AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 212
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....essee company to another non-resident entity, is unsustainable in law. 4. To adjudicate on this grievance, only a few material facts need to be taken note of. The assessee before us is a Singapore based company which held 7,49,999 shares in an Indian company by the name of Topcon Sokkia India Pvt Ltd (TSIPL, in short), and 1 share was held by Suntaro Tanaka in fiduciary capacity, on behalf of the company, by its director. All these shares were sold by the assessee company to another non-resident company, i.e. Topcon Corporation, Japan (TC-J, in short). The appellant had entered into a 'Stock Purchase Agreement' with TC-J on 1st April 2011, and, under this agreement, the assessee was to sell the TSIPL shares on the basis of its 'Net Asset Value', i.e. NAV, which, at that point of time, was estimated to be US $ 34,00,000 on the basis of figures then available. What was, anyway, agreed upon was the formula on the basis of which the sale consideration was to be worked out, and not the sale consideration itself in money terms. Be that as it may, the sale finally took place at US $ 35,08,000, as authorised by the board of directors resolution dated 9th May 2011, which worked out to Rs. ....
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....res of Topcon Sokkia India Pvt Ltd (subsidiary company of the assessee) to Topcon Corporation Japan (Holding Company) at Rs. 206.88/- while the price of the share is calculated at Rs. 224/- by Net assets value method. The calculation of NAV is shown and discussed above in this order. Hence, it is not being discussed here again. This share is not listed in any stock exchange and if the share of any company is not listed in any stock exchange, the value of share for sale/transfer should be determined on the basis of book value i.e. Rs. 224/- per share. The assessee has received the payment for transfer/sale of share as given below: Date Amount received in USD 01.04.2011 34,00,000 28.04.2011 1,08,000 The assessee has used the conversion rate of Dollar to Rupee @ 44.23 which was on 09.05.2011 while the conversion rate USD to INR was 45.21 on 01.04.2011 and 44.35 on 28.04.2011. Therefore, it is found that the assessee has taken incorrect conversion rate. The conversion rate should be used 45.21 which is on the date of receiving of first and major amount of transfer of share and further received amount is also converted on this rate only as per sec 48 read with rule 115A. ....
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....s, all that is required to be done by the Transfer Pricing Officer is to determine the arm's length price, which essentially refers to the consideration for which, on a conceptual note, a set of independent enterprise should have entered into similar of transaction as the international transaction, of the international transaction referred to him or of such other international transaction as may come to his notice during the course of proceedings before him. The entire exercise is intended to find out, and eliminate- by way of an ALP adjustment, the impact of intra AE relationship on the transaction value. Of course, where the consideration for which the intra AE transaction has taken place is less than such a hypothetical arm's length price, no adjustment are called for. The role of the TPO must remain confined within these parameters. It is not open to the TPO to go beyond this role of determining the ALP and intrude in the exclusive domain of the Assessing Officer to determine the income taxable in the hands of the assessee. In the case of Cushman & Wakefield India Ltd Vs CIT [(2014) 367 ITR 730 (Del), Hon'ble jurisdictional High Court had an occasion to examine the role of the ....
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....mely Comparable Uncontrolled Price, Resale Price Method, Cost Plus Method, Profit Split Method or Transactional Net Margin Method admittedly apply to the present case but, in residuary clause, it refers to "such other method as may be prescribed by the Board". In exercise of these powers, the CBDT has notified the sixth method as "any method which takes into account the price charged or paid, or would have been charged or paid for the same or similar transaction between non associated enterprises, under similar circumstances, considering all the relevant facts". While on this aspect of the matter, it may be mentioned that a coordinate bench of the Tribunal, in the case of Toll Global Forwarding India Pvt Ltd Vs DCIT [(2014) 152 ITD 283 (Del)] has held this method to be retrospective in effect right from the time the transfer pricing provisions have been introduced, and this coordinate bench decision has been upheld by Hon'ble Delhi High Court in the case of PCIT Vs Toll Global Forwarding India Pvt Ltd [(2016) 381 ITR 38 (Del)]. The question, therefore, that we need to consider is as to on what basis the price which would have been charged for sale of these shares can be ascertained....
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....): "...the real value of shares which a deceased person holds in a company at the date of his death will depend more on the profits which the company has been making and should be capable of making, having regard to the nature of its business, than upon the amounts which the shares would be likely to realise upon a liquidation," and stated in no uncertain terms that: "The general principles of valuation in a going concern is the yield on the basis of average maintainable profits, subject to adjustment, etc., which the circumstances of any particular case may call for." The break-up method would not be appropriate for valuation of shares of a company which is a going concern, because as pointed out by the Court in Mahadeo Jalan's case (supra), "among the factors which govern the consideration of the buyer and the seller where the one desires to purchase and the other wishes to sell, the factor or break-up value of a share as on liquidation hardly enters into consideration where the shares are of a going concern". It is only where a company is ripe for winding up or the situation is such that the fluctuations of profits and uncertainty of conditions at the date of valuation preve....
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....rdly be said to represent any logical approach, whatever its merit as a compromise. Despite its evident popularity in any quarters, it has not been given judicial recognition in decisions involving the fixation of a value by the Court." The combination of the two methods advocated on behalf of the Revenue has, thus, no sanction of any judicial or other authority and cannot be accepted as a valid principle of valuation of shares. 5. The Revenue then pointed out that the principles of valuation set out by the Court in Mahadeo Jalan's case (supra) were merely broad guidelines and they did not obviate the necessity of considering each case on its own facts and circumstances and in support of this contention the Revenue relied on the observation made by the Court that in setting out these principles, the Court had not "tried to lay down any hard and fast rule because ultimately the facts and circumstances of each case, the nature of the business, the prospects of profitability and such other considerations will have to be taken into account as will be applicable to the facts of each case". Now it is true, as observed by the Court, that there cannot be any hard and fast rule in....