DY COMMISSIONER OF INCOME TAX -8(3)(1), MUMBAI V. M/S WELSPUN GLOBAL BRANDS LTD , MUMBAI

ITA 2184/MUM/2022

AI Insights

The case involves the Deputy Commissioner of Income Tax (DCIT) as the appellant and M/s Welspun Global Brands Ltd. as the respondent. The primary issues in the appeal were related to the disallowance under section 14A r.w.r 8D(2)(iii) concerning investments that generated exempt income, and the transfer pricing adjustments made by the TPO regarding excess share premium paid by the assessee. The CIT(A) had deleted both the disallowance and the TP adjustment, which the revenue challenged before the Tribunal. The Tribunal's decision focused on the correct application of section 14A r.w.r 8D(2)(iii) and the interpretation of international transactions under the Income Tax Act, particularly in relation to capital transactions and their tax implications.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 25730 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: J
• Assessment Year: 2012-2013
• Other Referred Cases: Vodafone India Services Pvt. Ltd. vs UOI, Aegis Limited v/s ACIT, Topsgrup Electronic Systems Ltd vs ITO, Mahindra & Mahindra Ltd. vs. DCIT, Dexiskier Dhboal SA vs. ITO, Hill Country Properties Ltd. vs. ITO, Vijay Electricals Ltd. vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: HARSH KAPADIA; AJAY NAGPAL; ASIF KAR MALI
• Keywords: Set aside; Revised return; Transfer pricing; International transaction; Question of law; Depreciation; Tax effect; Commercial expediency; Capital receipt; Valuation report; Earning of tax free income; Notional interest; Wholly owned subsidiary; Rule 8D; Scheme of amalgamation
• Section: 263; 56; 43; 14A; 92B

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “J” BENCH, MUMBAI BEFORE MS PADMAVATHY S, AM & SHRI RAJ KUMAR CHAUHAN, JM I.T.A. No. 2184/Mum/2022 (Assessment Year: 2012-13) DCIT, CC-3(3), Room No. 1923, 19th Floor, Air India Building, Nariman Point, Mumbai-400021. Vs. M/s Welspun Global Brands Ltd., B-9, Trade World, Senapati Bapat Marg, Lower Parel, Mumbai-400013. PAN: AAACW5582G Appellant) : Respondent) Appellant /Assessee by : Shri Harsh Kapadia & Shri Ajay Nagpal, AR Revenue / Respondent by : Shri Asif Karmali, Sr. DR Date of Hearing : 06.03.2025 Date of Pronouncement : 17.03.2025 O R D E R Per Padmavathy S, AM: This appeal of the revenue is against the order of the Commissioner of Income Tax (Appeal) – 58 Mumbai (in short \"CIT(A)\") dated 01.07.2022 for Assessment Year (AY) 2012-13. The revenue raised the following grounds of appeal – 2 ITA No.2184/Mum/2022- M/s Welspun Global Brands Ltd. Non TP issues: 1.1 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) in correct in directing the Assessing Officer to delete the entire disallowance u/s 14A r.w.r 8D(2)(iii), without appreciating the facts that assessee has made the investments to the tune of Rs. 1.38 millions which has generated the exempt income? 1.2 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in treating the whole amount of investment made by the assessee as the investment in foreign companies which has not generated the exempt income, whereas the assessee itself has accepted before the CIT (A) that investment were also made to generating the exempt income to the tune of Rs. 1.38 millions which should be considered while making the disallowance u/s 14A r.w.r. 8D(2)(iii)? (Tax Effect: Rs. 2,345/-) TP issues: Grounds of appeal on the issue of excess share premium paid by assessee: 2.1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing the AO to delete the adjustment without discussing the facts of the case or deciding the issue on the merits of the case? 2.2. Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in relying on Hon'ble Bombay High Court's decision in the case of Vodafone India Services Pvt. Ltd. for AY 2009-10 (WP No. 871/2014) when facts of the instant case are different? In the Vodafone case, capital was inbound whereas in the instant case capital is outbound in the form of share premium being paid to purchase shares of foreign. AE at excessive valuation. The petitioner in Vodafone case had argued that the Income Tax Act does not tax inflow of capital into the country so as to impede its coming into India. However, in instant case capital is flowing out of India leading to Base Erosion and Profit shifting and thus facts are different in this case. 2.3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing the AO to delete the adjustment without appreciating the Explanation (1)(c) to Section 92B which states that international transaction includes capital financing, including any type of long term or short term borrowing, lending or guarantee? 3 ITA No.2184/Mum/2022- M/s Welspun Global Brands Ltd. 2.4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not appreciating the substance of the transaction which is in essence capital financing, camouflaged as share premium? (Tax effect: Rs. 82,40,615/-) 3. The Ld. CIT (A)'s order is contrary in law and on facts and deserves to be set aside. 