Case Law Details
Information Technology Park Ltd. Vs ITO (ITAT Bangalore)
ITAT Bangalore held that excess premium paid by the assessee on redemption of preference shares cannot be taxed as deemed dividend under section 2(22)(d) or section 2(22)(e) and hence deleted the addition.
Facts-
During the assessment proceedings a reference was made to the Transfer Pricing Officer (TPO) for determination of the Arm’s Length Price (ALP) of this international transaction assessee entered into with AFPI. The assessee has during the previous year relevant to AY 2010-11 redeemed some of the preference shares at a premium based on the valuation done the expert valuer by adopting the Net Asset Value (NAV) method. The TPO accepted the method of valuation adopted by the assessee i.e., NAV method, but reworked the redemption value based on book value of assets. The TPO arrived at the redemption value at Rs.286.80 per share which resulted in an adjustment of Rs.29,95,66,000 that arose out of the difference between the redemption value adopted by the assessee and the TPO. The AO passed the final assessment order giving effect to the TP adjustment based on the letter filed by the assessee that the assessee would not be filing objections before the DRP and would prefer appeal with the CIT(Appeals).
The CIT(Appeals) held that the TP adjustment made by the TPO determining the value at which the preference shares should have been redeemed cannot be treated as income in the hands of the assessee. However since the ALP of the share price determined by the TPO is lesser than the price determined by the assessee, the CIT(Appeal) proposed to make addition to the extent of the same amount by treating it as deemed dividend. Being aggrieved, the assessee preferred the present appeal.
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