TaxTMI 
TaxTMI 
TaxTMI 
2024 (10) TMI 772
X X X X Extracts X X X X
X X X X Extracts X X X X
....e income and dismissing the objections of the assessee on account of the following:- a) Rs. 1,03,26,939 on account of notional interest on share application monies invested in overseas subsidiary. b) On the facts and in the circumstances of the case and in law, the Assessing Officer erred in holding that the share application monies were interest free loans to Associate Enterprise (AE). c) Assessing Officer further erred in not considering that the investment in AE is in nature of Share capital and not in nature of loan. d) Assessing Officer further erred in not considering the fact that the share application monies were converted into equity and the delay was due to the provision of law in UAE where the entities registered under the Free Trade Zone (FTZ) require approval of share capital amount. Further, the monies are remitted with the due knowledge of the RBI and there is no loan element. e) Assessing Officer erred in not considering the fact that in absence of income arising out of an international transaction, transfer pricing provisions are not applicable. 2. Assessing officer and Hon'ble DRP also erred in not considering the rectification order passed by assessin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Section 143(1) of the Act as the basis. Thus, the Assessing Officer assessed the income of the Appellant at INR 90,80,91,579/- after making transfer pricing addition of INR.1,03,26,939/- to the income of INR 90,77,64,640/- computed under Section 143(1) of the Act. The Appellant filed objection before DRP against the Draft Assessment Order on 13/01/2023 challenging to the additions made in the intimation issued under Section 143(1) of the Act and the proposed transfer pricing adjustments on account of interest on share application money. Vide order dated 25/09/2023, DRP rejected the objections. Accordingly, the Assessing Officer passed the Final Assessment Order, dated 26/10/2023, making transfer pricing addition of INR 1,03,26,939/- being interest on share application money remitted to AE to the income of INR 90,77,64,640/- as computed under Section 143(1) of the Act. 4. Being aggrieved, the Appellant has preferred the present appeal on the grounds reproduced in para 2 above. 5. The Learned Senior Counsel appearing on behalf of the Appellant submitted that the issue relating to transfer pricing adjustment on account of interest on share application money stands decided in favour ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tted that even the Share Certificated issued on 23/08/2022 there was no reference to any application filed by the Appellant. It was further submitted that the Appellant has placed reliance upon the Application, dated 07/02/2017, whereas the share application money was transferred prior to 2010. 7. In rejoinder the Learned Senior Counsel appearing on behalf of the Appellant submitted that the Appellant had also applied for increase in authorized share capital in the year 2007 and placed on record copy of application dated 07/02/2007 whereby the Appellant has sought enhancement of authorized share capital from 1,50,000/- AED to 50,00,000 AED for the purpose of setting of manufacture of organic and chemical fertilizers. It was submitted that there was no change in facts and circumstances of the case and in the earlier years the Tribunal had accepted the contention of the Appellant that delay in allotment of shares could not be attributed to the Appellant. The Appellant had again applied for seeking permission for enhancement of share and allotment of shares in the year 2017 and the shares were finally allotted on 23.08.2022. The Appellant was diligent and continued to follow up with ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....years 2012-13, 2013-14 and 2014-15, we find that identical submissions were made by the Revenue before the Tribunal. However, the same did not find favour with the Tribunal. In this regard we find that the Appellant has, right from the very beginning, contended that the sole reason for delay in allotment of shares was attributable to non-receipt of approval from SAIF Zone Authority even though an application was made by the AE for seeking such approval. However, on perusal of the order, date 30/11/2022, passed by the TPO under Section 92CA(3) of the Act, we find that the TPO has not taken into consideration the submission of the Appellant application was made to SAIF Zone Authority for seeking approval for increase of authorised share capital and for allotment of shares to the Appellant by the AE. Whereas, the DRP had rejected objection of the Appellant observing that the Appellant had failed to furnish the evidence to show that the application was actually made to SAIF Zone Authority. In this regard, we find that the Appellant had placed before Authorities below copy of the Application, dated 07/02/2017, addressed to Director SAIF Zone, Sarjah. However, the same was rejected by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ore the first appellate authority). In view of the aforesaid facts and circumstances, the approach adopted by the DRP to simply rejecting the application, dated 07/02/2017, without bringing on record any material to doubt its veracity cannot be countenanced. Taking into account the overall facts and circumstances of the present case we hold that the onus was on the Revenue to bring on record material to show that there was default on the part of the Appellant leading to inordinate delay in allotment of shares. In our view, the Revenue has failed to discharge the aforesaid onus and to controvert the contention of the Appellant that the delay in allotment of shares was on account of non-receipt of appropriate approval of SAIF Zone Authority despite appropriate application having been made. Accordingly, we accept the contention of the Appellant that the delay in allotment of shares cannot be attributed to the Appellant. Therefore, the transfer pricing addition which is based upon incorrect understanding that there was inordinate delay in allotment of shares cannot be sustained. Accordingly, the transfer pricing addition of INR.103,26,939/- is deleted. Ground No. 1 raised by the Appell....