Aries Agro Limited Vs Assessment Unit (ITAT Mumbai)
Conclusion: Where no income had accrued from the transaction of remittance of share application money by assessee to its overseas AE, then such transaction could not be subjected to the transfer pricing provisions and AO was not justified in treating the share application money as interest free loan/advance to AE.
Held: During the assessment proceeding, AO noted that appellant had entered into International Transaction which was Associated Enterprises [AE] during the relevant previous year and therefore, a reference was made to TPO for the computation of Arm’s Length Price (ALP) in relation to the aforesaid international transactions. TPO proposed transfer pricing adjustments of INR 1,03,26,939/-. According to TPO, appellant had advance funds to its AE [i.e. Golden Harvest Middle East (FZC)] under the grab of share application money and there was inordinate delay in allotment of shares. Therefore, treating the share application money as interest free loan/advance to AE, TPO proposed transfer pricing adjustments of interest of INR 1,03,26,939/- computed @ 5.10% on the share application money of INR 20,24,89,000/- remitted by appellant to AE. AO assessed the income of appellant at INR 90,80,91,579/- after making transfer pricing addition of INR.1,03,26,939/- to the income of INR 90,77,64,640/-computed under Section 143(1). Appellant filed objection before DRP against the Draft Assessment Order challenging to the additions made in the intimation issued under Section 143(1) and the proposed transfer pricing adjustments on account of interest on share application money. It was held that the onus was on the Revenue to bring on record material to show that there was default on the part of appellant leading to inordinate delay in allotment of shares. Revenue had failed to discharge the aforesaid onus and to controvert the contention of appellant that the delay in allotment of shares was on account of non-receipt of appropriate approval of SAIF Zone Authority despite appropriate application having been made. Accordingly, the delay in allotment of shares could not be attributed to appellant. Therefore, the transfer pricing addition which was based upon incorrect understanding that there was inordinate delay in allotment of shares could not be sustained. Accordingly, the transfer pricing addition of INR.103,26,939/- was deleted.
