9911796707
TMI Blog2018 (8) TMI 1708X X X X Extracts X X X X X X X X Extracts X X X X ..... Kundra ('RK') was a 'relative' of the Appellant within the meaning of section 92A(2)(j). c. Appellant profession was an 'enterprise' within the meaning of section 92F(iii) of the Act separate from the Appellant being an 'enterprise'. 3. The Appellant therefore, prays that the alleged 'international transaction' was not between AE5 and therefore the addition be considered as bad in law and be deleted. WITHOUT PREJUDICE TO GROUND I GROUND II 1. On the facts and circumstances and in law the CIT(A) erred in considering that agreeing to be associated with 'Rajasthan Royals' franchise ('RR') amounted to an "international transaction" as contemplated in section 92C of the Act. 2. He further erred in holding that the obligation to be associated with RR, free of charge, was an integral component of the consideration paid for the purchase of shares of EM Sporting Holding Limited (EMSHL') by Kuki from the existing shareholders. 3. He particularly failed to appreciate and ought to have held that: a. the alleged services, if any, were provided by the Appellant, a resident to Jaipur IPL Cricket Private Limited ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion, capital gains and other sources. The assessee filed her return of income on 20.09.2010 declaring a total income of Rs. 82,73,481. The return was selected for scrutiny and the assessment order was passed on 31.3.2012 assessing the total income at Rs. 4,25,59,195. The facts relevant to the addition to the returned income by the AO by way of a transfer pricing adjustment of Rs. 3,42,85,714 are that during the period under consideration the assessee was a party to a Share Purchase Agreement (SPA) signed by the existing shareholders of a Mauritius based company, namely EM Sporting Holding Limited (EMSHL) for the transfer of a portion of the shareholding of that company to M/s Kuki Investments Ltd. (incorporated in Bahamas) („Kuki‟) represented by Shri Raj Kundra („RK‟) and under the same SPA, Kuki was also to subscribe to additional shares to be issued by the company EMSHL. After giving effect to the SPA, the shares of the said EMSHL, Mauritius came to be held by M/s. Kuki Investments Limited, Bahamas (11.7%), Blue Water Estates Limited, Hong Kong (11.74%), Tresco International Limited, British Islands (44.15%) and Emerging Media IPL Limited, UK (32.41%). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent of monetary value of the (brand promotion) services provided by the Assessee to EMSHL and its the then existing shareholders on behalf of Kuki. He then made adjustment to Assessee's income on the basis of ALP. Aggrieved by the order of Ld. CIT(A), the assessee filed the present appeal before us on the grounds mentioned herein above. Ground No. 1 & 2 3. Since both the grounds raised by the assessee relates to challenging the order of Ld. CIT(A) in confirming the action of ACIT in making additions on account of transfer pricing adjustment made on the basis of share purchase agreement and also challenging the action of Ld. CIT(A) in considering that agreeing to be associated with „Rajasthan Royals‟ frenchise („RR‟) amounted to an „international transaction‟ as contemplated in section 92C of the Act. Since, both the grounds are inter related and also challenges the jurisdiction of Ld. CIT(A) in substituting its satisfaction to that of ACIT, therefore we thought it fit to dispose of the same by this common order. 4. Ld. AR appearing on behalf of the assessee while challenging the jurisdiction of Ld. CIT(A) to substitute its satisfa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was placed upon the judgment of Narrondas Manordass vs. CIT [1957] 31 ITR 909 (Born. HC). Ld. DR also during the course of hearing relied on the decisions of Hon'ble Supreme Court in case of CIT v. McMillan & Co. [1958] 33 ITR 182 and CIT v. Nirbherarn Deluram [1997] 224 ITR 610. 6. We have heard the counsels for both the parties and we have also perused the material placed on record, judgment cited by both the parties as well as orders passed by revenue authorities. We find that although, the powers of Ld. CIT(A) being wider than that of any other appellate authorities or Court is not disputed, but the Ld. CIT(A) cannot cure a jurisdictional defect, which the AO derives only by recording a satisfaction as has been held in the case of Vodafone India Services Pvt. Ltd. Vrs. Union of India and others 920140 361 ITR 531 (Bom HC). We have gone through the decision relied upon by Ld. DR, but the para materia contained in those judgments are not applicable to the facts of the present case as the same do not deal with exercise of Ld. CIT(A)'s powers to cure jurisdictional defect. In this respect, we rely upon the decision in the case of Hindustan Lever's case (supra) and Equ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by revenue authorities and submitted that assessee and Kuki were AE‟s u/s. 92A(2)(J) as: a) the Assessee's husband, RK, controlled Kuki. b) the Assessee is an individual and as such a 'person' within the meaning of sec. 2(31). During the course of hearing, the Ld. DR also argued that Kuki had controlled the Assessee as Kuki had paid association fee on behalf of the Assessee to EMSHL. 