Transfer Pricing Law Not Applies to Share Investment Transactions

In our opinion, the amount representing 2118.84 is towards investment in share capital of the subsidiaries outside India as the transactions are not in the nature of transactions referred to section 92-B of the IT Act and the transfer pricing provisions are not applicable as there is no income. Accordingly, we set aside the order passed by the CIT u/s 263 and that of the AO is restored and the grounds raised by the assessee in this regard are allowed.

IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH “A”, HYDERABAD

BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER

ITA No. 842/HYD/2012
Assessment Year: 2007-08

MIs Vijai Electricals Ltd.

Vs.

Addl. Commissioner of Income-tax

Date of Hearing  : 08/05/2013

Date of Pronouncement : 31/05/2013

ORDER

PER ASHA VIJAYARAGHAVAN, J.M.:

This appeal preferred by the assessee is directed against the order of CIT-III, Hyderabad dated 26/03/2012 passed u/s 263 of the Act, for the assessment year 2007-08.

2. The assessee company M/s Vijay Electricals Ltd. is engaged in the business of manufacture and sale of distribution and power transformers and rural electrification projects on turn key basis. The assessee filed its return of income for the assessment year 2007-08 on 30/10/2007, declaring  a total income of Rs. 208,40,81,674/-. The scrutiny assessment was completed u/s 143(3) on 17/12/2009, determining total income at Rs. 211,68,51,117/-. The CIT perused the assessment records and was of the opinion that the order passed by the AO u/s 143(3) is erroneous and prejudicial to the interests of the revenue, hence, the CIT proceeded to pass the order u/s 263 and held that during the year under consideration the assessee company had invested Rs. 2118.84 lakhs in its subsidiaries outside India as below: