ALLCARGO GLOBAL LOGISTICS LTD, MUMBAI V. ASST CIT CEN CIR 44, MUMBAI

ITA 4910/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79115 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 03-06-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 30-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: P J PARDIWALA
• Keywords: Transfer pricing; International transaction; Validity of assessment; Notional interest; Commercial expediency
• Section: 143(3); 153A; 147; 148; 92

Judgement Text

K IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI .. , , BEFORE SHRI P.M. JAGTAP, AM AND SHRI. SHRI AMIT SHU KA, JM ./ I.T.A. NO.4909 /MUM/2012 ( / ASSESSMENT YEAR : 2007-2008 ./ I.T.A. NO.4910 /MUM/2012 ( / ASSESSMENT YEAR : 2008-2009 M/S ALLCARGO GLOBAL LOGISTICS LTD., 5 TH FLOOR, DIAMOND SQUARE, CST ROAD, KALINA, SANTACRUZ, MUMBAI 400 051. / VS. A.C.I.T. CENTRAL CIRCLE - 44, MUMBAI. ./ PAN : AACCA2894D ( # / APPELLANT ) .. ( $%# / RESPONDENT ) A PPELLANT BY SHRI P.J. PARDIWALA R E SPONDENT BY : SHRI SURENDRA KUMAR ) * / DATE OF HEARING : 3-6-2014 ) * / DATE OF PRONOUNCEMENT : 11-6-2014 [ / O R D E R PER BENCH . : THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST TWO SEPARATE ORDERS PASSED BY THE LD. CIT(A)-15, MUMBAI DATED 22-05-2012 AND 24-5-2012 FOR ASSESSMENT YEARS 2007-08 AND 2008-09 RESPECTIVELY AND SINCE COMMON ISSUES ARE INVOLVED THEREIN, THE SAME HAVE B EEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDE R FOR THE SAKE OF CONVENIENCE. ITA 4909 & 4910/M/12 2 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH FILED ITS RETURNS OF INCOME FOR BOTH THE YEARS UNDER CONSIDERATION I.E. ASSESSMENT YEARS 2007-08 AND 2008-09 ON 30-10-2009 DECLARING TOTAL INCOME OF RS. 17,91,60,615/- AND RS. 15,03,05,686/- RESPECTIVELY. IN THE ORDERS ORI GINALLY COMPLETED U/S 143(3) R.W.S. 153A OF THE INCOME TAX ACT, 1961, THE TOTAL INCOME OF THE ASSESSEE WAS COMPUTED BY THE A.O. AT RS. 49,61,88,6 05/- AND RS. 58,26,34,273/- FOR ASSESSMENT YEARS 2007-08 AND 200 8-09 RESPECTIVELY. THESE ASSESSMENTS MADE FOR BOTH THE YEARS UNDER CON SIDERATION WERE SUBSEQUENTLY REOPENED BY THE A.O. U/S 147 OF THE AC T AND AFTER RECORDING THE FOLLOWING IDENTICAL REASON, NOTICES U/S 148 OF THE ACT WERE ISSUED BY THE A.O. TO THE ASSESSEE ON 11-11-2010:- THE ASSESSEE HAD INVESTED IN SHARES OF ALLCARGO BE LGIUM NV AN ASSOCIATED ENTERPRISE AND HAD PAID THE SHARE APPLIC ATION MONEY AS FOLLOWS: ON 19.05.2006 - RS. 11,65,00,000/- ON 22.06.2006 - RS. 46,18,94,150/- TOTAL - RS. 57,83,94,150/- THIS SHARE APPLICATION MONEY WAS REPORTEDLY CONVERT ED INTO SHARES ON 08.06.2007. THE ASSOCIATED ENTERPRISE HELD THE SAID AMOUNT FOR AN