DCIT RG 8(2), MUMBAI V. MSC CREWING SERVICES P.LTD, MUMBAI

ITA 1739/MUM/2014

• Counselvise Citation: 173919914 RSA 2014
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Next Hearing Date: 20-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 13-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: S E DASTUR
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary; Fair market value; Notional interest; Capital receipt
• Section: 68; 56; 92

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - K BENCH. . .. . . .. . , ,, , ! ' ! ' ! ' ! ' , BEFORE S/SH. I.P. BANSAL,JUDICIAL MEMBER & RAJEND RA,ACCOUNTANT MEMBER /. ITA NO.1666/MUM/2014 , # # # # $ $ $ $ / ASSESSMENT YEAR-2009-10 MSC CREWING SERVICES P. LTD, 2 ND -3 RD FLOOR,ANDHERI-KURLA ROAD,ANDHERI(E)MUMBAI-59 PAN: AAECM1876B DCIT CIR 8(2) AAYAKAR BHAVAN MUMBAI. /. ITA NO.1739/MUM/2014 , # # # # $ $ $ $ / ASSESSMENT YEAR-2009-10 DCIT CIR 8(2) AAYAKAR BHAVAN, MUMBAI. MSC CREWING SERVICES P. LTD, 2 ND -3 RD FLOOR, ANDHERI-KURLA ROAD,ANDHERI(E)MUMBAI-59 PAN: AAECM1876B ( %& / APPELLANT) ( '(%& / RESPONDENT) %& ) %& ) %& ) %& ) / // / ASSESSEE BY :SHRI. S.E. DASTUR ! ! ! ! + ++ + ) ) ) ) / REVENUE BY :SHRI. N.K. CHAND # + ,- # + ,- # + ,- # + ,- / // / DATE OF HEARING : 20/11/2014 ./$ + ,- / DATE OF PRONOUNCEMENT :11/12/2014 PER RAJENDRA,A.M: CHALLENGING THE ORDER OF THE ASSESSING OFFICER(AO), PASSED ON U/S.143(3)R.W.S.144(C)OF THE ACT, IN PURSUANCE OF DIRECTIONS OF DISPUTE RESOLUTION PA NEL-MUMBAI,THE ASSESSEE-COMPANY HAS RAISED FOLLOWING GROUNDS OF APPEAL: I)ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND I N LAW, THE ASSESSMENT ORDER PASSED IN PURSUANCE TO THE DIRECTIONS ISSUED BY THE DISPUTE R ESOLUTION PANEL ('DRP') IS WITHOUT JURISDICTION AND BAD-IN-LAW AND IS, THEREFORE, LIAB LE TO BE QUASHED. II) THE ASSESSING OFFICER (AO)/DRP/TRANSFER PRICING OFFICER ('TPO') ERRED IN LAW AND IN FACTS IN MAKING/CONFIRMING/PROPOSING A TRANSFER PRI CING ADJUSTMENT OF RS 122.62 CRORE TO THE INCOME OF THE APPELLANT. THE APPELLANT SUBMITS THAT THE ENTIRE TRANSFER PRICING ADDITION OF RS. 122.62 CRORE ULTIMATELY MADE BY THE AO PURSU ANT TO THE DIRECTIONS OF DRP IS BAD- IN-LAW AND WITHOUT JURISDICTION AND, HENCE, OUGHT T O BE DELETED. III) THE AO/DRP/TPO FAILED TO APPRECIATE THAT: (A) AS NO INCOME HAD ARISEN TO THE APPELLANT AS A RESUL T OF ISSUE OF SHARES, TRANSFER PRICING PROVISIONS WERE NOT APPLICABLE TO THE APPELLANT; (B) NONE OF THE PROVISIONS IN THE ACT DEEM THE INSTANT TRANSFER PRICING ADJUSTMENT TO BE INCOME; (C) TRANSFER PRICING PROVISIONS