TaxTMI 
TaxTMI 
TaxTMI 
2022 (12) TMI 687
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.... to consideration received for the transfer of business undertaking, to the Associated Enterprise (AE) by the Appellant. Ground 2: Adjustment to the Arm's Length Price (ALP) of the consideration received for the transfer of business undertaking 2. On the facts and circumstances of the case and in law, the learned AO, based on the directions of the Hon'ble DRP, interalia erred on the following grounds: 2.1 In rejecting the analysis undertaken by the Appellant to determine the ALP as documented in the valuation report for the consideration received for the transfer of business undertaking to the associated enterprise (AE). 2.2 In failing to take the cognizance of the fact that certain assets and liabilities were retained by the Appellant during the transfer of business undertaking to the AE. 2.3 In incorrectly alleging that several submissions filed and documents submitted as additional evidence did not substantiate the fact that certain assets and liabilities were actually retained by the Appellant post the transfer of business undertaking to the AE. 2.4 In incorrectly adjusting the value of the subjected transaction by not allowing the deduction for the assets and....
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.... independent valuer for the purpose of deriving the valuation of its entire business and the valuation of the shares as per Valuation Report has been done by DCF Method and the valuation has been determined at Rs.13,80,42,771/-. The assessee was required to furnish details, working for arriving at the terminal value along with the valuation report. The TPO also required the assessee to furnish detailed working of arrival at the present market value of the assets taken by AE as on the date of the transfer. The assessee vide letter dated 15.01.2021 filed copy of unaudited balance sheet along with relevant annexures and notes to accounts for the period ended 31.01.2016, net asset value of assets and liability taken over as on 31.01.2016. 5. With regard to transaction pertaining to sale of business undertaking by the assessee to its AE Saxo AS it was stated that a business transfer agreement was entered between assessee and Saxo AS on 29.02.2016, however, the actual transfer of assets was undertaken on 01.04.2016. Copy of the agreement was furnished before the TPO. The assessee further stated that the valuation of the said transaction was undertaken by the independent valuer using Dis....
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....Officer to make adjustment of Rs.15,55,31,595/- (31,39,11,962 - 15,83,80,367) as cumulative adjustment. 6. Draft assessment order was passed by the Assessing Officer on 12.02.2021 making adjustment of Rs.15,55,31,595/- as directed by the TPO. The assessee before the DRP furnished additional evidences vide letter dated 28.07.2021 to substantiate its claim that part of assets and liabilities were retained and not transferred to its AE. The additional evidences include "Addendum to Business Agreement" dated 07.05.2016 between the assessee and Saxo AS giving the details of value of assets and liabilities transferred by the assessee Saxo India Pvt. Ltd. to Saxo AS branch office of Saxo Bank AS w.e.f. 01.04.2016. A remand report was called for by the DRP from the TPO and the TPO in the remand report stated that the assessee's contention that some of the assets/liabilities were not part of business transfer has not been mentioned in the Business Transfer Agreement. In the remand report TPO also observed that assessee itself submitted that its entire business undertaking including fixed assets was sold to Saxo AS w.e.f. 01.04.2016. 7. Considering the remand report and also the submission....
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....abilities to ultimately transfer in pursuance of the BTA is completely a commercial prerogative of the Appellant and Saxo AS. Both the parties even agreed for this prerogative as per Clause 5.3 of the BTA and pursuant to that even mutually agreed for the assets and liabilities which will actually be transferred. It is submitted that there is no requirement for an explanation as to why certain assets and liabilities were not transferred. It purely falls into the commercial wisdom of the Appellant which cannot be questioned by the Ld. DRP or by the Ld. TPO. In any case, the reason for not transferring the assets and liabilities which were in the nature of cash and cash equivalents was duly submitted before the DRP wherein it has been clearly mentioned that the assets and liabilities not transferred were primarily in the nature of cash/receivables which the Assessee wished to retain for certain business contingencies, such as i.e., ongoing service tax litigation, potential liability, etc. 9. The third finding of the Ld. DRP that Assessee itself stated that entire assets were transferred is again erroneous because the statement made by the Appellant has been taken completely out of c....
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....the mere reason that no such question was asked by the Ld. TPO. (@pg. 20 of PB, Objection 3.2). 12. The finding of the Ld. TPO is completely perverse in light of the fact as already submitted that all the details with respect to assets and liabilities retained by the Appellant were duly submitted before the Ld. TPO as following: i. Addendum dated 07 May 2016 specifying that instead of the entire undertaking, only certain assets (having book value of INR 11.29 Cr.) and liabilities (having book value of INR 3.93 Cr.) will be transferred under the BTA. (@pg 109 of PB) was filed before the TPO as Annexure 3 along with the BTA (@pg 82 of PB, point 2 read with pg 109 of PB). ii. A management certificate in this regard listing the assets and liabilities retained back by the Appellant was also filed before the Ld. TPO/AO during the assessment proceedings vide submission dated 17 Aug 2020 in response to a specific request by the Ld. TPO/AO. (@pg 184- 186 of PB) iii. Audited financials of the Appellant for year ending 31 Mar 2017 were also filed before the Ld. TPO/AO (@pg 82 of PB, point 3) and a mere perusal of the financials made it clear (@pg 447 of PB) that the entire undertakin....
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.... Appellant before the DRP (@pg. 20 of PB, Objection 3.2) and supporting documents were also filed (@pg 198-346 of PB). 14.2 Ld. Counsel submits that there is no dispute either by the Ld. TPO or by the Ld. DRP on the valuation of the entire undertaking. Both the authorities have accepted INR 3 1,39,11,962/- as the fair value for the transfer of the entire undertaking of the Appellant taken as a whole. Further, there is also no dispute on the fact that INR 31,39,11,962/- is the valuation for the entire undertaking. DRP has itself given a finding of fact on the same. This is also evident from the fact that both the authorities have assumed that the entire undertaking has been transferred and accordingly has considered the aforesaid valuation of INR 31,39,11,962/- for the entire undertaking. The dispute arises only because both the Ld. TPO as well as the Ld. DRP firstly has perversely disregarded the assets and liabilities which were not actually transferred to Saxo AS but were duly retained by the Appellant giving complete prominence to the BTA as well as the initial valuation report which was carried out for the entire undertaking. 14.3 It is submitted that the following assets and....
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....e form of Addendum to BTA, etc. to demonstrate that part of the assets only were transferred to its AE. 17. On perusal of the order of the TPO, we noticed that the contention of the assessee was rejected as neither the Addendum to BTA nor the exhibits forming part of Business Transfer Agreement (BTA) were filed before the TPO. We also noticed that even though the Addendum to BTA and exhibits forming part of BTA were filed before the Ld. DRP the Ld. DRP finds no reason to interfere with the order of the TPO which in our view is not correct. The Addendum to BTA which was placed before us clearly show what all the assets and liabilities to be transferred by the assessee to its AE as per BTA. Therefore, since what all the assets and liabilities to be transferred by the assessee are clearly reflected in the Addendum to BTA the TPO/DRP are not justified in assuming that the assessee has transferred the entire assets and liabilities to its AE under BTA as slump sale completely ignoring the evidences on record and making some observations on assumptions. The assessee has clearly demonstrated with evidences that it has transferred only part of the assets to its AE under BTA read with Adden....