UNUSUALLY LONG DURATION OF TIME WITHOUT ALLOTTING THE SHARES IN LI EU THERE-OF, WHICH COULD HAVE BEEN DONE BY THEM WITHOUT ANY PROBLEM OR DIFFICULTY. THE NATURE OF THIS AMOUNT FOR THE INTERMITTENT PERIOD, I.E. FROM 19.05.2006/22.06.2006 TILL 08.06.2007, WAS THEREFOR E AKIN TO A LOAN. IN THE CASE OF M/S. PEROT SYSTEMS TSI, THE ITAT, DE LHI HAS HELD AS UNDER: I). THE ARGUMENT THAT THE LOANS WHERE IN REALITY N OT LOANS BUT QUASI-CAPITAL CANNOT BE ACCEPTED BECAUSE THE AGREEM ENTS SHOW THEM TO BE LOANS AND THERE IS NO SPECIAL FEATURE IN THE CONTRACT TO TREAT THEM OTHERWISE. THERE IS ALSO NO REASON WH Y THE LOANS WERE NOT CONTRIBUTED AS CAPITAL IF THEY WERE ACTUAL LY MEANT TO BE CAPITAL CONTRIBUTION; II). THE ARGUMENT THAT THE LOANS WERE GIVEN ON INTE REST-FREE TERMS OUT OF COMMERCIAL EXPEDIENCY IS NOT ACCEPTABLE BECA USE THIS WAS NOT A CASE OF AN ORDINARY BUSINESS TRANSACTION BUT WAS AN INTERNATIONAL TRANSACTION BETWEEN ASSOCIATED ENTERP RISES. ONE ITA 4909 & 4910/M/12 3 HAD TO SEE WHETHER THE TRANSACTION WAS AT ARMS LENG TH UNDER THE TRANSFER PRICING PROVISIONS; III). THE ARGUMENT THAT NOTIONAL INTEREST INCOME CA NNOT BE ASSESSED IS NOT ACCEPTABLE IN THE CONTEXT OF TRANSF ER PRICING. SECTION 92 (1) OF THE INCOME TAX ACT PROVIDES THAT ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION HAS TO BE COMPUTED HAVING REGARD TO THE ARMS LENGTH PRICE. SECTION 928 (1) OF THE INCOME TAX ACT DEFINES AN INTERNATIONAL TRANSACTION TO MEAN A TRANSACTION BETWEEN TWO OR MORE ASSOCIATED ENTERPRI SES.... IN THE NATURE OF... LENDING OR BORROWING MONEY... IN CONSI DERING THE ARMS LENGTH PRICE OF A LOAN, THE RATE OF INTEREST H AS TO BE CONSIDERED AND INCOME ON ACCOUNT OF INTEREST CAN BE ATTRIBUTED. THE DECISION OF THE ITAT, DELHI, IS SQUARELY APPLIC ABLE TO THE FACTS OF THE ASSESSEES CASE. IN VIEW OF THE RATIO LAID DOWN BY THIS DECISION, THE AMOUNT PAID BY THE ASSESSEE AS SHARE APPLICATION MO NEY (QUASI-CAPITAL) SHOULD BE RECKONED AS A LOAN FOR THE INTERMITTENT PERIOD AND NOTIONAL INTEREST NEEDS TO BE RECKONED ON THE SAME WHICH LAY INVESTED WITH ALLCARGO BELGIUM, NV - THE ASSOCIATED ENTERPRISE - FOR AN UNUSUALLY LONG DURATION OF TIME. AN ORDER U/S. 92CA(3) OF THE IT ACT DATED 28.10.201 0 PASSED BY THE TRANSFER PRICING OFFICER1(1), MUMBAI HAS BEEN RECEI VED IN THIS OFFICE WHERE-IN IT HAS BEEN HELD BY THE SAID AUTHORITY THA T THE AMOUNT INVESTED BY THE ASSESSEE AS SHARE APPLICATION MONEY WITH ITS ASSOCIATED ENTERPRISE LYING UNUTILIZED FOR A LONG DURATION IS IN FACT AKIN TO A LOAN BEYOND A PERIOD OF 60 DAYS AND HAS SUGGESTED ADJUST MENT TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF NOTIONAL INTER EST ON SUCH LOAN