TaxTMI 
TaxTMI 
2023 (11) TMI 994
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....nst loss of INR 4,69,740 returned by the Appellant. 3. On the facts and circumstances of the case and in law, a) the Ld. AO erred in exceeding jurisdiction in not following the order dated January 30, 2021 passed by Learned Assistant Commissioner of Income-tax, Transfer Pricing, DC/ ACIT TP Delhi 3(1)(2) ("Ld. TPO") under section 92CA of the Act, and thereby contravening the provisions of section 92CA (4) of the Act and available judicial precedents. b) the learned Dispute Resolution Panel ("Ld. DRP") erred in stating that the Ld. AO is not precluded from re-examining/ re-evaluating the international transactions wherein certain facts have not been brought to the notice of Ld. TPO during the course of transfer pricing proceedings without pointing out/ substantiating the facts which were not available with the Ld. TPO and ignoring that information/ facts relied upon by the Ld. AO pertains to the subsequent year. 4. On the facts and circumstances of the case and in law, the Ld. AO erred in not abiding by the following binding directions of Ld. DRP and not undertaking any independent verification: a) to independently verify the claim of the....
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....ircumstances of the case and in law, the Ld. AO erred in not providing relief for expenses of INR 4,89,969 bome by the Appellant in relation to stamp duty on the acquisition of Equity Shares of Orbgen from third-party shareholders, 8. On the facts and circumstances of the case and in law, the Ld. AO erred in levying interest under section 234B of the Act. 9. On the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 270A of the Act, mechanically on the additions/ disallowance made." 2. Briefly stated facts are that for A.Y. 2017-18 the assessee filed its return of income on 31.11.2017 declaring NIL income. The case was selected for complete scrutiny and statutory notice u/s 143(2) of the Act was issued. The basis of selection for scrutiny assessment, as per AO, was high value of international transactions other than issue of shares (T.P. Risk Parameter) as per Form 3CEB amounting to Rs. 1,82,40,89,439/-. During the assessment proceedings the case was referred to the Transfer Pricing Officer ("TPO), who vide order dated 30.01.2021 u/s 92CA(3) of the act did not draw any adverse inference in respect....
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....ull and correct value of sale consideration and consequent taxable income based on facts that were not available with the TPO at the time of TP analysis. In view of the above, the assessee's objections in this regard are not tenable. However, the AO shall verify the claim of the assessee that the entire value of Wormhole Singapore is not relatable to its investments in Orbgen India and accordingly such value relating to other investments shall be excluded in the determination of full value of consideration. The capital gain shall be computed in accordance with the provisions of section 48 of the Act. Grounds 4 to 15 are disposed of as above." 2.2 Thereafter, the AO proceeded to finalize the assessment and computed taxable income of the assessee company at Rs. 16,69,27,557/- by making addition on account of short term capital gain amounting to Rs. Rs. 16,69,27,557/-. The addition was made in respect of capital gain calculated by the AO, thereby adopting a different sale consideration at Rs. 123,22,34,504/- as against Rs. 106,53,06,947/- declared by the assessee. 3. Apropos to the grounds of appeal, learned counsel for the assessee vehemently argued that the action of the A....
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.... arm's length character of transactions (refer para 3.1 to para 5 at page 138 of paper book) 7. Thereafter, in the final order after DRP directions the Ld.AO made the following adjustment to the sale value of shares sold to Wormhole by SAC and computed capital gain of INR 16,69,27,557: (Amount in INR) Particulars As per ROI (converted into INR) As per Final Order Remarks Sales consideration 103,52,71,530 1,23,22,34,505 a) Assessee determined FMV on DCF method supported by report of CA. b) Ld. AO arbitrarily made calculation on the basis of sale of shares of Wormhole in the next FY (i.e. FY 2017-18). c) DRP directed the Ld. AO to verify that the entire value of Wormhole is not relatable to its investment in Orbgen. (refer para 3,5 at page 178 of paper book). However, the Ld. AO does not follow the aforesaid DRP directions. Cost Acquisition 103,52,71,530 106,53,06,947 a) The DRP deleted the proposed adjustment in the cost of acquisition proposed by the Ld. AO in the draft order. Expense borne on purchase (Stamp duty) 469,736 0 a) The Ld.AO has not allowed the cost of stamp duty while c....
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....or sale consideration, no verification was undertaken, and the Assessee suo- moto submitted the accounts of Wormhole vide submission dated July 08, 2022, which was rejected by the Ld. AO alleging that the accounts shared by the Assessee are not relevant for FY 2016-17 and therefore, cannot be taken into consideration. Basis the above, the Ld. AO passed the final assessment order and computed a revised capital gain of INR 16,69,27,557. OUR CONTENTIONS Ld. AO exceeded its jurisdiction by not following the order of Ld. TPO [Ground 3(a) of our appeal] TPO order-refer para 3.1 to para 5 on page 138 of Paper-book 1. As per the provision of section 92CA(4), that the order passed by the Ld. TPO has a binding effect and the assessing officer is bound to incorporate the order of Ld. AO on as-is-basis and compute total income of the assessee in conformity with the ALP determined by the Ld. TPO. The said principle is duly supported by following judgments: * Cushman & Wakefield India Pvt. (ITA No.3933/Del/2010)- Delhi ITAT [refer para 39 at page no. 16 of the case law compilation). Later on, duly affirmed by Delhi High Court in case....
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....AY 2018-19)- Refer para 1.2 and pare 15.2 of draft assessment order on Page 150 and 152 of Poper Book 3.2. The audited financial statements of Wormhole submitted for the year ended March 31, 2018 are the first financial statement of Womhole prepared for the period beginning from October 25, 2016, till March 31, 2018 and thus include the value for both FY 2016-17 and FY 2017-18. Sefer page 209 of paper book. Without prejudice, the management certified accounts of Wormhole at Page 229 of paperbook also substantiate it holds other assets amounting to USD 2,993,060 and accordingly, it cannot be assumed that Wormhole derives 100% value from its investment in Orbgen. Therefore, the calculation made by the Ld.AO needs to be re-calculated based on the DRP directions by reducing the value of other assets. 4. Ld. AO substituted the value of sale consideration without giving reference to any provision/section of the Act (Ground 6(a) of our appeal). 4.1. During the subject year, the Act embodies no substitution of sale consideration provisions. Section SOCA of the Act which provides power to substitute full value of consideration with the FMV was inserted by....
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....at 100% value is relatable to its investment in Orbgen. There is no dispute that the ld. TPO did not propose any adjustment. As per Section 92CA(4) of the Act, the AO is required to compute the Arm's Length Price in conformity with the ALP so determined by the TPO. But in the present case, the AO deviated from the order of TPO. Such deviation is not permissible under law in the light of the statutory provisions and judicial pronouncements as relied by the assessee in its written submissions. In this regard reference is made to the decision of the Coordinate Bench in the case of Cushman & Wakefield (P.) Ltd. v. ACIT rendered in ITA No. 3933/Del/2010 (order dated 18.11.2011), observing as under: "38. It is clear from the above explanation that the provisions of transfer pricing are applicable as well to expenses and outgoing in an international transaction. The impugned amount represent the outgo of the assessee or the expense of the assessee for earning income with reference to the real property transactions in the shape of lea16 etc. It cannot be disputed by the revenue that the impugned transaction is international transaction falling within the scope of transfer pricing ....