9911796707
TMI Blog2022 (12) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... fere with the order of the TPO which in our view is not correct. The Addendum to BTA which was placed before us clearly show what all the assets and liabilities to be transferred by the assessee to its AE as per BTA. Since what all the assets and liabilities to be transferred by the assessee are clearly reflected in the Addendum to BTA the TPO/DRP are not justified in assuming that the assessee has transferred the entire assets and liabilities to its AE under BTA as slump sale completely ignoring the evidences on record and making some observations on assumptions. Assessee has clearly demonstrated with evidences that it has transferred only part of the assets to its AE under BTA read with Addendum to BTA and, therefore, there is no reason as to why the Addendum should not be considered and acted upon. Therefore, taking the totality of facts and circumstances into consideration, we direct the TPO to take cognizance of the Addendum the exhibits forming part of BTA and the other evidences and calculate the value of only those assets transferred by the assessee and exclude the assets which were retained, for the purpose of determining the ALP. TP Adjustment under the head Income from b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant post the transfer of business undertaking to the AE. 2.4 In incorrectly adjusting the value of the subjected transaction by not allowing the deduction for the assets and liabilities not transferred by the Appellant and instead equating the value of the assets and liabilities transferred with the total value of the business as determined in the valuation report. Ground 3: Incorrect computation of total tax demand under section 156 of the Act Without prejudice to the above, the learned AO erred in computing the final tax demand by incorrectly adding the transfer pricing adjustment amounting to INR 15,55,31,595 to the Income from Business or Profession instead of Income from Capital Gains. Ground 4: Initiation of penalty proceedings under section 270A of the Act On the facts and circumstances of the case, the learned AO erred in initiating penalty proceedings under section 270A of the Act for the transfer pricing adjustment made in the final assessment order." 2. Ground no. 1 & 2 relates to upward adjustment of Rs.15,55,31,595/- made by the Assessing Officer in determining the Arm's Length Price (ALP) of the International Transaction pertaining to consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the agreement was furnished before the TPO. The assessee further stated that the valuation of the said transaction was undertaken by the independent valuer using Discounted Cash Flow (DCF) Method as mentioned in the valuation report as on 31.01.2016. The assessee also furnished copy of valuation report before the TPO. The assessee also contended that DCF is the most appropriate and judicially accepted method for valuation in cases with similar facts. The assessee also furnished the net asset value of assets and liabilities taken over by its AE as on 31.01.2016. The TPO on examining the details furnished by the assessee observed that assessee has submitted only copy of agreement and the exhibit which was mentioned as part of agreement was not furnished. The TPO observed that as per the valuation provided by the assessee based on NAV Method the net asset value as on 31.01.2016 is Rs.25,23,06,207/- and this comes to 521.3746 per share. The TPO also observed that the Authorized Representative pointed out that some assets were not transferred to Saxo AS. The assessee also pointed out to the TPO that in the internal communication between Saxo India and Saxo AS that the Business Tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf submitted that its entire business undertaking including fixed assets was sold to Saxo AS w.e.f. 01.04.2016. 7. Considering the remand report and also the submissions of the assessee the DRP was of the view that as per clause (19) of the Business Transfer Agreement, Exhibit 1.1, all the assets and liabilities were to be transferred and this clause was also referred to in Addendum to Business Transfer Agreement dated 07.05.2016. The DRP was of the view that the Addendum only gives the value of the assets and liabilities transferred by the assessee to Saxo AS under various heads and there is no narrative as to why the entire asset have not been transferred and why specific assets have been retained when the Business Transfer Agreement refers to entire assets. The DRP finds no reason to interfere with the finding of the AO/TPO. 8. Before us the Ld. Counsel for the assessee submits that the DRP failed to consider the Addendum to Business Transfer Agreement in spite of the assessee making elaborate submissions with evidences demonstrating that certain assets and liabilities were actually in possession with the assessee even after the transfer of business to Saxo AS. The Ld. Counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. DRP that Assessee itself stated that entire assets were transferred is again erroneous because the statement made by the Appellant has been taken completely out of context and singled out to allege that the Appellant itself has admitted that the entire undertaking has been transferred (at pg 43-44 of Appeal set, para 4.13 read with pg 45, para 4..24) while all that the Appellant in its statement reproduced in para 4.13 states is that since the valuation was obtained under DCF method which takes into account the future projections from the business as a whole, there was no requirement to do a valuation again. This by no stretch means that the entire undertaking has been sold. 10. Ld. Counsel further submits that in its case, there was no possibility of any such finding by the authorities because Appellant had filed submissions prior to 23.12.2020 and post such date submitting consistently, along with evidence, that the entire undertaking of the Appellant has not been transferred. Submissions made by the Appellant are enumerated herein below: a. Submission dated 31.01.2020 (@pg 82 of PB, point 3) submitting the audited financials which made it clear (@pg 447 of PB) that the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 31 Mar 2017 were also filed before the Ld. TPO/AO (@pg 82 of PB, point 3) and a mere perusal of the financials made it clear (@pg 447 of PB) that the entire undertaking was not transferred and Appellant had retained back assets and liabilities. iv. A reconciliation of the adjusted consideration was provided to the Ld. TPO vide letter dated 09 Mar 2020 in response to a specific request from the TPO during hearing dated 03 Mar 2020. (@pg 129 read with pg 183 of PB) v. Further, the exhibits only gave the list of assets and liabilities as on 31 Jan 2016. The same did not give any details about the assets and liabilities which were retained. Irrespective, the same were submitted before the DRP as additional evidence. (@pg 198-201 and 347- 381 of PB) 13. After having the above evidence, the only question put forth by the TPO was if the Appellant has undertaken a valuation for arriving at the present market value of the fixed assets as on the date of transfer. There was no further enquiry and no further questions asked by the Ld. TPO and it directly gave such findings in its order regarding non submission of BTA exhibits and evidence. 14. Ld. Counsel submits that the observat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplete prominence to the BTA as well as the initial valuation report which was carried out for the entire undertaking. 14.3 It is submitted that the following assets and liabilities (values as on 31.03.2016) were retained by the Appellant as per the Management Certificate: Particulars Amount (In INR) Amount (In INR) Assets not transferred: Cash and cash equivalents 9,86,96,254 Net tax receivables (net of provision/tax payable) 58,25,699 Security deposits 2,58,65,309 Tangible assets (Old lights) 12,87,309 Receivables from customers 14,27,667 Service tax receivable/refund 2,57,93,751 TOTAL ASSETS NOT TRANSFERRED 15,88,95,988 Liabilities not transferred TDS Payable 6,566 Accrued pension contributions 97,716 Other Payables (Creditors not transferred) 32,60,110 TOTAL LIABILITIES NOT TRANSFERRED 33,64,392 It is submitted that the above assets and liabilities clearly do not form part of the addendum in which the assets and liabilities have been listed which were transferred. (@pg 109 of PB). It is submitted that the aforementioned assets and liabilities were not transferred will also be conclusively evident from the audited financials of the Appellant for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assets to its AE under BTA read with Addendum to BTA and, therefore, there is no reason as to why the Addendum should not be considered and acted upon. Therefore, taking the totality of facts and circumstances into consideration, we direct the TPO to take cognizance of the Addendum the exhibits forming part of BTA and the other evidences and calculate the value of only those assets transferred by the assessee and exclude the assets which were retained, for the purpose of determining the ALP. 18. Ground no. 3 of grounds of appeal of the assessee is in respect of adding the Transfer Pricing Adjustment amounting to Rs.15,55,31,595/- under the head "Income from business or profession" instead of income from capital gains. 19. The Ld. Counsel for the assessee submits that the AO/TPO erred in computing the Transfer Pricing Adjustment as income from business or profession instead of capital gains. The ld. Counsel submits that the addition on issue of capital gains will add to the income from capital gains since there is no dispute on the nature of income. Therefore, directions may be given to the AO/TPO to assess the adjustment if any under the head "Income from capital gains" a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