CALCULATED @ 3% ABOVE THE LIBOR RATE OF 5.277%. THE AMOUNT OF SUCH INTEREST HAS BEEN WORKED OUT BY HIM AT RS. 3,01,47, 078 FOR THIS AY 2007-08 (RS. 89,18,933/- FOR AY 2008-09), WHICH HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 148 OF THE INCOME TAX ACT. 3. IN RESPONSE TO THE NOTICES ISSUED BY THE A.O. U/ S 148 OF THE ACT, A LETTER DATED 8-12-2010 WAS FILED BY THE ASSESSEE STATING T HEREIN THAT THE RETURNS ORIGINALLY FILED ON 30-10-2009 MAY BE CONSIDERED AS THE RETURNS FILED IN RESPONSE TO THE NOTICES ISSUED U/S 148 OF THE ACT F OR BOTH THE YEARS UNDER CONSIDERATION. DURING THE COURSE OF REASSESSMENT P ROCEEDINGS, THE ASSESSEE WAS CALLED UPON BY THE A.O. TO EXPLAIN WHY THE AMOU NT INVESTED BY IT AS SHARE APPLICATION MONEY WITH ITS AE LYING UNUTILIZE D FOR A LONG DURATION SHOULD NOT BE TREATED AS LOAN BEYOND A PERIOD OF 60 DAYS AND WHY TP ADJUSTMENT SHOULD NOT BE MADE ON ACCOUNT OF INTERES T CHARGEABLE ON THESE AMOUNTS TREATED AS LOAN FOR A PERIOD BEYOND 60 DAYS . IN REPLY, THE FOLLOWING ITA 4909 & 4910/M/12 4 EXPLANATION WAS OFFERED BY THE ASSESSEE TO JUSTIFY THE DELAY IN ALLOTMENT OF SHARES BY ITS AE AGAINST THE SHARE APPLICATION MONE Y:- 7. M/S. ALLCARGO INDIA WAS HOLDING 49.99% SHARES OF MIS. ECUHOLD WHICH WAS INCORPORATED IN BELGIUM IN THE YEAR 1997 AND THE BALANCE 50.01% SHARES OF MIS. ECUHOLD WERE HELD BY M/S. RMK . 8. ON 10E JANUARY, 2006 A LETTER OF INTENT WAS EXEC UTED BETWEEN ALLCARGO INDIA AND THE SHAREHOLDERS OF RMI( TO PURC HASE 100% SHARES OF RMI( FROM THE EXISTING SHAREHOLDERS BY A NEW COMPAN Y (ALLCARGO BELGIUM NV) TO BE FORMED ON OR BEFORE 20.01.2006, F OR TOTAL CONSIDERATION OF 13.4 MILLION EUROS, SUBJECT TO THE TERMS AND CONDITIONS STIPULATED IN THE SAID LOI, 9. THE NEW COMPANY (ALLCARGO BELGIUM) WAS INCORPORA TED ON L7TH MARCH, 2006. 10. DURING THE DUE DILIGENCE CARRIED OUT OF M/S.RMI < IT WAS NOTICED THAT M/S.RMI< HAD A LOAN OF 3.15 MILLION EUROS TO B E REPAID TO FORTIS AND TNG FINANCIAL INSTITUTIONS. THEREFORE THE PARTI ES RE-NEGOTIATED THE DEAL AND AGREED FOR A REVISED CONSIDERATION OF 10.2 05 MILLION EUROS (INSTEAD OF 13.4 MILLION EUROS) WITH A CONDITION TH AT BEFORE ENTERING INTO SUCH AMENDED 101 THE BUYER (I,E.,M/S. ALLCARGO BEL GIUM) SHALL PAY AT LEAST 2 MILLION EUROS AND PAY 1.15 MILLION EUROS IM MEDIATELY ON ENTERING INTO THE AMENDED 101 TO REPAY THE LOAN OF 3.15 MILLION EUROS TO FORTIS/TNG. 11. FOR DEPOSITING THE AFORESAID 3.15 MILLION EUROS BY ALLCARGO BELGIUM WITH RMK, ALLCARGO INDIA, BEING THE HOLDING COMPANY OF ALLCARGO BELGIUM, WAS TO PROVIDE FUND OF 3.15 MILLION EUROS TO ALLCARGO BELGIUM BY WAY OF SHARE APPLICATION MONEY FOR ALLOTMENT OF SHARES, WITH UNDERSTANDING THAT THE SHARES SHALL BE ALLOTTED BY ALLCARGO BELGIUM, ONLY IF THE DEAL FOR PURCHASE OF 100% SHARES OF RMI < (WHEREBY PURCHASE 50.01% SHARES OF ECUHOLD) MATERIALISES. IF THE TRAN SACTION DOESNT MATERIALISE, THE SUBSCRIPTION MONEY WAS TO BE RETUR NED BACK TO ALLCARGO INDIA. 