Strides Pharma Science Ltd. Vs DCIT (ITAT Mumbai)
Facts- During the relevant A.Y., the assessee had invested as share application money in two Associated Enterprises (AEs). The share application money was remitted to its A.Es from time–to–time during the relevant A.Y. In addition to this, during the earlier years, the assessee had invested the share application money in three A.Es which was outstanding as on 31.03.2014.
During the proceedings before the TPO, the assessee was asked to show cause as to why there should not be any interest imputation on the share application money.
The AO passed draft assessment order dated 20.12.2018, under section 143(3) r/w section 144C(1) of the Act on the basis of adjustment proposed by the TPO.
The DRP, vide its directions dated 30.09.2019, issued u/s 144C(5) of the Act upheld the order passed by the TPO following its directions issued in preceding AY and accordingly rejected the objections filed by the assessee. Being aggrieved, the assessee is in appeal before us.
Conclusion- Hon’ble Bombay HC, in the case of DIT v/s Besix Kier Dabhol, has held that the Revenue has no power to re-characterize a transaction entered into by the Assessee. Therefore admittedly, the AO or the TPO are not empowered to convert and re-characterize a transaction of share application into a loan transaction.
We find that the Co–ordinate Bench of the Tribunal in assessee’s own case in Strides Pharma Science Ltd. v/s DCIT for the AY 2014–15, vide order dated 07.02.2020, has decided the issue in favor of the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal has been filed by the assessee challenging the final assessment order dated 31.10.2019, passed by the Assessing Officer under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961 (“the Act”), for the assessment year 2015–16.
2. The assessee is engaged in the business of manufacturing and marketing of pharmaceutical products. The assessee filed its return of income electronically on 27.11.2015, declaring total income at Rs. 663,51,10,460.
3. The issue arising in ground no.2, in assessee’s appeal is with regard to imputation of interest on share application money paid to the Associated Enterprises (“A.Es”).
4. The brief facts of the case pertaining to this issue as emanating from the record are: During the relevant assessment year, the assessee had invested as share application money in two A.Es namely Strides Pharma Asia Pte. Ltd., Singapore, and Strides Pharma International Ltd., Cyprus. The share application money was remitted to its A.Es from time–to–time during the relevant assessment year. In addition to this, during the earlier years, the assessee had invested the share application money in following A.Es which was outstanding as on 31.03.2014.
