Case Note & Summary
The petitioner, M/s. Shell India Markets Pvt. Ltd., filed a writ petition under Article 226 of the Constitution of India challenging the order dated 30 January 2013 passed by the Transfer Pricing Officer (TPO) under Section 92CA(3) of the Income Tax Act, 1961 and the Draft Assessment Order dated 28 March 2012 passed by the Assessing Officer for Assessment Year 2009-10. The core issue was whether the revenue had jurisdiction under Chapter X of the Act to tax amounts received on issuance of equity shares to its non-resident Associated Enterprises, which were capital account transactions not giving rise to income. The petitioner, through Senior Counsel Mr. P. J. Pardiwala, submitted that the issue was no longer res integra in view of the Bombay High Court's decision in Vodafone India Services Pvt. Ltd. vs. Union of India (Vodafone-IV). The petitioner had also filed objections before the Dispute Resolution Panel (DRP) on various issues including jurisdiction, but undertook to withdraw those objections, which was accepted by the court. The respondent revenue, represented by Mr. Girish Dave, accepted that the issue was in principle covered by Vodafone-IV but argued that there were distinguishing features in this case that warranted a different outcome. The court, after considering the rival submissions, reproduced the broad summary of findings in Vodafone-IV as culled out in W.P. No.583 of 2014 and held that the issue was squarely covered by that decision. The court found no distinguishing features that would justify not extending the benefit of Vodafone-IV to the petitioner. Consequently, the court allowed the petition and quashed the impugned orders dated 30 January 2013 and 28 March 2012 to the extent they sought to tax the share premium received by the petitioner on issuance of equity shares to its non-resident Associated Enterprises. The court directed that the petition be disposed of in terms of the decision in Vodafone-IV.
Headnote
A) Transfer Pricing - Capital Receipt - Jurisdiction to Tax - Chapter X of Income Tax Act, 1961 - Issue pertains to whether revenue can tax premium received on issuance of equity shares to non-resident Associated Enterprises under transfer pricing provisions - Court held that such capital account transactions do not give rise to income and are outside the scope of Chapter X, following the decision in Vodafone India Services Pvt. Ltd. vs. Union of India (Vodafone-IV) - Petition allowed (Paras 1-6).
Issue of Consideration
Whether the revenue has jurisdiction under Chapter X of the Income Tax Act, 1961 to tax amounts received on issuance of equity shares to non-resident Associated Enterprises, being capital account transactions not giving rise to income
Final Decision
Petition allowed. Impugned orders dated 30 January 2013 and 28 March 2012 quashed to the extent they seek to tax the share premium received by the petitioner on issuance of equity shares to its non-resident Associated Enterprises. Petition disposed of in terms of the decision in Vodafone India Services Pvt. Ltd. vs. Union of India.
Law Points
- Transfer pricing provisions under Chapter X of Income Tax Act
- 1961 do not apply to capital account transactions
- issuance of equity shares at premium is capital receipt not income
- Vodafone India Services Pvt. Ltd. vs. Union of India ratio applies