12. ACCORDINGLY, ALLCARGO INDIA REMITTED 2 MILLION EUROS ON 1905.2006 ARID 1.15 MILLION EUROS ON 13.06.2006 (AGGREGATING TO 3.15 MILLION EUROS) TO ALLCARGO BELGIUM TOWARDS THE SHARE APPLIC ATION MONEY. 13. THE CONSIDERATION OF 13.4 MILLION EUROS WAS RED UCED TO 10.205 MILLION EUROS (INCLUDING 3.15 MILLION EUROS ALREADY REMITTED TO RM1( FOR REPAYING THE LOAN OF FORTIS/TNG). THE REVISED B ALANCE CONSIDERATION OF 7.055 MILLION EUROS (I.E., 10.205 MILLION EUROS MINUS 3.15 MILLION EUROS) WAS TO BE PAID IN THE FOLLOWING MANNERS: A) 3,150,000 EUROS (ALREADY PAID) FOR REPAYING THE LOAN ITA 4909 & 4910/M/12 5 B) 6,305,000 EUROS TO BE PAID TO THE FIVE SHAREHOLD ERS OF RMK SIMULTANEOUSLY ON TRANSFERRING RMI( SHARES TO ALLCA RGO BELGIUM C) 750,000 EUROS TO BE KEPT IN ESCROW, A/C AT THE T IME OF TRANSFERRING RMI< SHARES TO ALLCARGO BELGIUM 14. FOR RELEASING THE OF PAYMENT OF 6.305 MILLION E UROS AS PER 13(B) ABOVE, ALLCARGO INDIA, BEING THE HOLDING COMPANY, W AS TO FUND 6.305 MILLION EUROS TO ALLCARGO BELGIUM BY WAY OF SHARE A PPLICATION MONEY FOR ALLOTMENT OF SHARES, WITH THE UNDERSTANDING THA T THE SHARES OF ALLCARGO BELGIUM SHALL BE ALLOTTED TO ALLCARGO INDI A ONLY IF THE DEAL FOR PURCHASE OF 100% SHARES OF RMI< (WHEREBY PURCHASE 5 0.01% SHARES OF ECUHOLD) MATERIALISES. IF THE TRANSACTION DOESNT M ATERIALISE, THE SUBSCRIPTION MONEY WAS TO BE RETURNED BACK TO ALLCA RGO INDIA BY ALLCARGO BELGIUM. 15. ACCORDINGLY, ALLCARGO INDIA REMITTED TOTAL 6.30 5 MILLION EUROS ON 16.06.2006 TO ALLCARGO BELGIUM TOWARDS THE SHARE AP PLICATION MONEY. WITH THIS PAYMENT THE SHARE APPLICATION MONEY PAID BY ALLCARGO INDIA WAS 9.455 MILLION EUROS (3.15 + 6.305). 16. BEFORE RELEASING THE AFORESAID PAYMENT OF 6.305 MILLION TO THE SHAREHOLDERS OF RMK, PARTIES FURTHER RENEGOTIATED T HE DEAL AND REDUCED THE CONSIDERATION FROM 10.205 MILLION EUROS TO 9.95 MILLION EUROS (INCLUDING 3.15 MILLION EUROS ALREADY REMITTED TO R MK FOR REPAYING THE LOAN OF FORTIS/TNG). THE REVISED CONSIDERATION OF 9 .95 MILLION EUROS WAS TO BE PAID IN THE FOLLOWING MANNERS: A) 3,150,000 EUROS (ALREADY PAID BEFORE EXECUTION O F AMENDED 101) FOR REPAYING THE LOAN OF FORTIS/TNG. B) 6,050,000 EUROS TO THE FIVE SHAREHOLDERS OF RMK SIMULTANEOUSLY ON TRANSFERRING RMK SHARES TO ALLCARGO BELGIM. C) 495,000 EUROS KEPT IN ESCROW A/C SIMULTANEOUSLY ON TRANSFERRING RMK SHARES TO ALLCARGO BELGIUM. 