DO NOT APPLY TO CAPITAL RECEIPTS SUCH AS SHARE PREMIUM. IV) THE AO/TPO/DRP ERRED IN SPLITTING UP THE SINGLE TRANSACTION OF ISSUE OF SHARES INTO TWO SEPARATE TRANSACTIONS VIZ. (I) ISSUE OF SHARES INTO TWO SEPARATE TRANSACTIONS VIZ. (I) ISSUE OF EQUITY SHARES AND (II) GRANT OF FINANCIAL ASSISTANC E. AO/TPO/DRP FAILED TO APPRECIATE THAT: A)THERE IS NO PROVISION IN THE ACT WHICH PERMITS SU CH SPLITTING UP OF A TRANSACTION OF ISSUE OF EQUITY SHARES INTO A TRANSA CTION OF ISSUE EQUITY AND ADVANCING A LOAN; B)GAAR PROVISIONS WHICH PERMIT RECHARACTERISATION O F TRANSACTION IN SPECIFIC CIRCUMSTANCES WERE NOT IN FORCE DURING THE ASSESSME NT YEAR UNDER CONSIDERATION. V) WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/DRP/TPO ERRED IN: A) CONSIDERING THE DIFFERENCE BETWEEN THE SO-CAL LED ARM'S LENGTH PRICE OF EQUITY SHARES AND ACTUAL AMOUNT RECEIVED ON SUCH IS SUE AS AN INTERNATIONAL TRANSACTION; 2 ITA NOS.1666&1739/M/2014 MSC CREWING SERVICES P. LT D. B) HOLDING THAT CAPITAL RECEIPTS ALSO NEED TO BE BE NCHMARKED UNDER CHAPTER X VI) WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AN D IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/DRP/TPO ERRED IN: A) HOLDING THAT THE APPELLANT HAS EXTINGUISHED/RELINQU ISHED A RIGHT UNDER SECTION 2(47)(I) AND SECTION 2(47)(II) OF THE ACT TO RECEIVE FAIR MARKET VALUE OF SHARES AND SUCH EXTINGUISHMENT/RELINQUISHMENT IS A TRANSFER FOR T HE DETERMINATION OF CAPITAL GAIN, WITHOUT APPRECIATING THAT BY ISSUANCE OF EQUITY SHARES RIGH TS ARE CREATED, NOT TRANSFERRED; B) CONSIDERING THE ISSUE OF SHARE AS A TRANSFER GIVIN G RISE TO CAPITAL GAINS BY SIMPLY REFERRING THE PROVISIONS OF SECTION 47(V), SECTION 47(VI) AND SECTION 47 (VID) OF THE ACT WITHOUT EXPLAINING HOW THESE PROVISIONS ARE APPLICABLE; C) DRAWING ERRONEOUS ANALOGY FROM THE PROVISION OF SEC TION 56 (VIIA) AND 56(VIIB) OF THE ACT WITHOUT CONSIDERING THE APPLICABILITY OF THE PROVIS IONS OF THESE SECTION IN CASE OF APPELLANT; D) CONSIDERING SHARE PREMIUM AS A INCOME TAXABLE UNDER THE ACT BY DRAWING ERRONEOUS ANALOGIES FROM SECTION 56(VIIB) AND SECTION 68 OF T HE ACT. VII) WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/DRP/TPO HAS ERRED IN CONFIRMING THE TAXABILI TY OF THE ALLEGED NOTIONAL RECEIVABLES WITHOUT SPECIFYING THE RELEVANT HEADS OF INCOME AND CONSIDERING THE CHAPTER X AS A SEPARATE CODE ITSELF AND SECTION 92 OF THE ACT IS S EPARATE CHARGING PROVISIONS. VIII) WITHOUT PREJUDICE TO THE ABOVE, THE DRP ERRED IN CONFIRMING THE ACTION OF THE AO / TPO IN MAKING ADDITION OF NOTIONAL INTEREST OF