2013 (9) TMI 680 - HC - Income Tax

Writ petition - alternative remedy - Transfer pricing adjustments - ALP - retrospective effect to section 92CA (2A) - sale of the call centre business - assignment of call options - maintainability of writ petition for setting aside of order passed by the TPO and writ of mandamus petition before the High Court to directing the AO to revise the Draft Assessment Order, after excluding the said transfer price adjustment. Lastly, the petitioner seeks a writ of prohibition, prohibiting the respondents from taking any steps pursuant to the impugned orders. There is one difference of vital importance between the Vodafone case and the case before us. We have already referred to the proceedings that led to Vodafone challenging the order under sections 195, 201(1) and 201(1A). In the Vodafone case, the Revenue proceeded on the basis of a concession and on a demurer. The Revenue did not raise the defence of an alternative remedy that was available to VIH BV even in that case. It was agreed by both the learned counsel that even in that case, VIH BV had an alternate remedy of challenging the notices before the CIT (Appeals). The Revenue, however, invited the Supreme Court to proceed on the basis of the record available in the Writ Petition. It is not open to this Court to speculate or even try and speculate the decision, had the defence of an alternate remedy been taken. However, in the case before us, the defence of an alternate remedy has not only been taken, but has been taken in a very substantial manner and we have found the same to be well founded. In other words, the Revenue in the case before us has not invited a decision on the merits of the matter alone. That they defended the contentions on the merits is irrelevant. In the earlier round in the Vodafone case, the Supreme Court had 2009 (1) TMI 778 - SUPREME COURT OF INDIA permitted VIH BV to question the decision of the authority on the preliminary issue before this Court in the event of the same being decided against it. The defence, therefore, of an alternate remedy may not have been available before the High Court. Nothing, however, prevented the Revenue from raising a contention of an alternate remedy before the Supreme Court in the final proceedings before the Supreme Court. Even the decision of the authority on the preliminary issue can be appealed against before the CIT (Appeals) and/or the ITAT, as the case may be. The respondents in this case are not bound by the stand taken by them in the Vodafone case. There is no basis for the Court to compel the Revenue in this case to abide by the stand taken by it in the Vodafone case. Writ Petition dismissed

Issues Involved:
1. Jurisdiction of the Transfer Pricing Officer (TPO) under sections 92CA(2A) and 92CA(2B) of the Income Tax Act, 1961.
2. Jurisdiction of the TPO regarding the valuation of the sale of the call center business.
3. Alleged assignment of call options and whether it constitutes an international transaction.

Issue-wise Detailed Analysis:

1. Jurisdiction of the TPO under sections 92CA(2A) and 92CA(2B) of the Income Tax Act, 1961:
The court examined whether the TPO had jurisdiction to consider unreported international transactions suo moto under sections 92CA(2A) and 92CA(2B). Section 92CA(2A) was introduced by the Finance Act, 2011, effective from 1st June 2011, and section 92CA(2B) by the Finance Act, 2012, with retrospective effect from 1st June 2002. The court held that section 92CA(2A) confers fresh jurisdiction on the TPO, allowing him to consider international transactions not referred to him by the Assessing Officer (AO) if the proceedings were pending before him on 1st June 2011. The court also held that section 92CA(2B) applies to cases where an assessee has filed a report under section 92E but has not disclosed certain international transactions. Therefore, the TPO had jurisdiction to consider the unreported transactions in this case.

2. Jurisdiction of the TPO regarding the valuation of the sale of the call center business:
The petitioner contended that the sale of the call center business was a domestic transaction between two Indian companies and not an international transaction. The court examined the relationship between the sale of the call center business and the Share Purchase Agreement (SPA) dated 11th February 2007. The court noted that the SPA included provisions relating to the disposal of the call center business and that the Business Transfer Agreement (BTA) dated 8th May 2007 was entered into to give effect to the SPA. The court held that the transaction between the petitioner and Hutchison Whampoa Properties (India) Pvt. Ltd. (HWP India) was in substance an international transaction due to the involvement of associated enterprises and the provisions of section 92B(2) of the Income Tax Act.

3. Alleged assignment of call options and whether it constitutes an international transaction:
The court examined the Framework Agreements (FW Agreements) dated 1st March 2006 and 5th July 2007, which involved call options granted to the petitioner. The TPO had held that the 2007 FW Agreements assigned the call options to Vodafone International Holdings B.V. (VIH BV), making it an international transaction. The petitioner relied on the Supreme Court's judgment in Vodafone International Holdings BV v. Union of India (2012) 341 ITR 1, which held that call options are contractual rights and had not been transferred or assigned by the petitioner. The court acknowledged the Supreme Court's findings but noted that the Finance Act, 2012, had amended the definition of "transfer" in section 2(47) of the Income Tax Act with retrospective effect from 1st April 1962. The court held that the amended definition and other factual aspects required consideration by the authorities under the Act.

Conclusion:
The court dismissed the writ petition, holding that the TPO had jurisdiction under sections 92CA(2A) and 92CA(2B) to consider the unreported international transactions. The court also held that the transaction relating to the sale of the call center business was an international transaction and that the alleged assignment of call options required further consideration by the authorities under the Act. The court directed the respondents not to serve the order of the Dispute Resolution Panel (DRP) or the final assessment order of the AO on the petitioner until 30th November 2013.

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