17. ALLCARGO INDIA, BEING THE HOLDING COMPANY, AGAI N REMITTED 0.483 MILLION EUROS 19TH JUNE, 2006 TO ALLCARGO BELGIUM B Y WAY OF SHARE APPLICATION MONEY FOR ALLOTMENT OF SHARES, WITH UND ERSTANDING THAT THE SHARES SHALL BE ALLOTTED BY ALLCARGO BELGIUM, ONLY IF THE DEAL FAR PURCHASE OF 100% SHARES OF RMI( (WHEREBY PURCHASE 5 0.01% SHARES OF ECUHOID) MATERIALISES. LF THE TRANSACTION DOESNT M ATERIALISE, THE SUBSCRIPTION MONEY TO BE RETURNED BACK TO ALLCARGO INDIA. 18. AT THIS STAGE, THE TOTAL SHARE SUBSCRIPTION MON EY PAID BY ALLCARGO INDIA WAS 9.938 MILLION EUROS (3.15 + 6.305 +0.483) . ITA 4909 & 4910/M/12 6 19, ON 20.06.2006 THE AGREEMENT FOR SALE AND PURCHA SE OF SHARES WAS EXECUTED BETWEEN ALLCARGO BELGIUM AND THE SHAREHOLD ERS OF RMK NV. AS PER THE SAID AGREEMENT, THERE WERE THREE CLOSING DATES AS FOLLOWS; FIRST CLOSING DATE JUNE 30, 2006 PAYMENT OF 6.05 MILLION EUROS TO THE SHAREHOLDERS OF RMK AND DELIVERY OF 100% SHARES OF RMI( TO ALLCARGO BELGIUM. SECOND CLOSING DATE MAY 01. 2007 ACHIEVING REQUISITE EBITDA BY ECUHOLD FOR THE YEAR 2006 AND RELEASE OF 50% OF 75 0,000 EUROS TO THE SHAREHOLDERS OF RMK( DEPOSITED IN ESCROW A/C. THIRD CLOSING DATE MAY 01. 2008 ACHIEVING REQUISITE EBITOA BY ECUHOLD FOR THE YEAR 2007 AND RELEASE OF BALANCE 50 % OF 750,000 EUROS TO THE SHAREHOLDERS OF RMK DEPOSITED IN ESCRO W A/C. BY MAY 2007, IT WAS ESTIMATED THAT THE REQUISITE EB ITOA WOULD BE ACHIEVED AND IT WAS DECIDED TO ALLOT SHARES FROM AL LCARGO BELGIUM TO ALLCARGO INDIA FOR THE TOTAL SHARE APPLICATION MONE Y OF 9.938 MILLION EUROS. ACCORDINGLY, THE SHARES WERE ALLOTTED BY ALL CARGO BELGIUM ON 8TH JUNE, 2OO7. 4. ON THE BASIS OF ABOVE EXPLANATION, IT WAS CONTEN DED ON BEHALF OF THE ASSESSEE BEFORE THE A.O. THAT THE DELAY IN ALLOTMEN T OF SHARES BY ITS AE AGAINST THE SHARE APPLICATION MONEY WAS FOR GENUINE AND UNAVOIDABLE REASONS AND THERE WAS NO JUSTIFICATION TO TREAT THE TRANSACTIONS INVOLVING PAYMENT OF SHARE APPLICATION MONEY AS THE LOAN TRAN SACTIONS SO AS TO MAKE ANY ADDITION ON ACCOUNT OF ARMS LENGTH PRICE (ALP) OF INTEREST UNDER THE TRANSFER PRICING ADJUSTMENT. THIS EXPLANATION OF T HE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE A.O. FOR THE REASONS GIVEN IN THE ASSESSMENT ORDER AND RELYING ON THE SAID REASONS AS WELL AS THE ORDER OF THE TPO DTD. 28-10-2010 PASSED U/S 92CA(3) OF THE ACT, HE HELD THAT THE SHA RE APPLICATION MONEY PAID BY THE ASSESSEE TO ITS AE WAS IN THE NATURE OF LOAN GIVEN BY IT TO THE SAID AE AND THE SAME THEREFORE ACTUALLY REPRESENTED THE INT ERNATIONAL TRANSACTIONS BETWEEN THE ASSESSEE AND IT S AE OF GIVING LOAN FRE E OF COST. ACCORDINGLY, THE AMOUNT INVESTED BY THE ASSESSEE