Case Law Details
Shilpa Shetty Vs ACIT (ITAT Mumbai)
Conclusion: As the actor Shilpa Shetty was a brand ambassador for IPL team Rajasthan Royals, she was bound to render certain services without any charge to subsidiary company JIPL owned by holding company of her husband and assessee did not receive any consideration for the services rendered to JICPL, in the absence of any ‘price’, the provision of services could not be considered as an ‘international transaction under sec. 92(1).
Held:
Assessee-Shilpa Shetty being a film actress was acted as brand ambassador for Jaipur IPL Team. Jaipur IPL Cricket Private Limited [JIPL] was engaged in the business of sports and media, owned Rajasthan Royals IPL Cricket team and was stated to be 100% subsidiary of EMSHL, Mauritius, which in turn, was owned by several entities namely M/s. Kuki Investment Ltd. (Bahamas), Blue Water Estates Ltd. (Hong Kong), Tresco International Ltd. (British Island) & Emerging Media IPL Ltd. (UK) in certain proportions. Shri Raj Kundra (Husband of assessee) made a decision to buy shares of EMHSL, Mauritius through M/s Kuki Investments. Accordingly, a share purchase agreement [SPA] was entered between Shri Raj Kundra (Husband), the assessee, EMHSL (Mauritius) & M/s Kuki Investment Ltd. AO formed an opinion that the assessee and EMHSL were Associated Enterprises [AE] within the meaning of Section 92A(1) and the services rendered by the assessee to JIPL was an international transaction within the meaning of Section 92B which was to be benchmarked on the principle of Arm’s Length Price [ALP] under section 92C. AO assessed assessee’s income at Rs.1303.15 Lacs after certain transfer pricing adjustments as against returned income of Rs. 759.94 Lacs e-filed by assessee. It was held that although assessee was neither a buyer nor a seller of shares but still she was a signatory to the agreement and the said agreement bind her to render certain services without any charge to 100% subsidiary of EMSHL, Mauritius i.e. JIPL by virtue of the fact that her husband, Shri Raj Kundra, through his intermediary company got the shares of EMSHL, Mauritius. Section 92B(2) could not be applied to hold that transaction between assessee and JICPL was an „International transaction‟ as neither any of the parties to the share purchase agreement (SPA) were an AE of the assessee nor JICPL entered into a prior agreement with the AE of the Assessee (JICPL was not a party to the SPA); and as such the pre-requisite of a prior agreement between a non-AE with the AE of an assessee was not fulfilled. Moreover, assessee did not receive any consideration for the services rendered to JICPL, there was no ‘price’ which could be substituted with ALP. In the absence of any ‘price’, the provision of services could not be considered as an ‘international transaction’. In absence of any ‘international transaction’, the provisions of sec. 92(1) could not be applied and as such an adjustment on the basis of ALP could not be made. If at all it was held that there was a ‘price’ and therefore there existed a ‘transaction’, then in that eventuality, since the services were provided to JICPL, the alleged transaction was between the Assessee and JICPL, both being residents, then in that eventuality even otherwise the alleged transaction could not be considered as an “international transaction”. Thus, an addition of Rs 5.4 crore to her income for the financial year 2010-11 was to be deleted.
FULL TEXT OF THE ITAT JUDGEMENT
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