4. The appellant prays that the order of Ld. CIT (A) on the above grounds be set aside and that of the AO restored. The appellant craves leave to amend or alter any ground or add a new ground that may be necessary at the time of hearing.” 2. The assessee is a public limited company engaged in the business of trading in home textile products. The assessee filed the return of income for AY 2012-13 on 30.11.2012 declaring a total income of Rs.12,75,63,528/-. The assessee filed the revised return on 23.07.2013 declaring a loss of Rs.65,61,19,756 on account of scheme of amalgamation sanctioned by the Hon'ble High Court. The case was selected for scrutiny and the statutory notices were duly served on the assessee. A reference was made to the Transfer Pricing Officer (TPO) to determine the Arm's Length (ALP) price of the international transaction entered into by the assessee with its Associate Enterprise (AE). The TPO passed an order under section 92CA(3) of the Act proposing a TP adjustment of Rs.2,42,44,233/ by towards interest by treating the excess premium paid on purchase of shares of AE as loan. The AO while passing the final assessment order besides incorporating the TP adjustment also disallowed a sum of Rs.14,02,674/- under section 14A of the Act. Aggrieved the assessee filed further appeal before the CIT(A). The CIT(A) deleted both the addition / disallowance and the revenue is in appeal against the order of CIT(A) before the Tribunal. 4 ITA No.2184/Mum/2022- M/s Welspun Global Brands Ltd. Disallowance under section 14A – Ground No.1.1 & 1.2 3. The AO during the course of assessment noticed that the assessee has earned dividend income of Rs.6,54,354 and has claimed the same as exempt. In this regard the AO issued a show notice to the assessee as to why the disallowance under section 14A r.w.r 8D cannot be made. The assessee submitted that the investment of the assessee is with the Foreign AEs and since the income earned from the said investments are taxable in India section 14A cannot be applied. The assessee further submitted that the dividend income earned is from the investment in Reliance Equity Fund out of own funds. Therefore the assessee submitted that Rule 8D is not applicable to assessee's case. The AO did not accept the submissions of the assessee and disallowed 0.5% of the average investments amounting to Rs.14,02,674/-. The CIT(A) deleted the addition stating that the dividend foreign companies are not exempt under the Act and hence provisions of section 14A cannot be invoked. 4. We heard the parties and perused the material on record. We notice that the breakup of investment for the year end 31.03.2012 consists of investment in subsidiaries (foreign companies) to the tune of Rs.55.97 crores and in Mutual Funds amounting to Rs.0.138 crores. The AO while arriving at the disallowance under section 14A r.w.r. 8D(2)(iii) has considered the entire investments including the investment which does not give tax free income. In other words, the investment in foreign company the dividend from which is taxable in India has also been considered for arriving at the disallowance. It is a settled legal position that for the purpose of computing the disallowance under rule 8D(2)(iii), only those investment earning tax free income should be considered. Therefore we are of the considered view that the AO is not correct in considering the entire investment 5 ITA No.2184/Mum/2022- M/s Welspun Global Brands Ltd. including the investments whose income is taxable. The ld AR during the course of hearing submitted that the assessee as on the year end did not have any any balance in the investments from which the exempt income is earned. Accordingly we direct the AO to consider only the average of those investments which earn tax free income and re-compute the disallowance accordingly. The AO is further directed to keep in mind that the disallowance if any cannot be more than the exempt income earned by the assessee in accordance with the settled legal position in this regard. The ground raised by the revenue is partly allowed. TP Adjustment – Ground No.2.1 to 2.4 5. The assessee during the financial year relevant to AY 2010-11 converted the loans from Welspun Holdings Pvt. Ltd., Cyprus into equity. The assessee was issued 9000 equity shares of GBP 1 each at a premium of GBP 999. The assessee had submitted the valuation report as per DCF method in support of the share premium. The TPO in the said AY did not accept the submissions of the assessee and reworked the share premium at GBP 339.5 and treated the difference of GBP 660.5 as loan in the hands of the assessee. The TPO accordingly made the TP adjustment towards interest on the amount of excess premium treated as loan. For the year under consideration, the TPO made a similar adjustment by applying the interest rate of 5.67% and made the TP adjustment of Rs.2,42,44,233/-. The CIT(A) relied on the decision of the Hon'ble Bombay High Court in the case of Vodafone India Services (P) Ltd vs UOI (2014) 50 taxmann.com 300 (Bom) and deleted the TP adjustment. 