AS SHARE APPLICATIO N MONEY WITH ITS AE LYING UNUTILIZED FOR A PERIOD BEYOND 60 DAYS WAS TREATED BY THE A.O. AS A LOAN AND AS SUGGESTED BY THE TPO IN HIS ORDER, THE TP ADJUST MENT OF RS. 3,01,47,078/- AND RS. 89,18,933/- WAS MADE BY THE A.O. IN ASSESSM ENT YEARS 2007-08 AND ITA 4909 & 4910/M/12 7 2008-09 ON ACCOUNT OF INTEREST CALCULATED @ 3% ABOV E THE LIBOR RATE 5.277% IN THE ASSESSMENTS COMPLETED U/S 143(3) R.W.S. 147 OF THE ACT VIDE ORDERS DATED 31-12-2010. 5. AGAINST THE ORDERS PASSED BY THE A.O. U/S 143(3 ) R.W.S. 147 OF THE ACT, APPEALS WERE PREFERRED BY THE ASSESSEE BEFORE THE L D. CIT(A) CHALLENGING THE VALIDITY OF THE SAID ASSESSMENTS AS WELL AS DISPUTI NG THE ADDITIONS MADE THEREIN ON ACCOUNT OF TP ADJUSTMENTS. AFTER CONSID ERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AS WELL AS THE MATER IAL AVAILABLE ON RECORD, THE LD. CIT(A) DID NOT FIND MERIT IN THE CONTENTION RAI SED ON BEHALF OF THE ASSESSEE CHALLENGING THE VALIDITY OF ASSESSMENT MADE BY THE A.O. FOR BOTH THE YEARS UNDER CONSIDERATION AND REJECTING THE SAME, HE UPHE LD THE VALIDITY OF THE SAID ASSESSMENTS. THE LD. CIT(A) ALSO CONFIRMED THE ADDI TIONS MADE BY THE A.O./TPO IN BOTH THE YEARS UNDER CONSIDERATION BY W AY OF TP ADJUSTMENTS ON ACCOUNT OF INTEREST CHARGEABLE BY THE ASSESSEE COMP ANY TO ITS AE ON UNUTILIZED SHARE APPLICATION MONEY LYING WITH THE S AID AE BEYOND A PERIOD OF 60 DAYS TREATING THE SAME AS LOANS TO THE SUBSTANTI AL EXTENT ALLOWING ONLY A PART RELIEF ON THIS ISSUE BY ACCEPTING THE ALTERNAT IVE CONTENTION OF THE ASSESSEE THAT THE RATE OF INTEREST SHOULD BE TAKEN AT 3% ABO VE THE EURO BASED LIBOR OF 3.5263% INSTEAD OF US DOLLAR BASED LIBOR OF 5.277%. AGGRIEVED BY THE ORDERS OF THE LD. CIT(A) FOR ASSESSMENT YEARS 2007- 08 AND 2008-09, THE ASSESSEE HAS PREFERRED THESE APPEALS BEFORE THE TRI BUNAL. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN GROUND N O. 1 OF BOTH THE PRESENT APPEALS, THE ASSESSEE HAS RAISED A PRELIMINARY ISSU E CHALLENGING THE VALIDITY OF ASSESSMENTS MADE BY THE A.O. U/S 143(3) R.W.S. 1 47 OF THE ACT FOR BOTH THE YEARS UNDER CONSIDERATION WHILE IN GROUND NO. 2, TH E ASSESSEE HAS CHALLENGED THE ADDITION MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) BY WAY OF TP ADJUSTMENT ON ACCOUNT OF INTEREST CHARGEABLE ON THE AMOUNT OF SHARE APPLICATION MONEY PAID TO ITS AE AND LYING UNUTILIZ ED FOR A PERIOD BEYOND 60 ITA 4909 & 4910/M/12 8 DAYS TREATING THE SAME AS LOAN. AS AGREED BY THE L D. REPRESENTATIVES OF BOTH THE SIDES, THE COMMON ISSUE INVOLVED IN GROUND NO. 2 OF THE ASSESSEES APPEALS FOR BOTH THE YEARS UNDER CONSIDERATION IS S QUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE LATEST DECISION OF DELHI BEN CH OF ITAT IN THE CASE OF BHARTI AIRTEL LTD., VS. ACIT RENDERED VIDE ITS ORDE R DATED 11-3-2014 PASSED IN ITA NO. 5816/DEL/12 WHEREIN A SIMILAR ISSUE WAS DEC IDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE HOLDING THAT THE TRANSACTION S INVOLVING PAYMENT OF SHARE APPLICATION MONEY COULD NOT BE TREATED AS INT ERNATIONAL TRANSACTIONS OF LOAN GIVEN BY THE ASSESSEE COMPANY TO ITS AE MERELY BECAUSE THERE WAS A DELAY IN ALLOTMENT OF SHARES. A COPY OF THE SAID O RDER OF THE TRIBUNAL IS ALSO PLACED ON RECORD BEFORE US AND PERUSAL OF THE SAME SHOWS THAT A SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE A SSESSEE VIDE PARA NO. 47 OF ITS ORDER WHICH READS AS UNDER:- ` 47. WE FIND THAT IN THE PRESENT CASE THE TPO HAS N OT DISPUTED THAT THE IMPUGNED TRANSACTIONS WERE IN THE NATURE OF PAYMENT S FOR SHARE APPLICATION MONEY, AND THUS, OF CAPITAL CONTRIBUTIO NS. THE TPO HAS NOT MADE ANY ADJUSTMENT WITH REGARD TO THE ALP OF THE C APITAL CONTRIBUTION. HE HAS, HOWEVER, TREATED THESE TRANSA CTIONS PARTLY AS OF AN INTEREST FREE LOAN, FOR THE PERIOD BETWEEN THE D ATES OF PAYMENT TILL THE DATE ON WHICH SHARES WERE ACTUALLY ALLOTTED, AN D PARTLY AS CAPITAL CONTRIBUTION, I.E. AFTER THE SUBSCRIBED SHARES WERE ALLOTTED BY THE SUBSIDIARIES IN WHICH CAPITAL CONTRIBUTIONS WERE MA DE. NO DOUBT, IF THESE TRANSACTIONS ARE TREATED AS IN THE NATURE OF LENDING OR BORROWING, THE TRANSACTIONS CAN BE SUBJECTED TO ALP ADJUSTMENT S, AND THE ALP SO COMPUTED CAN BE THE BASIS OF COMPUTING TAXABLE BUSI NESS PROFITS OF THE ASSESSEE, BUT THE CORE ISSUE BEFORE US IS WHETHER S UCH A DEEMING FICTION IS ENVISAGED UNDER THE SCHEME OF THE TRANSF ER PRICING LEGISLATION OR ON THE FACTS OF THIS CASE. WE DO NOT FIND SO. WE DO NOT FIND ANY PROVISION IN LAW ENABLING SUCH DEEMING FICTION. WHA T IS BEFORE US IS A TRANSACTION OF CAPITAL SUBSCRIPTION, ITS CHARACTER AS SUCH IS NOT IN DISPUTE AND YET IT HAS BEEN TREATED AS PARTLY OF TH E NATURE OF INTEREST FREE LOAN ON THE GROUND THAT THERE HAS BEEN A DELAY IN ALLOTMENT OF SHARES. ON FACTS OF THIS CASE ALSO, THERE IS NO FIN DING ABOUT WHAT IS THE REASONABLE AND PERMISSIBLE TIME PERIOD FOR ALLOTMEN T OF SHARES, AND EVEN IF ONE WAS TO ASSUME THAT THERE WAS AN UNREASO NABLE DELAY IN ALLOTMENT OF SHARES, THE CAPITAL CONTRIBUTION COULD HAVE, AT BEST, BEEN TREATED AS AN INTEREST FREE LOAN FOR SUCH A PERIOD OF INORDINATE DELAY ITA 4909 & 4910/M/12 9 AND NOT THE ENTIRE PERIOD BETWEEN THE DATE OF MAKIN G THE PAYMENT AND DATE OF ALLOTMENT OF SHARES. EVEN IF ALP DETERMINAT ION WAS TO BE DONE IN RESPECT OF SUCH DEEMED INTEREST FREE LOAN ON ALL OTMENT OF SHARES UNDER THE