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TMI Blog2017 (1) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... been undertaken by the investee subsidiary company, the CIT(A) noted that the valuation of shares has not been disputed by the Transfer Pricing Officer during the proceedings before him. In fact, the CIT(A) has categorically observed that the Transfer Pricing Officer in his order has observed the per share price of the shares as reflected in the Balance Sheet of the assessee for the various years. On this point, we also note that before the Transfer Pricing Officer, assessee had given justification of the buy-back price by pointing-up the NAV of the investee company on the date of buy-back, which was much lower than buyback price. We find nothing adverse on such assertions of the assessee. Therefore, under these circumstances, in our view, the CIT(A) has made no mistake in deleting the addition. Whether the Transfer Pricing Officer is competent to re-characterize a tested transaction - Held that:- The ratio of the reasoning approved by the Hon'ble Bombay High Court in the case of Besix Kier Dabhol SA (2012 (10) TMI 817 - BOMBAY HIGH COURT ) clearly militates against the action of the Transfer Pricing Officer in re-characterizing the transaction of investment in the equity share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since it was an international transaction within the meaning of section 92B of the Act, the Assessing Officer referred the matter to the Transfer Pricing Officer under section 92CA(1) of the Act. The Transfer Pricing Officer vide order dated 30/10/2009 passed under section 92CA(3) proposing an adjustment of ₹ 78,48,476/-. 3.1 During the year under consideration, the subsidiary of the assessee PEI decided to reduce its share capital and accordingly undertook buy-back of the equity shares held by the assessee @ US $ 20.35 per shares. The background of the transaction is that somewhere in 1997, assessee decided to explore business opportunity in USA and accordingly, acquired 1,22,846 shares of ASI RCC Inc. USA for a consideration of US $20.35 per share totalling to US $25,00,000 (equivalent to INR 9,73,25,475/-). The said concern was engaged in the business of general contractor focussing on Roller compacted concrete dam construction, renovation and also provided construction management services for project in foreign countries. In 1999, assessee decided to restructure its US operations by forming a holding company in USA and accordingly PEI was incorporated. The assessee mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial submitted to the Transfer Pricing Officer during the proceedings under section 92CA of the Act and also reiterated the stand taken before the Transfer Pricing Officer. The CIT(A) noted fallacy in the approach of the Transfer Pricing Officer and came to conclude that the adjustment arrived at by the Transfer Pricing Officer on account of notional interest was not justified. According to the CIT(A) Transfer Pricing Officer was wrong in assuming the instant transaction as advancement of interest free loan to the subsidiary and imputation of notional interest and that too only for the year under consideration upto the date of remittance, considering that the investment in shares of PEI had been made by the assessee in the past years. The CIT(A) has also noted that the Transfer Pricing Officer had not disputed the valuation of the shares of the subsidiary either at the time of its acquisition by the assessee in the past years or even during the year at the time of buy-back of shares by PEI. The order of the CIT(A) directing the deletion of the addition of ₹ 78,48,476/- has been challenged before us. 3.4 As the canvassed Ground of appeal raised by the Revenue shows that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer, who has recharacterized it as provision of loan/fund by the assessee to its subsidiary on interest-free basis in the garb of investment in equity of the subsidiary. It is a trite law that the transfer pricing proceedings do not envisage empowering of the Transfer Pricing Officer to re-characterize the transactions on the basis of his own whims and fancies. In the present case, the CIT(A) has correctly brought out that the transactions of investment and buy-back of shares has been spread over more than one year and that there was no material to suggest that the stated transactions were unreal. 4.1 Even with regard to the value at which the buy-back of shares has been undertaken by the investee subsidiary company, the CIT(A) noted that the valuation of shares has not been disputed by the Transfer Pricing Officer during the proceedings before him. In fact, the CIT(A) has categorically observed that the Transfer Pricing Officer in his order has observed the per share price of the shares as reflected in the Balance Sheet of the assessee for the various years. On this point, we also note that before the Transfer Pricing Officer, assessee had given justification of the buy- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer as per the Discounted Cash Flow(DCF) method and in this context, he referred to the decision of the Chennai Bench of the Tribunal in the case of M/s. Ascendas (India) Pvt. Ltd. vs. DCIT, in ITA No.1460/Mds/2012 dated 12/03/2013, wherein reference to such a method has been made. In our considered opinion, the plea of the Ld. Departmental Representative is quite misconceived and if it is to be accepted, then it would result in unnecessary prolonging of litigation. We say so for the reason that at the stage of transfer pricing proceedings before the Transfer Pricing Officer, assessee has in a detailed manner furnished the justification of the value at which shares have been bought back by the investee company. In fact, the replies of the assessee have been reproduced by the Transfer Pricing Officer in his order, wherein not-only the various methodologies of valuation have been pointed out but even the respective values have also been brought out. Further, none of the same have been controverted by the Transfer Pricing Officer in his order and in fact the CIT(A) has specifically concluded that the valuation of shares has not been disputed by the Transfer Pricing Officer either at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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