9. We have heard the counsels for both the parties, we find that both the above stated facts by Ld.DR, i.e. RK controlling Kuki and Assessee being a "person" u/s. 2(3 1), are not in dispute at all. The Ld. DR's submission on AE relationship between the Assessee and Kuki is based on only one limb of sec. 92A(2)(J), i.e. an individual controlled one enterprise (RK controlled Kuki). Sec. 92A(2)(J) deems the two 'enterprises' as AE if one of the enterprises is controlled by an individual and the other 'enterprise' is controlled by such individual or his relatives. The Ld. DR did not submit as to how that individual (i.e. RK) or his relative controlled the other 'enterprise' (i.e. Assessee). Without satisfying the second limb, i.e. that individual or h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 92B(2) of the Act cannot be applied to hold that transaction between assessee and JICPL was an „International transaction‟ as neither any of the parties to the SPA were an AE of the assessee nor JICPL entered into a prior agreement with the AE of the Assessee (JICPL was not a party to the SPA); and as such the pre-requisite of a prior agreement between a non-AE with the AE of an assessee is not fulfilled. 14. Now, we proceed to deal with the objection of assessee on existence of "international transaction" and "price" is concerned, Ld. AR submitted that in order to apply Chapter X, existence of a 'transaction' is a pre-requisite. It was submitted that Sec. 92C(1) makes it clear that the transfer pricing adjustment substitutes the price of the transaction with ALP. Therefore, in order to constitute a 'transaction' there has to be a certain disclosed price. It was argued that existence of an „international transaction‟ cannot be presumed by assigning some price to it and then deducing that since it is not an arm's length price, an "adjustment" has to be made. 15. In this respect, Ld. AR relied upon the decision in the case of Maruti Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Pvt. Ltd. v. DOT [2017] ITA No. 1406/Del/2015, wherein, after considering Maruti Suzuki's case, determination of ALP was upheld. He also relied on the decision of Hon'ble Mumbai Tribunal in case of Sabre Asia Pacific Pte. Ltd. [2018] ITA No. 4882/M/2015, to submit that the Tribunal had upheld the transfer pricing adjustment on the basis of ALP determination in case of assessee advancing interest free loan to its AE, by considering the income offered as zero. After relying on these decisions, the Ld. DR contended that in Assessee's case, the price was zero and therefore, the transaction is subjected to transfer pricing adjustment based on ALP determination. 17. We have heard the counsels for both the parties and we have also perused the material placed on record, judgments relied upon and orders passed by revenue authorities, we find that none of the 3 decisions cited by the Ld. DR can be applied in Assessee's case, as the facts of the cited cases are distinguishable from that of Assessee's case as under - i) In BMW's case (supra), BMW India had incurred expenses on marketing and promotional activities on behalf of its foreign holding company, agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 5, no notional income can be brought to tax u/s. 92. In this regard, Ld. AR relied upon the following judgments:- i. Dana Corporation [2010] 321 ITR 178 (AAR) - Pg. 192 & 193 ii. Amiantit International Holding Ltd [2010] 322 ITR 678 (AAR) - Pg. 682, 683 and 692 iii. Praxair Pacific Ltd [2010] 326 ITR 276 (AAR) - Pg. 279 and 286 iv. Deere & Co [2011] 337 ITR 277 (AAR) - Pg. 280 & 284 v. Venenburg Group B.V [2007] 289 ITR 464 (AAR) - Para 15 at Pg. 472 vi. Goodyear Tire & Rubber Co. [2011] 334 ITR 69 (AAR) - Para 10 at Pg. 78 vii. Vodafone India Services (P.) Ltd. v. Union of India [2013] 361 ITR 531 (Born HC) - Para 32 at Pg. 564 viii. Vodafone India Services (P.) Ltd. v. Union of India [2014] 368 ITR 1 (Born HC) - Para 24 (Pg. 30), 40 (Pg. 37-38) ix. Vodafone India Services (P.) Ltd. v. Union of India [2015] 369 ITR 511 (Born HC) - Para 8 at Pg. 515 x. Vodafone India Services (P.) Ltd. v. CIT [2016] 385 ITR 169 (Born HC) - Pg. 312 and 320 The Ld. AR further submitted that when the machinery provisions fail, then the charging provisions cannot be applied. In this respect, Ld. AR relied upon the decision in the case of CIT v. B.C. Srinivasa Setty [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