CUP METHOD, AS HAS BEEN CLAIMED TO HAVE B EEN DONE IN THIS CASE, IT WAS TO BE DONE ON THE BASIS AS TO WHAT WOU LD HAVE BEEN INTEREST PAYABLE TO AN UNRELATED SHARE APPLICANT IF , DESPITE HAVING MADE THE PAYMENT OF SHARE APPLICATION MONEY, THE APPLICA NT IS NOT ALLOTTED THE SHARES. THAT ASPECT OF THE MATTER IS DETERMINED BY THE RELEVANT STATUTE. THIS SITUATION IS NOT IN PURL MATERIA WITH AN INTEREST FREE LOAN ON COMMERCIAL BASIS BETWEEN THE SHARE APPLICANT AND THE COMPANY TO WHICH CAPITAL CONTRIBUTION IS BEING MADE. ON THESE FACTS, IT WAS UNREASONABLE AND INAPPROPRIATE TO TREAT THE TRANSAC TION AS PARTLY IN THE NATURE OF INTEREST FREE LOAN TO THE AE. SINCE THE T PO HAS NOT BROUGHT ON RECORD ANYTHING TO SHOW THAT AN UNRELATED SHARE APP LICANT WAS TO BE PAID ANY INTEREST FOR THE PERIOD BETWEEN MAKING THE SHARE APPLICATION PAYMENT AND ALLOTMENT OF SHARES, THE VERY FOUNDATIO N OF IMPUGNED ALP ADJUSTMENT IS DEVOID OF LEGALLY SUSTAINABLE MERITS. 7. AS THE ISSUE INVOLVED IN GROUND NO. 2 OF THE PR ESENT APPEALS AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE CASE OF BHARTI AIRTEL LIMITED (SUPRA) DECIDED BY THE TRIBUNAL, WE RESPECT FULLY FOLLOW THE SAID DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL AND DELETE THE ADDITION MADE BY THE A.O./TPO AND SUSTAINED BY THE LD. CIT(A ) BY WAY OF TP ADJUSTMENT ON ACCOUNT OF INTEREST CHARGEABLE ON THE AMOUNT OF SHARE APPLICATION MONEY PAID BY THE ASSESSEE AND LYING UN UTILIZED WITH ITS AE TREATING THE SAME AS THE TRANSACTION OF LOAN. GROU ND NO. 2 OF THE ASSESSEES APPEALS FOR BOTH THE YEARS UNDER CONSIDERATION IS A CCORDINGLY ALLOWED. 8. AS A RESULT OF OUR DECISION RENDERED ON THE ISS UE RAISED IN GROUND NO. 2 DELETING THE ADDITION MADE ON ACCOUNT OF TP ADJUSTM ENT IN BOTH THE YEARS UNDER CONSIDERATION, THE ISSUE RAISED BY THE ASSESS EE IN GROUND NO. 1 OF THESE APPEALS CHALLENGING THE VALIDITY OF ASSESSMENT MADE BY THE A.O. U/S 143(3) R.W.S. 147 OF THE ACT HAS BECOME INFRUCTUOUS OR ACA DEMIC. WE THEREFORE DO NOT CONSIDER IT NECESSARY OR EXPEDIENT TO ADJUDICAT E UPON THE SAME. ITA 4909 & 4910/M/12 10 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE TREATED AS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JUNE, 2014. ) / 0 11-06-2014 ) SD/- SD/- (AMIT SHUKLA) (P.M. JAGTAP ) JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 0 DATED 1140642014. .../ RK , SR. PS ' #%& '& / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $%# / THE RESPONDENT. 3. () / THE CIT(A)15, MUMBAI. 4. / CIT CENTRAL CONCERNED, MUMBAI 5. ; $= , * = , / DR, ITAT, MUMBAI KD BENCH 6. @ / GUARD FILE. / BY ORDER, %; $ //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI