Case Law Details
Pr. CIT Vs PMP Auto Components Pvt. Ltd (Bombay High Court)
Conclusion: Transfer Pricing provisions on shares purchased at value in excess of FMV was not applicable as the same could only be invoked to bring to tax any income arising from an international transaction.
Held: Assessee was investing an amount of Rs.2.67 Crores to acquire shares of its AE (subsidiary company), which had a fair market value of 8.19 lakhs. It was this excess payment of Rs.2.58 Crores, when compared to fair market value of the shares which was sought by Revenue to be brought to tax under the transfer pricing provisions under Chapter X.T It was contended that the additional investment of capital by assessee in its AE’s shares vis-a-vis its fair market value was subject to transfer pricing adjustment as done by TPO and upheld by DRP. It was held Chapter X of the Act was machinery provision and could only be invoked to bring to tax any income arising from an international transaction. It was necessary for the Revenue to show that income as defined in the Act did arise from the international transaction. The distinction between inbound and outbound investment was a distinction which did not take the case of Revenue any further, as the Legislature had made no such distinction while providing for determination of any income on adjustments to arrive at ALP arising from an international transaction.
FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT
This appeal under section 260A of the Income Tax Act (Act for short) challenges the order dated 13th January 2016 passed by the Income Tax Appellate Tribunal (Tribunal for short). The appeal relates to the assessment year 2010-2011.
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