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TMI Blog2018 (12) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the case and in law, the Tribunal was correct in holding that there was no international transaction between the assessee company and its AE on account of back to back agreements between the assessee company and its AE and in turn between its AE and a third party M/s Citi Gate Trade FZE, even though the agreements were made for procurement of film rights and payment of advance for the same, which falls within the definition of International Taxation in the explanation given in Section 92B of the Act? 6.2 Whether on the facts and in the circumstances of the case and in Law, the Tribunal was correct in holding that the provisions of Chapter X were not attracted even though the assessee has interest bearing borrowed funds in its books a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AE entered into an agreement with Citi Gate. To operationalize said arrangement, the assessee advanced certain amounts to the AE. The AE, in turn, immediately paid up such amounts to Citi Gate. However, eventually, the arrangement did not work out. Citi Gate, thereupon, refunded the advance to the assessee through its AE. In the process, however, some time was consumed and the repayment was made over a period of time. 4.2 The Revenue contends that by making interest free advances to the AE, the assessee has transferred its profit and therefore, the transfer price regime would apply. 5. Learned counsel for the Revenue vehemently contended that the Tribunal has committed serious error in holding that the present is not a case giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te. Upon acquisition of such rights, the AE would transfer the same to the assessee at the price at which it had acquired such rights from Citi Gate. 8. The Tribunal noted that the AE had entered into back to back contracts with the assessee and Citi Gate which envisaged inter alia that Citi Gate would grant, sale, assign and transfer to the AE as well as to the assessee all rights for sale, absolute and exclusive rights of distributorship. The Tribunal, therefore, was of the opinion that there was no ambiguity over the scope of such agreements. Under the arrangement, the AE of the assessee was under obligation to transfer the rights to the assessee. The assessee had, therefore, established that the transaction of giving advance to the AE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal, therefore, are that the assessee had released money in favour of the AE with a specific purpose of acquisition of distributorship of the films from Citi Gate. Two back to back contracts entered into between the assessee and the AE and the AE and the Citi Gate duly establish this. Further, the AE never retained any amount either when the assessee released the same for payment to Citi Gate or when Citi Gate refunded the same to the assessee through AE. 14. Chapter X of the Act makes special provisions relating to avoidance of tax. Section 92 deals with computation of income from international transaction having regard to arm's length price. Section 92A pertains to meaning of associated enterprise. Section 92B pertains to mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation. However, having regard to the nature of entire arrangement and the different transactions, noted above, in our opinion, the said explanation would not cover the present situation. As noted, the present case is a simple one where the money was routed through the AE by the assessee for the purpose of acquisition of distributorship. This is not a case of either financing or landing or advancing of any moneys. The back to back agreements, the contents thereof and most significantly, the fact that neither at the point of payment nor at the point of refund of money, the AE retained the same for any significant period of time, in our opinion, would be crucial. This transaction did not result into diversion of income of the assessee to its ..... X X X X Extracts X X X X X X X X Extracts X X X X
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