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TMI Blog2011 (5) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... 011 -TMI - 202806 - AAR (INCOME-TAX) NEW DELHI] has held that when there is chargeability under the Income-tax Act notwithstanding that no tax may be payable, there is an obligation to file a return under section 139 of the Act - Thus, the applicant is bound to file the return. - AAR NO. 934 OF 2010 - - - Dated:- 27-5-2011 - P.K. BALASUBRAMANYAN, J. KHOSLA, V.K. SHRIDHAR, JJ. Rajan S. Vora, Rajesh Parikh, Satish Nadiger and Pushkar for the Applicant. Saroj Mahapatra for the Commissioner. RULING J. Khosla, Member. The applicant, Deere Company, USA, is a foreign company incorporated under the laws of the USA. It has worldwide subsidiaries. It provides advanced products and services for agriculture, forestry, construction, lawn and turf care, landscaping and irrigation. The Deere Group also provides financial services worldwide and manufactures and markets engines used in heavy equipments. John Deere India Private Limited (JDIPL) is a company incorporated in India and is a subsidiary of the applicant. It is engaged in manufacture of tractors and provides services in the field of water solutions, crop solutions, information technology and Income-tax enabled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xable in India, whether the applicant is required to file any return of income under section 139 of the Income-tax Act? 1.4 The applicant's application was allowed under section 245R(2) of the Income-tax Act on 31-3-2011 after hearing both the parties and the question No. 2 supra is a recasted one. 2. Prelude to the transfer of shares by the applicant, a new Global operating Model was announced for reorganization of the holding structure of the Deere Group of Companies. Pursuant to it, the applicant in its letter dated 23-4-2010 to the company Director Secretary, John Deere Asia (Singapore) Pvt. Ltd. conveyed its intention to transfer entire shares held in JDIPL to the company. The company Director Secretary had agreed to accept the shares vide its letter dated 26-4-2011 to the applicant and these shares were transferred consequently without any consideration by means gift deeds. 2.1 The learned Counsel for the applicant while submitting the facts has argued that the transfers of shares are without consideration and hence termed the transfer as gift. According to the Learned Counsel, the shares are capital assets of the company. With the transfer of shares, no gain or pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits or gains under that head. No existing principle or provision at variance with them can be applied for determining the chargeable profits and gains. All transactions encompassed by section 45 must fall under the governance of its computation provisions. A transaction to which those provisions cannot be applied must be regarded as never intended by section 45 to be the subject of the charge. This inference flows from the general arrangement of the provisions in the Income-tax Act, where under each head of income the charging provision is accompanied by a set of provisions for computing the income subject to that charge. The character of the computation provisions in each case bears a relationship to the nature of the charge. Thus, the charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. Otherwise, one would be driven to conclude that while a certain income seems to fall within the charging section there is no scheme of computation for quantifying it. The legislative pattern discer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its mode of transfer involves transfer of Capital Asset giving rise to Capital Gains. The learned representative further argued that there is a transfer of shares between two corporate entities. In case of a gift, an element of love and affection should be there but in this instant case no love and affection between two corporate entities can be said to be subsisting and the concept of gift is devised just to hoodwink the revenue. It is argued that the applicant is an American company and the shares are transferred to a Singapore based company and so the transfer is a cross border transaction. Transfer pricing issues will be applicable to such transaction and section 92 to 92F of the Income-tax Act will be squarely applicable to such transaction. It is also argued that in the transaction, the capital gains arise in the hands of the applicant which is taxable in India. Consequently TDS provision as per section 195 of the Income-tax Act will be squarely applicable before effecting any transfer in this regard. It is strenuously argued that under such circumstances the applicant is required to file a return of income under section 139 of the Income-tax Act. Therefore, it is submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvisaged by section 45 is not something which remains ambivalent or indefinite or indeterminable. The profit or gain or the full value of the consideration, cannot be arrived at on notional or hypothetical basis. The profit or gain to the transferor must be a distinctly and clearly identifiable component of the transaction. The consideration for the transfer of shares in terms of money or money's worth is not something which can be implied or assumed. No profit or gain in the form of consideration for transfer can be inferred by a process of deeming or on presumptive basis. There must be a casual nexus between the transfer of capital asset and the profit or gain accruing to or received by the assessee as pointed out by the Gujarat High Court in CIT v. Vania Silk Mills (P.) Ltd. [1977] 107 ITR 300." In view of the legal position thus explained, question No. 1 has to be answered in the negative. 6. With regard to question No. 2, the Learned Counsel argues that section 92 of Income-tax Act provides that computation of income arising from an international transactions having regard to the arm's length price. This provision cannot be applied to a transaction which is not chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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