6. The ld DR vehemently argued that the CIT(A) is not correct in relying on he decision of the jurisdictional High Court in the case of Vodafone Services (P) Ltd (supra) for the reason that the in that case the shares of Indian Company was 6 ITA No.2184/Mum/2022- M/s Welspun Global Brands Ltd. bought by the AE whereas in assessee's case it is the reverse where the assessee has acquired the shares of the AE for a premium. Accordingly the ld DR supported the order of the TPO. 7. The ld. AR on the other hand submitted that the Hon'ble Bombay High Court in the case Vodafone has held that the premium on shares is a capital transaction which does not give rise to any income and therefore no TP adjustment can be made. The ld AR further submitted that the TPO is not correct in re- characterising the share transaction entered into by the assessee as loan and in this regard relied on the decision of the coordinate bench in the case of Aegis Limited v/s ACIT (ITA No.1213/Mum/2014 dated 27.07.2015). The ld. AR brought to our attention the decision of coordinate bench in the above case is upheld by the Hon'ble Bombay High Court where it has been held that – “2. The respondent-assessee is a Company registered under the Companies Act. For the Assessment Year 2009-10, the assessee was subjected to transfer pricing regime. Question no.1 arises out of the action of the Revenue to tax notional interest in the hands of the assessee through transfer pricing. The facts are that, during the period relevant to the assessment year in question, the assessee had subscribed to redeemable preferential shares of its Associated Enterprises (\"AE\" for short) and redeemed some of its shares at par. The Transfer Pricing Officer (\"TPO\" for short) held that the preference shares were equivalent to interest free loans advanced by the assessee and accordingly charged the interest on notional basis. The Tribunal by the impugned judgment, deleted the addition observing that the TPO had re- characterised the transaction of subscription of shares into advancing of unsecured loans. The Tribunal did not accept such conclusion, inter-alia on the grounds that the TPO cannot disregard the apparent transaction and substitute the same without any material of exceptional circumstances pointing out that the assessee had tried to conceal the real transaction or that the transaction in question was sham. The Tribunal observed that the TPO cannot question the commercial expediency of the assessee entered into such transaction. 3. We are broadly in agreement with the view of the Tribunal. The facts on record would suggest that the assessee had entered into a transaction of 7 ITA No.2184/Mum/2022- M/s Welspun Global Brands Ltd. purchase and sale of shares of an AE. Nothing is brought on record by the Revenue to suggest that the transaction was sham. In absence of any material on record, the TPO could not have treated such transaction as a loan and charged interest thereon on notional basis. No question of law arises.” 8. With regard to the argument of the ld DR that the decision of Hon'ble High Court in the case of Vodafone Services (P) Ltd (supra) is not applicable to assessee's case, the ld AR submitted that the revenue raised a similar argument while contending the identical issue in the case of Topsgrup Electronic Systems Ltd vs ITO (2016) 67 taxmann.com 310 (Mum-Trib) and the coordinate bench has held that the ratio laid down in the case of the Vodafone Services (P) Ltd (supra) is applicable to both inbound and outbound transactions. Accordingly the ld AR argued that the CIT(A) has rightly deleted the TP adjustment. 9. We heard the parties and perused the material on record. The TPO in AY 2010-11 has re-characterised assessee's equity transaction of purchasing shares of its AE as a loan to the extent of alleged excess premium. The TPO had made TP adjustment towards interest on the said recharacterised loan transaction in AY 2010-11. The TPO during the year under consideration followed the decision of his predecessor and made TP adjustment towards interest on the amount treated as loan. The primary argument of the assessee is that the TPO cannot re-characterise the transaction of purchase of shares entered into by the assessee as loan. With regard to the contention that the TPO cannot re-characterise the transaction we notice that the Hon'ble High Court in the case of Aegis Ltd (supra) while considering the issue of TP adjustment made by re-characterising a capital transaction as loan has upheld the decision of the coordinate bench (refer relevant observations of the Hon'ble High Court extracted in earlier part of this order). It is 8 ITA No.2184/Mum/2022- M/s Welspun Global Brands Ltd. also relevant to take note of the following observations of the coordinate bench in the case