RS. 7.69 CRS ON THE AFORESAID IMPUGNED ADJUSTMENTS. IX)WITHOUT PREJUDICE TO THE ABOVE, THE AOITPO/DRP E RRED IN INCORRECTLY VALUING THE ALLEGED ARM'S LENGTH PRICE AT WHICH THE EQUITY SHARES OUGHT TO HAVE BEEN ISSUED BY THE APPELLANT X)AO/TPO/DRP FAILED TO APPRECIATE THAT NONE OF THE PRESCRIBED METHODS WERE APPLIED IN THE PRESENT CASE AND, HENCE, THE TRANSFER PRICIN G ADJUSTMENT OUGHT NOT TO HAVE BEEN MADE. XI)AO/TPO/DRP ERRED IN REJECTING THE APPELLANT'S VA LUATION OF SHARES AND FURTHER ERRED IN HOLDING THAT THE DISCOUNTED CASH FLOW (DCF') METHOD WAS THE PROPER METHOD FOR VALUATION OF THE SHARES. XII)AO/TPO/DRP ERRED IN INCORRECTLY APPLYING THE DC F METHOD FOR VALUATION OF THE SHARES AND, AS A RESULT, SIGNIFICANTLY OVERVALUING THE FAI R VALUE OF THE SHARES. XIII) THE APPELLANT PRAYS THAT; A. THE ENTIRE TRANSFER PRICING ADJUSTMENT OF RS.122.62 CRORE BE DELETED. B. WITHOUT PREJUDICE, THE ADJUSTMENT BE APPROPRIATELY REDUCED. ITA NO.1739/M/2014: THE AO HAS FILED FOLLOWING GROUNDS OF APPEAL AGAINS T THE ORDER OF THE DRP: 1.WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HONBLE DRP ERRED IN DIRECTING THE TP/ASSESSING OFFICER TO CHARGE INTERE ST AT THE RATE OF RETURN FROM FIXED DEPOSITS BY ADDING MARK UP OF 30% FOR RISK FACTORS WITHOUT APPR ECIATING THE FACT THAT THE TPO HAD ADOPTED WELL ACCEPTED YIELD METHOD BASED ON BBB(-) RATED CO RPORATE BOND FROM CRISIL LTD. TO BENCHMARK INTEREST RATE ON A DEEMED LOAN/RECEIVABLE S FROM THE AE. 2.THE APPELLANT PRAYS THAT THE ORDER OF THE DRP ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ASSESSEE-COMPANY ENGAGED IN THE BUSINESS OF RECRUIT MENT SERVICES FOR EMPLOYMENT OF MARINERS/ SEAMEN,FILED ITS RETURN ON 29.09.2009,DECLARING INC OME OF RS.1,29,42,518/-.THE AO COMPLETED THE ASSESSMENT ON 07.03.2013,U/S.143(3)R.W.S.144(C) OF THE ACT, DETERMINING THE INCOME OF THE ASSESSEE AT RS.1,75,25,25,940/-. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT TRANSFER PRICIN G ADJUSTMENT OF RS 122.62 CRORES.DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT 1,00,0 00 SHARES OF THE FACE VALUE OF RS. 10 EACH WERE ISSUED BY THE ASSESSEE TO MSC SHIP MANAGEMENT (HONG KONG) LTD. OF WHICH THE ASSESSEE WAS A WHOLLY OWNED SUBSIDIARY,THAT THE ASSESSEE HAD ISSUED IN THREE TRANCHES TOTALING TO 13,37, 553 SHARES AND REALISED RS.3,67,59,192/- (RS.1,33,7 5,530/- AS SHARE CAPITAL AND RS.2,33,83,662/- AS PREMIUM).THE AO MADE A REFERENCE TO THE TRANSFER PRICING OFFICER(TPO) WHO HELD THAT A 3 ITA NOS.1666&1739/M/2014 MSC CREWING SERVICES P. LT D. PREMIUM OF RS.1187.0005 PER SHARE(AGGREGATING RS.1, 58,76,76,118)OUGHT TO HAVE BEEN CHARGED AND PROPOSED AN ADDITION OF RS.1,56,42,92,456/- BEI NG THE DIFFERENCE BETWEEN WHAT SHOULD HAVE BEEN CHARGED ACCORDING TO HIM AS A PREMIUM.PREMIUM ACTUALLY CHARGED BY THE ASSESSEE, AMOUNTING TO RS.2.33 CRORES WAS TREATED AS A RECEIP T ON CAPITAL ACCOUNT.THE TPO ALSO TOOK THE VIEW THAT THE PREMIUM ALLEGEDLY UNDER CHARGED WAS A RECEIVABLE ARISING OUT OF THE INTERNATIONAL TRANSACTION OF ISSUE OF SHARES BY THE ASSSSEE TO I TS AE AND PROPOSED A FURTHER ADDITION OF RS.17, 52,89,368/- BEING INTEREST @ 15.55%.AGAINST THE PRO POSED ADDITION MATTER WAS REFERRED TO DRP BY THE ASSESSEE.IT WAS HELD BY THE DRP THAT THE COR RECT AMOUNT WHICH OUGHT TO HAVE BEEN CHARGED AS PREMIUM WAS RS.876.75 PER SHARE.THE DRP ALSO HEL D THAT THE RATE OF INTEREST SHOULD BE ARRIVED AT BY ADDING 3% TO THE RETURN OBTAINED BY THE ASSES SEE FROM A FIXED DEPOSIT PLACED WITH THE BANK AGAINST BANK GUARANTEE OBTAINED BY IT.AS A RESULT, AS AGAINST THE TOTAL ADJUSTMENT OF RS.1,73,95,81,824(1,56,42,92,456+17,52,89,368)INITI ALLY PROPOSED BY THE TPO,THE AO FINALLY SUSTAINED ADDITION OF RS.1,22,62,39,100/-(RS.114,93 ,15,931+7,69, 23,169/-),AS PER THE DIRECTIONS OF THE DRP. 3. AT THE TIME OF HEARING BEFORE US,THE AUTHORISED REP RESENTATIVE OF THE ASSESSEE STATED THAT THE ISSUE OF SHARE PREMIUM HAS BEEN DECIDED BY THE HONBLE BOMBAY COURT IN THE CASE OF VODAFONE INDIA SERVICES PRIVATE LIMITED(VISPL)IN WP .871OF 2014 ON 23.07.2014.DEPARTMENT - AL REPRESENTATIVE (DR)FAIRLY CONCEDED THAT THE ISSU E IS DECIDED IN FAVOUR OF THE ASSESSEE BY THE SAID JUDGMENT OF THE HONBLE JURISDICTIONAL HIG H COURT. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IDENTICAL ISSUE HAD ARISEN IN THE CASE OF VISPL(SUP RA).BRIEFLY STATED IN THE CASE OF VISPLIT WAS FOUND THAT IT WAS A WHOLLY OWNED SUBSIDIARY OF A NON-RESIDENT COMPANY,VODAFONE TELE- SERVICES(INDIA)HOLDINGS LIMITED(VTIHL). IT REQUIRED FUNDS FOR ITS TELECOMMUNICATION SERVICES PROJECT IN INDIA FROM IT HOLDING COMPANY I.E. FROM VTIHL DURING THE AY.2009-10.ON 21.08. 2008,THE ASSESSEE ISSUED 2,89,224 EQUITY SHARES OF THE FACE VALUE OF RS.10/- EACH ON A PREMIUM OF RS.8,509/- PER SHARE TO VTIHL.THIS RESULTED IN THE ASSESSEE RECEIVING A TOTAL CONSIDERATION OF RS.246.38 CRORES FROM THE HOLDING COMPANY ON ISSUE OF SHARES BETWEEN AUGUST AND NOVEMBER 2008.THE FAIR MARKET VALUE OF THE ISSUE OF EQUITY S HARES AT RS.8,519/-PER SHARE WAS DETERMINED BY IT IN ACCORDANCE WITH THE METHODOLOGY PRESCRIBED BY THE GOVERNMENT OF INDIA.ACCORDING TO THE AO AND TRANSFER PRICING OFFICER (TPO), THE ASSESSEE OUGHT TO HAVE VALUED EACH EQUITY SHARE AT RS.53,775/- AS AGAINST THE AFORESAID VALUATION DONE UNDER THE CAPITAL ISSUES (CONTROL) ACT, 1947 AT RS. 8,519/- AND ON THAT BASIS SHORTFALL IN PREMIUM TO THE EXTENT OF RS.45,256/- PER SHARE RESULTED INTO TOTAL SHORTFALL OF RS. 1308.91 CRORES.BOTH THE AO AND THE TPO ON APPLICATION OF THE TRANSFER PRICING PROVISIONS OF THE ACT HELD THAT THIS AMOUN T OF RS.1308.91 CRORES WAS INCOME. AS A CONSEQUENCE OF THE ABOVE,SAID AMOUNT OF RS.1308.91 CRORES WAS REQUIRED TO BE TREATED AS DEEMED LOAN GIVEN BY THE ASSESSEE TO VTIHL AND PERIODICAL INTEREST THEREON WAS TO BE CHARGED TO TAX AS INTEREST INCOME OF RS.88.35 CRORES IN THE AY.2009-1 0.ACCORDING TO THE ASSESSEE, THE ACT DID NOT TAX INFLOW OF CAPITAL INTO THE COUNTRY NOR DID IT C REATE ANY LEGAL FICTION TO TREAT SUCH ALLEGED SHORTFALL IN CAPITAL RECEIPT ON ISSUE OF EQUITY SHA RES BY AN INDIAN COMPANY TO ITS NON-RESIDENT HOLDING COMPANY,AS INCOME.IT WAS ALSO ARGUED THAT T HERE COULD BE NO QUESTION OF TREATING THE ALLEGED SHORTFALL AS A DEEMED LOAN OR TAXING THE AL LEGED DEEMED INTEREST ON A DEEMED LOAN.IT WAS CONTENDED THAT THAT PROVISIONS OF CHAPTER X HAD NO APPLICATION IN CASES WHERE NO INCOME WAS ARISING FROM AN INTERNATIONAL TRANSACTION,THAT THE ISSUE OF EQUITY SHARES BY THE ASSESSEE TO VTIHL DID NOT GIVE RISE TO ANY INCOME FROM INTERNATIONAL TRANSACTION,THAT ARISING OF INCOME ON ACCOUNT OF INTERNATIONAL TRANSACTION WAS A CONDITION PRECED ENT FOR APPLICATION OF CHAPTER X OF THE ACT. DECIDING THE WRIT PETITION,THE HONBLE COURT HELD A S FOLLOW: 24.A PLAIN READING OF SECTION 92(1) OF THE ACT VER Y CLEARLY BRINGS OUT THAT INCOME ARISING FROM A INTERNATIONAL TRANSACTION IS A CONDITION PRECEDENT FOR APPLICATION OF CHAPTER X OF THE ACT. THIS HAS ALREADY BEEN SO HELD BY THE ORDER DATED 29 NOVE MBER 2013 OF THIS COURT IN VODAFONE-III. WE 4 ITA NOS.1666&1739/M/2014 MSC CREWING SERVICES P. LT D. COULD HAVE STRAIGHT WAY HELD THAT THE ISSUE OF EXAM INING THE JURISDICTION TO APPLY CHAPTER X OF THE ACT STANDS CONCLUDED BY THE ORDER IN VODAFONE- III. 25.BUT WE HAVE EXAMINED THE ISSUE AFRESH.THE WORD I NCOME FOR THE PURPOSE OF THE ACT HAS A WELL UNDERSTOOD MEANING AS DEFINED IN SECTION 2(24) OF T HE ACT. THIS EVEN WHEN THE DEFINITION IN SECTION 2(24) OF THE ACT IS AN INCLUSIVE DEFINITION. IT CAN NOT BE DISPUTED THAT INCOME WILL NOT IN ITS NORMAL MEANING INCLUDE CAPITAL RECEIPTS UNLESS IT IS SO SP ECIFIED, AS IN SECTION 2(24) (VI) OF THE ACT. IN SU CH A CASE, CAPITAL GAINS CHARGEABLE TO TAX UNDER SECTI ON 45 OF THE ACT ARE, DEFINED TO BE INCOME. THE AMOUNTS RECEIVED ON ISSUE OF SHARE CAPITAL INCLUDIN G THE PREMIUM IS UNDOUBTEDLY ON CAPITAL ACCOUNT. SHARE PREMIUM HAVE BEEN MADE TAXABLE BY A LEGAL FICTION UNDER SECTION 56(2)(VIIB) OF THE ACT AND THE SAME IS ENUMERATED AS INCOME IN SECTION 2(24)(XVI) OF THE ACT. HOWEVER, WHAT IS BOUGHT INTO THE AMBIT OF INCOME IS THE PREMIUM RECE IVED FROM A RESIDENT IN EXCESS OF THE FAIR MARKET VALUE OF THE SHARES. IN THIS CASE WHAT IS BE ING SOUGHT TO BE TAXED IS CAPITAL NOT RECEIVED FROM A NON-RESIDENT I.E. PREMIUM ALLEGEDLY NOT RECE IVED ON APPLICATION OF ALP. THEREFORE, ABSENT EXPRESS LEGISLATION, NO AMOUNT RECEIVED, ACCRUED OR ARISING ON CAPITAL ACCOUNT TRANSACTION CAN BE SUBJECTED TO TAX AS INCOME. THIS IS SETTLED BY THE DECISION OF THIS COURT IN CADELL WEAVING MILL CO. VS. CIT 249 ITR 265 WAS UPHELD BY THE APEX COURT IN CIT VS. D.P. SANDU BROS. CHEMBER (P) LTD. 273 ITR 1. THIS COURT HAS IN CADELL WEAVING MILLS C O. (SUPRA) INTER ALIA, OBSERVED AS UNDER:- ' IT IS WELL SETTLED THAT ALL RECEIPTS ARE NOT TAXA BLE UNDER THE INCOME TAX ACT. SECTION 2(24) DEFINES 'INCOME'. IT IS NO DOUBT AN INCLUSIVE DEFIN ITION. HOWEVER, A CAPITAL RECEIPT IS NOT INCOME UNDER SECTION 2(24) UNLESS IT IS CHARGABLE T O TAX AS CAPITAL GAINS UNDER SECTION 45. IT IS FOR THIS REASON THAT UNDER SECTION 2(24)(VI) THAT THE LEGISLATURE HAS EXPRESSLY STATED, INTER ALIA, THAT INCOME SHALL INCLUDE ANY CAPITAL G AINS CHARGEABLE UNDER SECTION 45. UNDER SECTION 2(24)(VI), THE LEGISLATURE HAS NOT INCLUDED ALL CAPITAL GAINS AS INCOME. IT IS ONLY CAPITAL GAINS CHARGEABLE UNDER SECTION 45 WHICH HAS BEEN TREATED AS INCOME UNDER SECTION 2(24). IF THE ARGUMENT OF THE DEPARTMENT IS ACCEPTE D THEN ALL CAPITAL GAINS WHETHER CHARGEABLE UNDER SECTION 45 OF NOT, WOULD COME WITH IN THE DEFINITION OF THE WORD 'INCOME' UNDER SECTION 2(24). FURTHER, UNDER SECTIO N 2(24)(VI) THE LEGISLATURE HAS NOT STATED THAT 'ANY CAPITAL GAINS' WILL BE COVERED UND ER THE WORD INCOME. ON THE CONTRARY, THE LEGISLATURE HAS ADVISEDLY STATED THAT ONLY CAPITAL GAINS WHICH ARE CHARGEABLE UNDER SECTION 45 OF THE ACT COULD BE TREATED AS INCOME. IN OTHER WORDS, CAPITAL GAINS NOT CHARGEABLE TO TAX UNDER SECTION 45 FALL OUTSIDE THE DEFINITION OF THE WORD 'INCOME' IN SECTION 2(24) OF THE ACT. IT IS TRUE THAT SECTION 2(24) OF THE ACT IS AN INCLUSIVE DEFINITION HOWEVER, IN THIS CASE, WE ARE REQUIRED TO ASCERTAIN THE SCOPE OF SECTION 2 (24)(VI) AND FOR THAT PURPOSE WE HAVE TO READ THE SUB SECTION STRICTLY. WE CANNOT WIDEN THE SCOPE OF SUB SECTION BY SAYING THAT THE DEFINITION AS A WHOLE IS INCLUSIVE AND NOT EXHAUSTI VE. IN THE PRESENT CASE, THE WORDS 'CHARGEABLE UNDER SECTION 45' ARE VERY IMPORTANT. T HEY ARE NOT BEING READ BY THE DEPARTMENT. THESE WORDS CANNOT BE OMITTED. IN FACT, THE PRIOR HISTORY SHOWS THAT CAPITAL GAINS WERE NOT CHARGEABLE BEFORE 1946. THEY WERE NO T CHARGEABLE BETWEEN 1948 AND 1956. THEREFORE, WHENEVER AN AMOUNT WHICH IS OTHERWISE A CAPITAL RECEIPT IS TO BE CHARGED TO TAX, SECTION 2(24) SPECIFICALLY SO PROVIDES.' IN VIEW OF THE ABOVE, WE FIND CONSIDERABLE SUBSTANC E IN THE ASSESSEE'S CASE THAT NEITHER THE CAPITAL RECEIPTS RECEIVED BY THE ASSESSEE ON ISSUE OF EQUITY SHARES TO ITS HOLDING COMPANY, A NON- RESIDENT ENTITY, NOR THE ALLEGED SHORT-FALL BETWEEN THE SO CALLED FAIR MARKET PRICE OF ITS EQUITY SHARES AND THE ISSUE PRICE OF THE EQUITY SHARES CAN BE CONSIDERED AS INCOME WITHIN THE MEANING OF THE EXPRESSION AS DEFINED UNDER THE ACT. (EMPHASIS BY US.) WE FIND THAT THE FACTS OF THE CASE UNDER CONSIDERATION ARE SIMIL AR TO THE FACT OF VIHPL.HONBLE BOMBAY HIGH COURT HAS HELD THAT THE CAPITAL RECEIPT S RECEIVED BY THE ASSESSEE ON ISSUE OF EQUITY SHARES TO ITS HOLDING COMPANY CANNOT BE CONSIDERED INCOME.RESPECTFULLY,FOLLOWING THE ABOVE JUDGMENT,WE HOLD THAT ADJUSTMENT MADE BY THE AO ON ACCOUNT OF SHARE PREMIUM AND INTEREST CHARGED ON ACCOUNT OF UNDER CHARGED PREMIUM AMOUNT CANNOT BE ENDORSED.WE ALSO HOLD THAT TP PROVISIONS ARE NOT APPLICABLE TO SUCH TRANSACTION.E FFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. 5 ITA NOS.1666&1739/M/2014 MSC CREWING SERVICES P. LT D. AS THE GROUND OF APPEAL TAKEN BY THE AO IS CONSEQUE NTIAL TO THE GROUND RAISED BY THE ASSESSEE AND WE HAVE ALREADY DECIDED THE APPEAL OF THE ASSESSEE IN ITS FAVOUR,SO,THE GROUND OF APPEAL FILED BY THE AO IS DECIDED AGAINST HIM. AS A RESULT,THE APPEAL OF THE ASSESSEE STANDS ALLOW ED AND THE APPEAL FILED BY THE AO IS DISMISSED. 0 ,1 #0, + !2 + !, 34 5 #0, - + #!2 + !, 34 . ORDER PRONOUNCED IN THE OPEN COURT ON 11TH DECEMBER,2014 . 6 + ./$ 7 8# 11 8 8 8 8 , 2014 / + 9 : SD/- SD/- ( . .. . . .. . / I.P.BANSAL ) ( ! ' ! ' ! ' ! ' / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 8# /DATE: 12. 1 2.2014 PS-A.K.PATEL 6 6 6 6 + ++ + ',; ',; ',; ',; < ;$, < ;$, < ;$, < ;$, / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / %& 2. RESPONDENT / '(%& 3. THE CONCERNED CIT(A)/ = > , 4. THE CONCERNED CIT / = > 5. DR K BENCH, ITAT, MUMBAI / ;?9 ',# , . . . 6. GUARD FILE/ 9 @ (;, ', //TRUE COPY// 6# / BY ORDER, A / 3 ! DY./ASST. REGISTRAR , /ITAT, MUMBAI