TaxTMI 
TaxTMI 
TaxTMI 
2017 (4) TMI 1139
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....sing Officer, was Rs. 1,640.15 crores, and this huge difference between the returned income and assessed income has arisen on account of additions of: (i) Rs. 1,588.85 crores on account of arm's length price adjustment on termination of call options; (ii) Rs. 19.53 crore being depreciation on goodwill, as disallowed; (iii) Rs. 8.30 crores being disallowance under section 14A; and (iv) Rs. 53.82 lakhs being entrance fees to club and subscription fees disallowed. The core issue in dispute: 3. As evident from the facts set out above, over 98% of the impugned additions, in terms of quantum, relate to the arm's length price adjustment on account of termination of call options. To get an idea about the nature of this arm's length price adjustment, a few material facts, as culled out from material on record, need to be taken note of. The assessee is a wholly owned subsidiary of a Mauritian company by the name of Hutchinson Teleservices (India) Holdings Limited [Hutch- M, in short], which, in turn, was a wholly owned subsidiary of CGP Investments (Holdings) Limited, a company incorporated in Cayman Islands [CGP-Cayman, in short]. CGP-Cayman, in turn, was owned by Hutchiso....
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....astructure Development Finance Co Ltd, and SSKI Corporate Finance Pvt Ltd. Pursuant to this change, a fresh framework agreement was entered into under which, inter alia, the assessee had a call option to "purchase the entire share capital of SMMS at a pre-determined price equal to Rs. 66,12,50,000 plus 15% compound interest". In February 2007, the Vodafone Group, through Vodafone International Holdings BV (VIH, in short), acquired entire stake in HTIL-Cayman, and thus the controlling interest in HEL. The new Framework Agreements were then entered into, in view of the fact that, in terms of the original framework agreements, any change in the control of the company was to result in a situation that the Indian partners were not to remain bound by the framework agreements. A series of agreements, including agreements between various stakeholders on 5th June 2007 providing for exercise of put option and cashless option under this agreement rather than under 2006 agreement and between SMMS HTIL and VIH on 7th June 2007 for regulating the affairs of Omega, were signed. The shareholding pattern of Omega now stood at 38.4% with HTIL-M and 61.6% with SMMS. Under the new Framework Agreement ....
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.... that the assessee could have bought under the call option have ultimately found their way to the VHI-BV, 2.52% in the current year, through TII and CGP, and the remaining 0.63% subsequently though Analjit Singh. Giving up the call option, it seems to be the suggestion of the revenue authorities, was a transaction in concert with its several AEs, including VIH-BV, for the benefit of VIH-BV. As for the decision of Hon'ble Bombay High Court in the case of Vodafone India Services Pvt Ltd v. CIT 2015 (10) TMI 2487 - HIGH COURT OF BOMBAY, the DRP has noted that the observations of Hon'ble Bombay High Court in the said case are "distinguishable on the facts of the present case" as "there was no express 'termination' of options rights by the assessee(whereas).... In the present case, the assessee has entered into a 'termination agreement' to terminate its option" The arm's length value of this termination of the agreement should have been the fair market value of the shares which, under the framework agreement, the assessee could have obtained for a token value of Rs. 2 crores. The amount is worked out by computing the FMV of these shares on the basis of a tran....
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....oints out in meticulous detail, on these issues also, he has a strong case on merits and judicial precedents in his favour. 7. Learned Departmental Representative vehemently opposes the stay petition. He submits that all the issues being raised by the assessee on merits, including the judgment of Hon'ble Bombay High Court and Hon'ble Supreme Court- in the cases of Vodafone India Services (supra)and Vodafone International Holdings (supra), have been adequately and judiciously dealt by the DRP, and the demands raised by the Assessing Officer having been judicially approved, there is no reason for not paying the disputed demands now. Learned Departmental Representative vehemently relied upon the orders of the authorities below. It is submitted that merely because the assessee has some arguments in support of his plea, a stay on collection or recovery of the disputed demands cannot be justified. The working of the Government, according to the learned Departmental Representative, will come to a halt if the collection of disputed demands is stayed in a routine manner. He thus urges us to reject the stay petition and decline to interfere in the matter. Without prejudice to these ....
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....tual aspects as discernible, though without the benefit of assistance of either of the parties, from the material on record. As regards the matter being covered by Hon'ble Bombay High Court decision, in assessee's own case for the assessment year 2008-09, and the impugned demands being stayed for that reason, it would prima facie appear to us, from a plain reading of the related judgment, that in the said case, there was no express termination of call option, and the fresh Framework Agreement in 2007 itself was treated, by the revenue authorities, as an assignment, or transfer, of the call option, and on this basis, it was held to be an international transaction. The stand so taken by the revenue authorities was negated by Hon'ble Bombay High Court, but the DRP has distinguished the said decision on the basis of a factual aspect, i.e. there was no express 'termination' of options rights by the assessee in the said case and that the assessee has entered into a 'termination agreement' in concert with several other associated entities in the year before us. The question, therefore, arises whether, on account of this distinction pointed out by the DRP, Hon&#....