Aegis Ltd (supra) – “27. We have heard the rival submissions and also perused the relevant findings in this regard in the impugned orders. The assessee has subscribed to redeemable preference shares of its AE, Essar Services, Mauritius and has also redeemed some of these shares at par. The TPO has redeemed some of these shares at par. The TPO has re-characterized the said transaction of subscription of shares into advancing of unsecured loan by terming it as an exceptional circumstance and has charged/imputed interest, on the reasoning that in an uncontrolled third party situation, interest would have been charged. We are unable to appreciate such an approach of TPO and under what circumstances, leave above any exceptional circumstances, a transaction of subscription of shares can be re-characterized as Loan transaction. The TPO/Assessing Officer cannot disregarded any apparent transaction and substitute it, without any material of exception circumstance highlighting that assessee has tried to conceal the real transaction or some sham transaction has been unearthed. The TPO cannot question the commercial expediency of the transaction entered into by the assessee unless there are evidence and circumstances to doubt. Here it is a case of investment in shares and it cannot be given different colour so as to expand the scope of transfer pricing adjustments by re-characterizing it as interest free loan. Now, whether in a third party scenario, if an independent enterprise subscribes to a share, can it be characterize as loan. If not, then this transaction also cannot be inferred as loan. The contention of the Ld. Counsel is also supported by the Hon'ble jurisdictional High Court in the case of Dexiskier Dhboal SA, ITA No. 776 of 2011 order dated 30th August, 2012 and by various other decisions, as cited by him. The Co-ordinate Benches of the Tribunal have been consistently holding that subscription of shares cannot be characterizes as loan and therefore no interest should be imputed by treating it as a loan. Accordingly, on this ground alone, we delete the adjustment of interest made by the Assessing Officer. Thus, ground no. 14 is treated as allowed.” 10. In assessee's case, the TPO has made the adjustment towards interest by re- characterising the share transaction as loan and therefore in our considered view, the ratio laid down by the Hon'ble High Court and the coordinate bench are applicable to assessee's case also. Accordingly we hold that the TP adjustment made by the TPO is not sustainable. 9 ITA No.2184/Mum/2022- M/s Welspun Global Brands Ltd. 11. The alternate arguments of the assessee is that the impugned transaction of alleged excess share premium on acquisition of shares is a capital transaction not giving rise to any income and therefore not liable for TP adjustment as has been held in the case of Vodafone Services (P) Ltd (supra). With regard to the contention of the ld DR that the decision of Vodofone Services (P) Ltd, is not applicable to assessee's case we notice that the coordinate bench in the case of Topsgrup Electronic Systems Ltd (supra) while deciding the similar issue where the Indian Company has subscribed to the shares of foreign AE i.e. the transaction identical to assessee's case has held that – “7. We have heard the rival contentions put forth by both the learned A.R. for the assessee and the learned DR for Revenue and perused and carefully considered the material on record, including the judicial pronouncements cited and relied on. Chapter X begins with section 92) of the Act which states that income arising from and international transaction shall be computed having regard to the arms length price.” Evidently, therefore, income arising from the international transaction is a condition precedent for computing the ALP and such income should be chargeable to tax under the Act. In the absence of such income. benchmarking of an international transaction and computing ALP thereof would not be in order. Consequently, if an international transaction is on capital account and does not result in income as defined under section 2(24) of the Act, the provisions of Chapter X of the Act would not be applicable to such transaction. This proposition finds support in a number of judgements of the Hon'ble Bombay High Court viz. Vodafone India Services (supra), i.e. (Vodafone IV), Shell India Markets (P) Ltd. (supra), Equinox Business Parks (P) Ltd. (supra) and decisions of the TAT, Hyderabad Hench in the case of Vijay Electrical Ltd. (supra) and Hill Country Properties Ltd. (supra). 7.1 Before us, the learned D.R. was not able to establish that any income arose out of the assessee's transaction, i.e. of investment in the shares of its wholly owned subsidiary, Tops BV, Netherlands. The learned D.R., however, contended that there is a scope for effect on potential income arising from subsequent sale of these shares and in this regard placed reliance on the decision of the Hon'ble Bombay High Court in the case of Vodafone India Services Ltd. (supra) (Vodafone-III). 