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TMI Blog2019 (6) TMI 1373X X X X Extracts X X X X X X X X Extracts X X X X ..... against the same, AO compute expense disallowance of 3.21 Lacs, being 0.5% of average investments, in terms of Rule 8D(2)(iii). The same upon, confirmation by Ld. first appellate authority is under appeal before us. CIT(A) has directed AO to exclude those investments which may not be capable of yielding exempt income to the assessee. AR, briefly submitted that keeping in view the decision of Delhi Tribunal (Special Bench) rendered in ACIT Vs. Vireet Investment (P.) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] AO may be directed to take into consideration only those investments which have actually yielded any exempt income during the year. Concurring with the same, we direct AO to take into consideration only those investments which have actually yielded any exempt income during the year. The assessee is directed to provide requisite information, in this regard. This ground stand partly allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... if at all, could have been made only in AY 2009- 10. 3. The Appellant therefore prays that said transfer Pricing Adjustment be deleted. WITHOUT PREJUDICE TO GROUND I, II & III GROUND IV 1. On the facts and circumstances and in law the CIT(A) erred in confirming the action of the AO by computing the Arm's Length Price by considering the Appellant's agreement with Star India Private Limited and applied CUP method. 2. The CIT(A) failed to appreciate and ought to have held that average rate of all agreements (including agreements other than Star India) must be taken and 8 days (on which matches were played) were only for 3 working hours per day, being the actual duration of the IPL matches, which the Appellant was required to attend. 3. Accordingly, the average daily rate and also the number of days worked out by the AO and confirmed by the CIT(A) is erroneous. 4. The Appellant, therefore prays that the AO be directed to recompute the transfer pricing addition accordingly. GROUND V 1. On the facts and circumstances and in law the CIT(A) erred in confirming the action of the AO in disallowing a sum of ₹ 3,21,7637- being 0.5% of average investments u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. (Bahamas), Blue Water Estates Ltd. (Hong Kong), Tresco International Ltd. (British Island) & Emerging Media IPL Ltd. (UK) in certain proportions. 3.4 It was further observed that Shri Raj Kundra (Husband of the assessee) made a decision to buy shares of EMHSL, Mauritius through M/s Kuki Investments. Accordingly, a share purchase agreement [SPA] was entered into on 02/02/2009 between Shri Raj Kundra (Husband), the assessee, EMHSL (Mauritius) & M/s Kuki Investment Ltd. The relevant extract of the agreement has already been reproduced in the quantum assessment order. It was noted that although the assessee was neither a buyer nor a seller of shares but still she was a signatory to the agreement and the said agreement bind her to render certain services without any charge to 100% subsidiary of EMSHL, Mauritius i.e. JIPL by virtue of the fact that her husband, Shri Raj Kundra, through his intermediary company got the shares of EMSHL, Mauritius. 3.5 In the said background, Ld. AO formed an opinion that the assessee and EMHSL were Associated Enterprises [AE] within the meaning of Section 92A(1) and the services rendered by the assessee to JIPL was an international transaction with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s powers to cure jurisdictional defect. In this respect, we rely upon the decision in the case of Hindustan Lever's case (supra) and Equitable Investment's case (supra). 7. As far as objection raised by assessee on AE relationship between the Assessee and Kuki u/s. 92A of the Act is concerned, in this respect, Ld. AR submitted that Ld. CIT(A) did not uphold AO's finding that the Assessee and EMSHL were AEs. The revenue has not challenged the order of Ld. CIT(A) and consequently, the issue before us is limited to examine AE relationship between the Assessee and Kuki. In this respect, Ld. AR submitted that Sec. 92A(1) of the Act cannot be applied in isolation to hold that the assessee and Kuki were AEs. It was submitted that in order to constitute a relationship between the AEs, the parameters laid down in both sub-sections (1) and (2) of section 92A of the Act should be fulfilled. Ld. AR also relied upon the decision in the case of Page Industries Ltd. v. DCIT [2016] 159 lTD 680 (Bang. ITAT), Obulapuram Mining Co. (P.) Ltd. v. DCIT [2016] 76 taxmann.com 240 (Bang. ITAT) and ACIT v. Veer Gems [2017] 183 TTJ 588 (Ahd. ITAT) . Ld. AR on the application of Sec. 92A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w 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 his relative controlled the other enterprise, provisions of sec. 92A(2)(j) cannot be applied. We have further noticed that in order to satisfy the second limb of sec. 92A(2)(J), the Ld. CIT(A) presumed that Assessee's Profession (separate from her) was the other 'enterprise' and RK‟s relative, i.e. Assessee, controlled that other 'enterprise', i.e. her 'profession'. Against this presumption, it was submitted that her 'profession' cannot be separated from herself (the individual) to consider as an 'enterprise' u/s. 92F(iii) as the 'profession' (independent from individual) is not a 'person' within the meaning of sec. 2(31). The Ld. DR had not made any submissions against this stand taken by the assessee. 10. Now, as far as the arguments that Kuki controlled the Assessee by paying association fees is concerned, it was submitted that the association fee was nothing but earnest money which in fact got repaid to Kuki (by way of adjustment against the (cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gning 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 Suzuki India Ltd. CIT [2016] 381 ITR 117 (Del. HC) and Bausch & Lomb Eyecare (India) (P.) Ltd v. ACIT [2016] 381 ITR 227 (Del HC) It was also argued that the word "Price" had not been defined in the Act. It seems to have been used in its ordinary sense as meaning money only. In this respect, reliance was placed on the decision in the case of CIT v. Ganesh Builders [1979] 116 ITR 911 (BomHC). Ld. AR further submitted that in the Assessee's case, she was desirous to enhance her brand image and hence, she got associated with RR, for which Kuki had paid a deposit of USD 10,00,000/-to EMSHL as Association fee. With the conclusion of transactions of purchase and subscription of shares completing on February 13, 2009, in terms of Cl. 2.3 and Cl.5.2 of the SPA, the rights granted to the Assessee automatically terminated and the said deposit was adjusted against the consideration payable on subscription of shares to EMSHL. Therefore, the association fee was only earnest mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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, against which it had not offered any income. It was found by the Hon'ble ITAT that the agreement between the parties provided for reimbursement of marketing and promotional expenses by foreign holding co. and certain amount was, in fact, reimbursed to the Indian Co. Therefore, it was not a case where the price of the transaction was not disclosed and the Department had assumed certain price to substitute it with the ALP, unlike the case of the Assessee. ii. In Instrumentarium's case, the assessee had advanced an interest free loan to its AE. The Hon'ble Special Bench observed that "consideration of loan, i.e. interest, is inherently in the nature of income ". The Tribunal, then, held that "when no income is reported in respect of an item in the nature of income, such as interest, but the substitution of transaction price by arm's length price results in an income, it can very well be brought to tax." The transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 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 [1981] 128 ITR 294 (SC) and CIT v. Official Liquidator, Palai Central Bank Ltd. [1979] 117 ITR 676 (Ker. HC) 19. On the other hand, Ld. DR relied upon the orders passed by revenue authorities and the decision in the case of Instrumentarium's case (supra) to contend that the price was zero and the provisions of Chapter X would apply accordingly. 20. After hearing both the parties at length, we find that since we have already rebutted the Ld. DR's reliance on Instrumentarium's case above in detail, therefore the same are not applicable to the facts of the present case and we are of the view that since chapter 10 pre-supposes the existence of 'income‟ and lays down machinery provision to compute ALP of such income, if it arises from an "International transaction‟. Section 92 is not an independent charging section to bring in a new head of income or to charge tax on income whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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