International Transaction. This income should be chargeable under the Act, before Chapter X can be applied; (II) The definition of income does not include within its scope capital receipts arising out of capital account transaction unless so specified in Section 2(24) of the Act as income; (III) There is no charge in the Act to tax amounts received and/or arising on account of issue of shares by an Indian entity to a non-resident entity in Sections 4,5,15,22,28,45 and 56 of the Act. This is as it arises out of Capital Accounts transaction and, therefore, is not income; (IV) Chapter X of the Act does not contain any charging provision but is a machinery provisio....

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....s sections 4 & 5 of the Act. Therefore, such capital account transaction not falling within a statutory exception cannot be brought to tax. Even income arising from international Transaction between AE must satisfy the test of income under the Act and must find its home in one of the above heads i.e. charging provisions. There is no charging section in chapter X of the act. Only if there is income which is chargeable to tax under the normal provisions of the act, then alone chapter X of the act could be invoked. Further, since there is no income arising from the transaction of issue of shares, the provisions of chapter X would not apply. The honourable High Court in the said case has quashed and set aside as being without jurisdiction, null....