10 ITA No.2184/Mum/2022- M/s Welspun Global Brands Ltd. 7.1.1 He learned A.R., for the assessee pointed out that this averment made by the learned D.R. was a new on and line of argument that does not emanate from the points considered by the TРО/AО/СІТ(А) in their orders and therefore in the light of the decision of the Special Bench of the Mumbai TAI in the case of Mahindra & Mahindra Ltd. (supra) this new argument/issue is not to be considered. We find force in the argument of the learned A.R. for the assessee for the assessee on this issue. 7.1.2 In any case the concept of potential income has been dealt with by the Hon'ble Bombay High Court in the case of Vodafone India Services (P) Ltd. (supra) (Vodafone IV) at para 31, 32 and 43 of its order as under: 31. Similarly, the reliance by the revenue upon the definition of International Taxation in the sub-clause (C) and (e) of Explanation (1) to Section 92B of the Act to conclude that income has to be given a broader meaning to include notional income, as otherwise Chapter X of the Act would be rendered otiose is far fetched. The issue of shares at a premium does not exhaust the universe of applicability of Chapter X of the Act. There are transactions which would otherwise qualify to be covered by the definition of International Transaction. The transaction on capital account or on account of restricting would become taxable to the extent a impacts income le under reporting of interest over reporting of interest paid or claiming of depreciation etc. It is that income which is to be adjusted to the ALP. It is...... tax on the Capital receipts. This aspect appears to have been completely lost sight of in the impugned order.\" 32. The other basis in the impugned order is that as a consequence of under valuation of shares there is an impact on potential income. The reasoning is that if the ALP were received, the Petitioner would be able to invest the same and earn income, proceeds on a mere surmise/assumption. This cannot be the basis of taxation. In any case, the entire exercise of charging to tax the amounts allegedly not received as share premium fails, as no tax is being charged on the amount received as share premium. Chapter X is invoked in ensure that the transaction is charged to tax only on working out the income after arriving at ALP of the transaction. This is only to ensure that there is no manipulation of prices/ consideration between AEs. The entire consideration received would not be a subject- matter of taxation. It appears for the above reason that the learned Solicitor General did not seek to defend the conclusion in the impugned order on the basis of the reasons found therein, but sought to support the conclusion with new reasons\". 11 ITA No.2184/Mum/2022- M/s Welspun Global Brands Ltd. 43. It was contended by the revenue that income becomes taxable no sooner it accrues or arises or when is deemed to accrue or arise and not only when it was received. It is submitted that even though the Petitioner did not receive the ALP value consideration for the issue of its shares to its holding company, the difference between the ALP and the contract price is an income, as it arises even if not received and the same must be subjected to tax There can be no dispute with the proposition that income under the Act as taxable when it accrues of arises or is received or when it is deemed to accrue, arise or received. The charge-ability to tax is when right to receive an income becomes vested in the assessee. However, the issue under consideration is different viz. whether the amount said to accrue, arise or receive is at all income. The issue of shares to the holding company is a capital account transaction, therefore, has nothing to do with income. We thus do not find substance in the above submission.\" As it is self evident from the above potential income arising from a capital transaction may be considered under Transfer Pricing provisions if it arises from out of the impugned transaction. The situations in which a capital transaction may have an impact on potential income are provided in para 31 of the decision in the case of Vodafone India Services (P) Ltd. (supro) (extracted supra) by way of instances such as interest on loan given or received or depreciation, etc 7.1.3 Turner, a plain reading of section 92(1) of the Act which specifies that any income arising from an international transaction shall be computed having regard to the Arm's Length Price' implies that the potential Income, if any, should arise from the impugned international transaction which is before the Transfer Pricing Officer for consideration and not out of a hypothetical international transaction which may or may not take place in future. Before us, except for making a claim in this regard the Ed. Departmental Representative was and able to establish that any income or potential income arose from the impugned transaction of the assessee's investment in acquiring the share capital of us wholly owned subsidiary, Tops BV, Netherlands. 7.1.4 In respect of the contention of the Ld. Departmental Representative that the decision of Vodafone India Services (P) Ltd. (supra) was not applicable to the assessee in the case on hand as it dealt with an inbound transaction and not an outbound transaction, the Ld. Representative for the assessee for the assessee submitted that the decision of the Hon'ble High Court in the case of Vodafone India Services P. Ltd. (supra) had observed that it would be applicable to both inbound and outbound transaction at para 42 thereof which extracted hereunder:- 12 ITA No.2184/Mum/2022- M/s Welspun Global Brands Ltd. “42. It was contended by the Revenue that in any event the charge would be found in Section 5441) of the Act. Section 56 of the Act does provide that income of every kind which is not excluded from the income is chargeable under the head income from other sources. However, before Section 56 of the Act can be applied, there must be income which arises. As pointed out above, the issue of shares at a premium is on Capital Account and gives rise to no income. The submission on behalf of the revenue the shortfall in the ALP as computed for the purpose of Chapter X of the Act given rise to income is misplaced. The ALP is meant to determine the real value of the transaction entered into between AEs. It is a re-computation exercise to be carried out only when income arises in case of an International transaction between AEs. It does not warrant re- compotation of a consideration received/given on capital account. It permits re-computation of income arising out of a Capital Account Transaction, such as interest paid/received on loans taken/given, depreciation taken on machinery etc. All the above would be cases of income being affected due to a transaction on capital account. This is not the revenue’s case here. Therefore, although Section 56(1) of the Act would permit including within its head, all income not otherwise excluded, it does not provide for a charge to tax on Capital Account Transaction of issue of shares as is specifically provided for in Section 45 or Section 56(2) (vib) of the Act and included within the definition of income in Section 2(24) of the Act.\" 7.1.5 In these circumstances, we are of the view that the impugned transaction cannot be brought within the ambit of Indian Transfer Pricing provisions merely on the presumption that it may impact profits arising out of a subsequent transaction which may or may not be an international transaction. In coming to this view, we draw support from the decisions of the ITAT, Hyderabad Bench in the case of Vijay Electricals Ltd (supra) and Hill Country Properties Ltd. (supra); which are cases of outbound investments, wherein prices at which the equity shares were acquired could have impacted the profits which may have arisen out of a subsequent transaction of the said shares. However, since no income arose from those transactions, it was held that the same would not tall within the ambit of Indian Transfer Pricing provisions, In the case of Vijay Electricals Ltd. (supra), the Tribunal in an appeal against order passed under section 263 of the Act held that Transfer Pricing provisions are not applicable to the transactions of investment in share capital since no income arises therefrom. Though in the case of Hill Country Properties Ltd., (supra), the transaction seas of share application money, the Tribunal followed the decision rendered in the case of Vijay Electricals Ltd (supra) 13 ITA No.2184/Mum/2022- M/s Welspun Global Brands Ltd. 7.1.6 The differentiation sought to be made by the Revenue between inbound investment in shares and outbound investment in shares for applicability of TP provisions does not, in our considered view, find any support therein. I would also be appropriate in this regard to refer to Rules 108 and 10C of the house Ta Rules, 1962 (in short the Rules') Rule 10B(2) reads as under- “(2) For the purposes of sub-rule (1), the comparability of an international transaction with in uncontrolled transaction shall be judged with reference to the following, namely: (a) the specific characteristics of the property transferred or services provided in either transaction (b) the functions performed, taking into account assets employed or to be employed and the risks assumed, by the respective parties to the transactions; (c) the contractual terms (whether or not such teams are format or in writing) of the transactions which lay down explicitly or implicitly how the responsibilities, risks and benefits are to be divided between the respective parties to the transactions: (d) conditions prevailing in die markets in which the respective parties to the transactions operate including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and capital in the markets, overall economic development and level of competition and whether the markers are wholesale or retail\" Equally important is sub-rule (3) to Rule 10B, which reads as under- “(3) An uncontrolled transaction shall be comparable to an international transaction if (i) none of the differences, if any, between the transactions being compared, or between the enterprises entering into such transactions are likely to materially affect the price or cost charged or paid in, or the profit arising from, such transactions in the open market; or (ii) reasonably accurate adjustments can be made to eliminate the material effects of such differences.” Similarly, Rule 10C(1) reads as under: 14 ITA No.2184/Mum/2022- M/s Welspun Global Brands Ltd. 10C. (1) For the purposes of sub-section (1) of section 92C, the most appropriate method shall be the method which is best suited to the facts and circumstances of each particular international transaction [or specified domestic transaction), and which provides the most reliable measure of an arm's length price in relation to the international transaction for the specified domestic transaction, as the case may be). (2) in selecting the most appropriate method as specified in sub-rule (1), the following factors shall be taken into account, namely:- (a) the nature and class of the international transaction for the specified domestic transaction]: (b) the class on classes of associated enterprises entering into the transaction and the functions performed by them taking into account assets employed or to be employed and risks assumed by such enterprises; (c) The availability, coverage and reliability of data necessary for application of the method; (d) the degree of comparability existing between the international transaction [or the specified domestic transaction] and the uncontrolled transaction and between the enterprises entering into such transactions; (e) The extent to which reliable and accurate adjustments can be made to account for differences, if any, between the international transaction for the specified domestic transaction) and the comparable uncontrolled transaction or between the enterprises entering into such transactions; (f) The nature, extent and reliability of assumptions required to be made in application of a method\" 7.1.7. The aforesaid Roles indicate factors that ought to be taken auto account for selection of the comparables, which necessarily include the contractual terms of the transaction and how the risks, benefits and responsibilities are to be decided. The conditions prevailing in the market in which the respective parties to the transactions operate, including the geographical location and the size of the markets, the laws and the Come orders in force, costs of labour and capital in the markets, overall economic development and world competition are all material and relevant aspects If we keep the aforesaid aspects in mind, it would be delusive to accept and agree that Transfer Pricing provisions/Rules can be different for inbound and outbound investment in shares. Such reasoning is not what Chapter X of 15 ITA No.2184/Mum/2022- M/s Welspun Global Brands Ltd. the Act and Rules mandate or prescribe. The aforesaid provisions, in our view, do not make any such distinction. 7.1.8 Therefore, whether the transaction under comparability is inbound share investment or outbound share investment, the comparison has to be with comparables and not with what options or choices were available to the assessee for earning income or maximizing returns. Thus, what is made applicable for inbound share investment would be equally applicable to outbound share investments also. The parameters to be applied cannot be different for outbound investment and inbound investment. Therefore, in our view, the argument that different parameters would apply for inbound and outbound investments does not have any basis that sate from the Transfer Pricing Rules.” 12. In the above decision, the coordinate bench has held that the ratio laid by the jurisdictional High Court in the case of Vodofone Services (P) Ltd (supra) is applicable to both in bound as well as out bound transaction relating to subscription of shares. Considering the binding precedence we are unable to agree with the contention of the ld DR that the CIT(A) is not correct in deleting the TP adjustment by relying on the decision of jurisdictional High Court in the case of Vodofone Services (P) Ltd (supra). Accordingly we see no reason to interfere with the decision of the CIT(A). The ground raised by the revenue in this regard is dismissed. 13. Ground No.3 and 4 of the revenue are general not warranting any separate adjudication. 14. In result the appeal of the revenue is partly allowed. Order pronounced in the open court on 17-03-2025. Sd/- Sd/- (RAJ KUMAR CHAUHAN) (PADMAVATHY S) Judicial Member Accountant Member *SK, Sr. PS 16 ITA No.2184/Mum/2022- M/s Welspun Global Brands Ltd. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai "