SHILPA SHETTY, MUMBAI V. ACIT CC 13, MUMBAI

ITA 5433/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2353 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 22-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M K SINGH LD
• Assessee Lawyers: RONAK G DOSHILD
• Keywords: Transfer pricing; Share purchase agreement; International transaction; Earning of tax free income; Wholly owned subsidiary; Rule 8D
• Section: 92C; 143(3); 92B; 92F; 92A; 14A; 92

Judgement Text

1 ITA NO.5433/MUM/2017 SHILPA SHETTY ASSESSMENT YEAR-2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI , , BEFORE HONBLE SHRI SAKTIJIT DEY, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5433/MUM/2017 ( / ASSESSMENT YEAR: 2011-12) SHI L PA SHETTY 7/D, ADITYA APARTMENTS, SVP NAGAR ANDHERI (EAST) MUMBAI-400 054. / VS. A CIT - CENTRAL CIRCLE - 13 CGO BUILDING ANNEX-11 TH FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. '# ! ./ ! ./PAN/GIR NO. ACPPS-6622-P ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI RONAK G. DOSHI-LD.AR / RESPONDENT BY : SHRI M.K. SINGH-LD. DR / DATE OF HEARING : 04/06/2019 / DATE OF PRONOUNCEMENT : 25/06/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2011-12 CONTEST THE ORDER OF LD. COMMIS SIONER OF INCOME-TAX (APPEALS)-58, MUMBAI, [IN SHORT REFERRED TO AS CIT (A)], APPEAL NO. CIT(A)- 58/72/2014-15/138 DATED 19/01/2017 ON FOLLOWING GROUNDS OF APPEAL :- 2 ITA NO.5433/MUM/2017 SHILPA SHETTY ASSESSMENT YEAR-2011-12 GROUND I 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) - 58 ('CIT(A)') ERRED IN CONFIRMING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-13, MUMBAI ('AO') IN MAKING AN ADDITION OF R S.5.40 CRORES ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT MADE ON THE BASIS OF SHARE PURCHASE AGRE EMENT ('SPA' / 'AGREEMENT'). 2. HE ERRED IN HOLDING THAT: A. M/S. KUKI INVESTMENTS ('KUKI') WAS AN 'ASSOCI ATED ENTERPRISES'('AE') OF THE APPELLANT WITHIN THE MEANING OF SECTION 92A OF THE INCOME TAX ACT, 1961 ('THE ACT'). B. APPELLANT'S PROFESSION WAS AN 'ENTERPRISE' WI THIN THE MEANING OF SECTION 92F(III) OF THE ACT SEP ARATE FROM THE APPELLANT BEING AN 'ENTERPRISE'. 3. THE APPELLANT PRAYS THAT THE ALLEGED 'INTERNA TIONAL TRANSACTION' WAS NOT BETWEEN AES AND THEREFO RE THE ADDITION BE CONSIDERED AS BAD IN LAW AND BE DEL ETED. WITHOUT PREJUDICE TO GROUND I GROUND II 1. ON THE FACTS AND CIRCUMSTANCES AND IN LAW THE CIT(A) ERRED IN CONSIDERING THAT AGREEING TO BE ASSOCIATED WITH 'RAJASTHAN ROYALS' FRANCHISE ('RR') AMOUNTED TO AN 'INTERNATIONAL TRANSACTION' AS CONTEMPLATED IN SECTION 92C OF THE ACT. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HEL D THAT: A. THE ALLEGED SERVICES, IF ANY, WERE PROVIDED B Y THE APPELLANT, A RESIDENT TO JAIPUR IPL CRICKET PRIVATE LIMITED ( ; JICPL'), ANOTHER RESIDENT AND ALSO THE OWNER OF THE RR B. IF AT ALL THE APPELLANT PROMOTED HER IMAGE BY BEING ASSOCIATED WITH RR. 3. THE APPELLANT, THEREFORE PRAYS THAT THE ACTION OF THE AO IN MAKING THE TRANSFER PRICING ADJUSTMEN T WAS ERRONEOUS AND ACCORDINGLY, LIABLE TO BE DELETED . WITHOUT PREJUDICE TO GROUND I & II GROUND III 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW THE AO ERRED IN MAKING AN ADDITION OF RS. 5.40 CRORES ON ACCOUNT OF TRANSFER PRICING ADJUSTME NT MADE ON THE BASIS OF SHARE PURCHASE AGREEMENT ('SPA'). 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HEL D THAT AS THE SPA WAS SIGNED AND EXECUTED ON 02.02.2009 AND THEREFORE TRANSFER PRICING ADJUSTMEN T, IF AT ALL, COULD HAVE BEEN MADE ONLY IN AY 2009- 10. 3. THE APPELLANT THEREFORE PRAYS THAT SAID TRANS FER PRICING ADJUSTMENT BE DELETED. WITHOUT PREJUDICE TO GROUND I, II & III GROUND IV 1. ON THE FACTS AND CIRCUMSTANCES AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO BY COMPUTING THE ARM'S LENGTH PRICE BY CONSIDERING THE APPELLANT'S AGREEMENT WITH STAR INDIA PRIVATE LIMITED AND APPLIED CUP METHOD. 2. THE CIT(A) FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT AVERAGE RATE OF ALL AGREEMENTS (INCLUDING AGREEMENTS OTHER THAN STAR INDIA) MUST B E TAKEN AND 8 DAYS (ON WHICH MATCHES WERE PLAYED) WERE ONLY FOR 3 WORKING HOURS PER DAY, BEIN G THE ACTUAL DURATION OF THE IPL MATCHES, WHICH THE APPELLANT WAS REQUIRED TO ATTEND. 3. ACCORDINGLY, THE AVERAGE DAILY RATE AND ALSO THE NUMBER OF DAYS WORKED OUT BY THE AO AND CONFIRMED BY THE CIT(A) IS ERRONEOUS. 4. THE APPELLANT, THEREFORE PRAYS THAT THE AO BE DIRECTED TO RECOMPUTE THE TRANSFER PRICING ADDITIO N ACCORDINGLY. GROUND V 1. ON THE FACTS AND CIRCUMSTANCES AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING A SUM OF RS. 3,21,7637- BEING 0.5% OF A VERAGE INVESTMENTS U/S. 14A READ WITH RULE 8D ON 3 ITA NO.5433/MUM/2017 SHILPA SHETTY ASSESSMENT YEAR-2011-12 THE GROUND THAT SINCE THERE IS A CHANGE IN THE PORT FOLIO OF INVESTMENT OF THE APPELLANT, CERTAIN PORTI ON OF EXPENDITURE IS ATTRIBUTABLE TO EARNING EXEMPT INCOM E. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HEL D THAT: A. THE APPELLANT, BEING A PROFESSIONAL ACTRESS, HAD CLAIMED EXPENDITURE IN RELATION TO HER PROFESSI ON AND NO PART OF THE EXPENDITURE COULD BE SAID TO HAV E BEEN INCURRED 'IN RELATION TO' EARNING WITH EXEMP T INCOME I.E. NO NEXUS, DIRECT OR INDIRECT WITH EXEMP T INCOME. B. IT IS A SETTLED PRINCIPLE THAT IF NO EXPENDIT URE IS INCURRED IN RELATION TO EXEMPT INCOME, NO DISALLOWANCE CAN BE MADE U/S. 14A OF THE ACT. 3. THE APPELLANT THEREFORE PRAYS THAT THE AO BE DIRECTED TO DELETE THE DISALLOWANCE MADE U/S. 14A R.W.R. 8D OF RS. 3,21,763A. 2. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], AT THE OUTSET, SUBMITTED THAT THE FIRST ISSUE OF TRANSFER PRICING [TP] ADJUSTMENT STOOD COVERED IN ASSESSEES FAVOUR BY THE EARLIER DECISIO N OF THIS TRIBUNAL FOR AY 2010-11 IN ASSESSEES OWN CASE VIDE ORDER DATED 21/ 08/2018 IN ITA NO.2445/MUM/2014. A COPY OF THE SAME HAS BEEN PLACE D ON RECORD. THE LD. DR WHO COULD NOT CONTROVERT THE SAID FACT. 3.1 FACTS IN BRIEF ARE THAT THE ASSESSEE BEING A FILM ACTRESS WAS ASSESSED FOR THE IMPUGNED AY U/S 143(3) ON 25/03/2014 WHEREI N THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.1303.15 LACS AFTER CE RTAIN TRANSFER PRICING ADJUSTMENTS AND DISALLOWANCE U/S. 14A AS AGAINST RE TURNED INCOME OF RS.759.94 LACS E-FILED BY THE ASSESSEE ON 25/09/201 1. 3.2 THE ISSUE OF TP ADJUSTMENT OF RS.540 LACS STEM FROM THE FACT THAT THE ASSESSEE ACTED AS BRAND AMBASSADOR FOR JAIPUR IPL TEAM. IN THE CAPACITY OF BRAND AMBASSADOR, THE ASSESSEE INVOLVED HERSELF IN CRICKET MATCHES, PHOTO SHOOTS, PRESS INTERVIEWS, PERSONAL APPEARANCE S ETC. HOWEVER, NO RECEIPTS WERE REFLECTED BY HER DURING IMPUGNED AY O N ACCOUNT OF RENDERING OF THESE SERVICES. TILL THE DATE OF ASSESSMENT, 6 S EASONS OF IPL WERE HELD 4 ITA NO.5433/MUM/2017 SHILPA SHETTY ASSESSMENT YEAR-2011-12 AND THE ASSESSEE HAD STARTED PROVIDING THE STATED S ERVICES FROM IPL-2 SEASON ONWARDS. 3.3 IT WAS OBSERVED THAT AN ENTITY NAMELY JAIPUR IP L CRICKET PRIVATE LIMITED [JIPL], ENGAGED IN THE BUSINESS OF SPORTS A ND MEDIA, OWNED RAJASTHAN ROYALS IPL CRICKET TEAM. JIPL WAS STATED TO BE 100% SUBSIDIARY OF EMSHL, MAURITIUS, WHICH IN TURN, WAS OWNED BY SE VERAL ENTITIES NAMELY M/S. KUKI INVESTMENT LTD. (BAHAMAS), BLUE WATER EST ATES LTD. (HONG KONG), TRESCO INTERNATIONAL LTD. (BRITISH ISLAND) & EMERGING MEDIA IPL LTD. (UK) IN CERTAIN PROPORTIONS. 3.4 IT WAS FURTHER OBSERVED THAT SHRI RAJ KUNDRA (H USBAND OF THE ASSESSEE) MADE A DECISION TO BUY SHARES OF EMHSL, M AURITIUS THROUGH M/S KUKI INVESTMENTS. ACCORDINGLY, A SHARE PURCHASE AGR EEMENT [SPA] WAS ENTERED INTO ON 02/02/2009 BETWEEN SHRI RAJ KUNDRA (HUSBAND), THE ASSESSEE, EMHSL (MAURITIUS) & M/S KUKI INVESTMENT L TD. THE RELEVANT EXTRACT OF THE AGREEMENT HAS ALREADY BEEN REPRODUCE D IN THE QUANTUM ASSESSMENT ORDER. IT WAS NOTED THAT ALTHOUGH THE AS SESSEE WAS NEITHER A BUYER NOR A SELLER OF SHARES BUT STILL SHE WAS A SI GNATORY TO THE AGREEMENT AND THE SAID AGREEMENT BIND HER TO RENDER CERTAIN S ERVICES WITHOUT ANY CHARGE TO 100% SUBSIDIARY OF EMSHL, MAURITIUS I.E. JIPL BY VIRTUE OF THE FACT THAT HER HUSBAND, SHRI RAJ KUNDRA, THROUGH HIS INTERMEDIARY COMPANY GOT THE SHARES OF EMSHL, MAURITIUS. 3.5 IN THE SAID BACKGROUND, LD. AO FORMED AN OPINIO N THAT THE ASSESSEE AND EMHSL WERE ASSOCIATED ENTERPRISES [AE] WITHIN T HE MEANING OF SECTION 92A(1) AND THE SERVICES RENDERED BY THE ASS ESSEE TO JIPL WAS AN 5 ITA NO.5433/MUM/2017 SHILPA SHETTY ASSESSMENT YEAR-2011-12 INTERNATIONAL TRANSACTION WITHIN THE MEANING OF SEC TION 92B WHICH WAS TO BE BENCHMARKED ON THE PRINCIPLE OF ARMS LENGTH PRICE [ALP] AS ENVISAGED BY LAW. 3.6 THE ASSESSEE DEFENDED HER STAND, INTER-ALIA, BY SUBMITTING THAT THE ASSESSEE AS WELL AS JIPL WERE RESIDENTS AND THEREFO RE, THE STATED TRANSACTION OF RENDERING OF SERVICES COULD NOT BE T ERMED AS AN INTERNATIONAL TRANSACTION. HOWEVER, REJECTING THE SAME, LD. AO OP INED THAT WHATEVER SERVICES WERE RENDERED BY THE ASSESSEE, ORIGINATED BY VIRTUE OF SAID AGREEMENT WITH EMHSL WHICH WAS A NON-RESIDENT COMPA NY. FURTHER, THE SERVICES WERE RENDERED IN INDIA AND IN ESSENCE, THE SERVICES WERE RENDERED TO A NON-RESIDENT ENTITY BY VIRTUE OF THAT AGREEMEN T. 3.7 SINCE, THE ASSESSEE HAD NOT BENCHMARKED THE SAI D TRANSACTION. LD. AO PROCEEDED TO COMPUTE THE ALP OF THE SAME IN TERM S OF PROVISIONS OF SECTION 92C(3). THE NUMBER OF DAYS FOR WHICH THE SE RVICES WERE RENDERED WERE 18 DAYS. APPLYING COMPARABLE PRICE WITH M/S ST AR INDIA PVT LTD., BEING THE PRICE FOR 15 DAYS @RS.30 LACS PER DAY, THE ALP OF THE SAME WAS DETERMINED AT RS.540 LACS WHICH WAS ADDED TO THE IN COME OF THE ASSESSEE AS TP ADJUSTMENT. 3.8 THE LD. FIRST APPELLATE AUTHORITY, PRIMARILY RE LYING UPON THE ORDER OF ITS PREDECESSOR IN ASSESSEES OWN CASE FOR AY 2010-11, CONFIRMED THE STAND OF LD. AO. AGGRIEVED, THE ASSESSEE IS IN FURTHER AP PEAL BEFORE US. 4. UPON CAREFUL CONSIDERATION, WE FIND THAT THE ASS ESSEE AGITATED THE STAND OF LD. FIRST APPELLATE AUTHORITY WITH SUCCESS BEFORE THIS TRIBUNAL VIDE 6 ITA NO.5433/MUM/2017 SHILPA SHETTY ASSESSMENT YEAR-2011-12 ITA NO. 2445/MUM/2014 ORDER DATED 21/08/2018. THE M ATTER HAS BEEN CONCLUDED BY CO-ORDINATE BENCH IN THE FOLLOWING MAN NER: - 6. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD, JUDGMENT CITED BY BOTH THE PARTIE S AS WELL AS ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND THAT ALTHOUGH, THE POWERS OF L D. CIT(A) BEING WIDER THAN THAT OF ANY OTHER APPELLATE AUTHORITIES OR COURT IS NOT DISPUTED, BUT THE LD. CIT(A) CANNOT CURE A JURISDICTIONAL DEFECT, WHICH THE AO DERIVES ONLY BY RECORDING A SA TISFACTION AS HAS BEEN HELD IN THE CASE OF VODAFONE INDIA SERVICES PVT. LTD. VRS. UNION OF IND IA AND OTHERS 920140 361 ITR 531 (BOM HC). WE HAVE GONE THROUGH THE DECISION RELIED UPON BY LD. DR, BUT THE PARA MATERIA CONTAINED IN THOSE JUDGMENTS ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AS THE SAME DO NOT DEAL WITH EXERCISE OF LD. CIT(A)'S POWERS TO CURE JURISDICTIONAL DEFECT. IN THIS RESPECT, WE RELY UPON THE DECISION IN THE CASE OF HINDUSTAN LEV ER'S CASE (SUPRA) AND EQUITABLE INVESTMENT'S CASE (SUPRA). 7. AS FAR AS OBJECTION RAISED BY ASSESSEE ON AE REL ATIONSHIP BETWEEN THE ASSESSEE AND KUKI U/S. 92A OF THE ACT IS CONCERNED, IN THIS RESPECT, LD. AR SUBMITTED THAT LD. CIT(A) DID NOT UPHOLD AO'S FINDING THAT THE ASSESSEE AND EMSHL WER E AES. THE REVENUE HAS NOT CHALLENGED THE ORDER OF LD. CIT(A) AND CONSEQUENTLY, THE ISSUE BEFORE US IS LIMITED TO EXAMINE AE RELATIONSHIP BETWEEN THE ASSESSEE AND KUKI. IN THIS RESPECT, LD. AR SUBMITTED THAT SEC. 92A(1) OF THE ACT CANNOT BE APPLIED IN ISOLATION TO HOLD THAT THE ASSESSEE AND KUKI WERE AES. IT WAS SUBMITTED THAT IN ORDER TO CONSTITUTE A RELATIO NSHIP BETWEEN THE AES, THE PARAMETERS LAID DOWN IN BOTH SUB-SECTIONS (1) AND (2) OF SECTION 92 A OF THE ACT SHOULD BE FULFILLED. LD. AR ALSO RELIED UPON THE DECISION IN THE CASE OF PAGE INDUSTRIES LTD. V. DCIT [2016] 159 LTD 680 (BANG. ITAT), OBULAPURAM MINING CO. (P.) LTD. V . DCIT [2016] 76 TAXMANN.COM 240 (BANG. ITAT) AND ACIT V. VEER GEMS [2017] 183 TTJ 5 88 (AHD. ITAT) . LD. AR ON THE APPLICATION OF SEC. 92A SUBMITTED THA T SEC. 92A(1)(A) DOES NOT APPLY TO THE ASSESSEE'S CASE, AS NEITHER KUKI, THROUGH /ONE OR M ORE INTERMEDIARIES, CONTROLS THE ASSESSEE NOR THE ASSESSEE, THROUGH /ONE OR MORE INTERMEDIARI ES, CONTROLS KUKI. IT WAS ALSO SUBMITTED THAT EVEN SEC. 92A(1)(B) IS ALSO NOT APPLICABLE AS, THOUGH RK CONTROLS KUKI, BUT HE CANNOT BE SAID TO HAVE CONTROLLED THE ASSESSEE. LD. AR ALSO SUBMITTED THAT SEC. 92A(2)(J) DEEMS THE TWO 'ENTERPRISES' AS AES IF ONE OF THE ENTERPRISES IS CONTROLLED BY AN INDIVIDUAL AND THE OTHER 'ENTERPRISE' IS ALSO CONTROLLED BY SUCH INDIVIDUAL OR HIS RELATIVES. IT WAS SUBMITTED IN AS SESSEE S CASE, SEC. 92A(2)(J) CANNOT BE APPLIED AS NEITHER RK NOR KUKI CANNOT SAID TO HAVE CONTROLLED THE ASSESSEE. IT WAS ALSO SUBMITTED THAT EVEN AS PER SEC. 92F(II I), AN 'ENTERPRISE' MEANS A 'PERSON', ENGAGED IN ACTIVITIES ETC. THE ASSESSEE'S PROFESSION CANNOT BE CONSIDERED AS A PERSON WITHIN THE MEANING OF SEC. 2(31), SEPARATE FROM HER, AS THE AS SESSEE'S PROFESSION IS NOT ASSESSABLE SEPARATELY FROM THE ASSESSEE. THEREFORE, THE QUESTI ON OF ASSESSEE BEING AN AE OF KUKI, BY HOLDING THAT RK CONTROLLED KUKI AND RK'S RELATIVE, I.E. ASSESSEE, CONTROLLED THE 'ENTERPRISE' OF ASSESSEE'S PROFESSION, DOES NOT ARISE. 8. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS PASSED BY REVENUE AUTHORITIES AND SUBMITTED THAT ASSESSEE AND KUKI WERE AE S U/S. 92A(2)(J) AS: A) THE ASSESSEE'S HUSBAND, RK, CONTROLLED KUKI. 7 ITA NO.5433/MUM/2017 SHILPA SHETTY ASSESSMENT YEAR-2011-12 B) THE ASSESSEE IS AN INDIVIDUAL AND AS SUCH A 'PER SON' WITHIN THE MEANING OF SEC. 2(31). DURING THE COURSE OF HEARING, THE LD. DR ALSO ARGUE D THAT KUKI HAD CONTROLLED THE ASSESSEE AS KUKI HAD PAID ASSOCIATION FEE ON BEHALF OF THE ASSE SSEE TO EMSHL. 9. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES, WE FIND THAT BOTH THE ABOVE STATED FACTS BY LD.DR, I.E. RK CONTROLLING KUKI AND ASSESSEE BEING A 'PERSON' U/S. 2(31), ARE NOT IN DISPUTE AT ALL. THE LD. DR'S SUBMISSION ON AE RELATIONSHIP BET WEEN THE ASSESSEE AND KUKI IS BASED ON ONLY ONE LIMB OF SEC. 92A(2)(J), I.E. AN INDIVIDUAL CONTROLLED ONE ENTERPRISE (RK CONTROLLED KUKI). SEC. 92A(2)(J) DEEMS THE TWO 'ENTERPRISES' A S AE IF ONE OF THE ENTERPRISES IS CONTROLLED BY AN INDIVIDUAL AND THE OTHER 'ENTERPRISE' IS CONT ROLLED BY SUCH INDIVIDUAL OR HIS RELATIVES. THE LD. DR DID NOT SUBMIT AS TO HOW THAT INDIVIDUAL (I. E. RK) OR HIS RELATIVE CONTROLLED THE OTHER 'ENTERPRISE' (I.E. ASSESSEE). WITHOUT SATISFYING TH E SECOND LIMB, I.E. THAT INDIVIDUAL OR HIS RELATIVE CONTROLLED THE OTHER ENTERPRISE, PROVISIONS OF SEC. 92A(2)(J) CANNOT BE APPLIED. WE HAVE FURTHER NOTICED THAT IN ORDER TO SATISFY T HE SECOND LIMB OF SEC. 92A(2)(J), THE LD. CIT(A) PRESUMED THAT ASSESSEE'S PROFESSION (SEPARAT E FROM HER) WAS THE OTHER 'ENTERPRISE' AND RK S RELATIVE, I.E. ASSESSEE, CONTROLLED THAT OTHER 'E NTERPRISE', I.E. HER 'PROFESSION'. AGAINST THIS PRESUMPTION, IT WAS SUBMITTED THAT HER 'PROFES SION' CANNOT BE SEPARATED FROM HERSELF (THE INDIVIDUAL) TO CONSIDER AS AN 'ENTERPRISE' U/S. 92F (III) AS THE 'PROFESSION' (INDEPENDENT FROM INDIVIDUAL) IS NOT A 'PERSON' WITHIN THE MEANING OF SEC. 2(31). THE LD. DR HAD NOT MADE ANY SUBMISSIONS AGAINST THIS STAND TAKEN BY THE ASSESSE E. 10. NOW, AS FAR AS THE ARGUMENTS THAT KUKI CONTROL LED THE ASSESSEE BY PAYING ASSOCIATION FEES IS CONCERNED, IT WAS SUBMITTED THAT THE ASSOCI ATION FEE WAS NOTHING BUT EARNEST MONEY WHICH IN FACT GOT REPAID TO KUKI (BY WAY OF ADJUSTM ENT AGAINST THE (CONSIDERATION PAYABLE ON SUBSCRIPTION OF SHARES TO EMSHL) ON SHARE COMPLETIO N. 11. AS FAR AS THE OBJECTION OF ASSESSEE ON THE FIND INGS OF LD. CIT(A) ON ACCOUNT OF HOLDING DEEMED 'INTERNATIONAL TRANSACTION' BETWEEN THE ASSE SSEE AND JICPL U/S. 92B OF THE ACT IS CONCERNED, IN THIS RESPECT, LD. AR SUBMITTED THAT S EC. 92B(2) DEEMS A TRANSACTION BETWEEN THE TWO NON-AES AS 'INTERNATIONAL TRANSACTION' IF T HERE EXISTS A PRIOR AGREEMENT IN RELATION TO THE RELEVANT TRANSACTION BETWEEN ONE OF THE NON-AE AND THE AE OF AN ASSESSEE. THE LD. CIT(A) CONSIDERED THE TWO NON-AES AS THE ASSESSEE AND JICP L AND HELD A DEEMED 'INTERNATIONAL TRANSACTION' WITHOUT ESTABLISHING AS TO WITH WHICH AE OF THE ASSESSEE HAD A PRIOR AGREEMENT WITH JICPL. IT WAS ALSO ARGUED THAT SEC. 92B(2) OF THE ACT CANN OT BE APPLIED TO HOLD THAT TRANSACTION BETWEEN ASSESSEE AND JICPL WAS AN 'INTERNATIONAL TR ANSACTION' AS: A) NEITHER ANY OF THE PARTIES TO THE SPA (I.E. PRIO R AGREEMENT) WAS AN AE OF THE ASSESSEE; B) NOR JICPL ENTERED INTO A PRIOR AGREEMENT WITH T HE AE OF THE ASSESSEE (JICPL WAS NOT A PARTY TO THE SPA); AND AS SUCH THE PRE-REQUISITE OF A PRIOR AGREEMENT BETWEEN A NON-AE WITH THE AE OF AN ASSESSEE IS NOT FULFILLED. 12. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS OF LD. CIT(A). 13. AFTER HAVING CONSIDERED THE SUBMISSION OF BOTH THE PARTIES, WE FIND THAT SECTION 92B(2) OF THE ACT CANNOT BE APPLIED TO HOLD THAT TRANSACTION BETWEEN ASSESSEE AND JICPL WAS AN INTERNATIONAL TRANSACTION AS NEITHER ANY OF THE PARTIES TO THE SPA WERE AN A E OF THE ASSESSEE NOR JICPL ENTERED INTO A PRIOR AGREEMENT WITH THE A E OF THE ASSESSEE (JICPL WAS NOT A PARTY 8 ITA NO.5433/MUM/2017 SHILPA SHETTY ASSESSMENT YEAR-2011-12 TO THE SPA); AND AS SUCH THE PRE-REQUISITE OF A PRI OR AGREEMENT BETWEEN A NON-AE WITH THE AE OF AN ASSESSEE IS NOT FULFILLED. 14. NOW, WE PROCEED TO DEAL WITH THE OBJECTION OF A SSESSEE ON EXISTENCE OF 'INTERNATIONAL TRANSACTION' AND 'PRICE' IS CONCERNED, LD. AR SUBMI TTED THAT IN ORDER TO APPLY CHAPTER X, EXISTENCE OF A 'TRANSACTION' IS A PRE-REQUISITE. IT WAS SUBMITTED THAT SEC. 92C(1) MAKES IT CLEAR THAT THE TRANSFER PRICING ADJUSTMENT SUBSTITUTES TH E PRICE OF THE TRANSACTION WITH ALP. THEREFORE, IN ORDER TO CONSTITUTE A 'TRANSACTION' THERE HAS TO BE A CERTAIN DISCLOSED PRICE. IT WAS ARGUED THAT EXISTENCE OF AN INTERNATIONAL TRANSACTION CANNOT BE PRESUMED BY ASSIGNING SOME PRICE TO IT AND THEN DEDUCING THAT SINCE IT IS NOT AN ARM'S LEN GTH PRICE, AN 'ADJUSTMENT' HAS TO BE MADE. 15. IN THIS RESPECT, LD. AR RELIED UPON THE DECISIO N IN THE CASE OF MARUTI SUZUKI INDIA LTD. CIT [2016] 381 ITR 117 (DEL. HC) AND BAUSCH & LOMB EYEC ARE (INDIA) (P.) LTD V. ACIT [2016] 381 ITR 227 (DEL HC) IT WAS ALSO ARGUED THAT THE WORD ' PRICE' HAD NOT BEEN DEFINED IN THE ACT. IT SEEMS TO HAVE BEEN USED IN ITS ORDINARY SENSE AS ME ANING MONEY ONLY. IN THIS RESPECT, RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF CIT V. GANESH BUILDERS [1979] 116 ITR 911 (BOMHC). LD. AR FURTHER SUBMITTED THAT IN THE ASSES SEE'S CASE, SHE WAS DESIROUS TO ENHANCE HER BRAND IMAGE AND HENCE, SHE GOT ASSOCIATED WITH RR, FOR WHICH KUKI HAD PAID A DEPOSIT OF USD 10,00,000/-TO EMSHL AS ASSOCIATION FEE. WITH TH E CONCLUSION OF TRANSACTIONS OF PURCHASE AND SUBSCRIPTION OF SHARES COMPLETING ON FEBRUARY 1 3, 2009, IN TERMS OF CL. 2.3 AND CL.5.2 OF THE SPA, THE RIGHTS GRANTED TO THE ASSESSEE AUTOMAT ICALLY TERMINATED AND THE SAID DEPOSIT WAS ADJUSTED AGAINST THE CONSIDERATION PAYABLE ON SUBSC RIPTION OF SHARES TO EMSHL. THEREFORE, THE ASSOCIATION FEE WAS ONLY EARNEST MONEY AND NOT MONETARY CONSIDERATION WHICH CAN BE CONSIDERED AS 'PRICE'. IT WAS ARGUED THAT AS THE ASSESSEE DID NOT RECEIVE ANY CONSIDERATION FOR THE SERVICES RENDERED TO JICPL, THERE WAS NO 'PRICE' WHICH CAN BE SUBSTIT UTED WITH ALP. IN THE ABSENCE OF ANY 'PRICE', THE PROVISION OF SERVICES COULD NOT BE CONSIDERED A S AN 'INTERNATIONAL TRANSACTION'. IN ABSENCE OF ANY 'INTERNATIONAL TRANSACTION', THE PROVISIONS OF SEC. 92(1) CANNOT BE APPLIED AND AS SUCH AN ADJUSTMENT ON THE BASIS OF ALP CANNOT BE MADE. IT WAS ALSO SUBMITTED THAT IF AT ALL IT IS HELD THA T THERE WAS A 'PRICE' AND THEREFORE THERE EXISTED A 'TRANSACTION', THEN IN THAT EVENTUALITY, SINCE THE SERVICES WERE PROVIDED TO JICPL, THE ALLEGED TRANSACTION WAS BETWEEN THE ASSESSEE AND JICPL, BOT H BEING RESIDENTS, THEN IN THAT EVENTUALITY EVEN OTHERWISE THE ALLEGED TRANSACTION CANNOT BE CONSIDERED AS AN 'INTERNATIONAL TRANSACTION' 16. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER S PASSED BY LD. CIT(A) AND ALSO ON THE DECISION OF HON'BLE SPECIAL BENCH OF KOLKATA ITAT I N CASE OF INSTRUMENTARIUM CORPORATION LTD. [2016] 179 TTJ 665, TO SUBMIT THAT, SINCE NO FEE WA S CHARGED BY THE ASSESSEE, THE PRICE WAS ZERO AND AS SUCH THE ALP HAS TO BE SUBSTITUTED WITH THE SAME. DURING THE COURSE OF HEARING, THE LD. DR HAD ALSO R ELIED ON THE DECISION OF HON'BLE DELHI TRIBUNAL IN CASE OF BMW INDIA PVT. LTD. V. DOT [201 7] ITA NO. 1406/DEL/2015, WHEREIN, AFTER CONSIDERING MARUTI SUZUKI'S CASE, DETERMINATION OF ALP WAS UPHELD. HE ALSO RELIED ON THE DECISION OF HON'BLE MUMBAI TRIBUNAL IN CASE OF SABR E ASIA PACIFIC PTE. LTD. [2018] ITA NO. 4882/M/2015, TO SUBMIT THAT THE TRIBUNAL HAD UPHELD THE TRANSFER PRICING ADJUSTMENT ON THE BASIS OF ALP DETERMINATION IN CASE OF ASSESSEE ADVA NCING INTEREST FREE LOAN TO ITS AE, BY CONSIDERING THE INCOME OFFERED AS ZERO. AFTER RELYI NG ON THESE DECISIONS, THE LD. DR CONTENDED 9 ITA NO.5433/MUM/2017 SHILPA SHETTY ASSESSMENT YEAR-2011-12 THAT IN ASSESSEE'S CASE, THE PRICE WAS ZERO AND THE REFORE, THE TRANSACTION IS SUBJECTED TO TRANSFER PRICING ADJUSTMENT BASED ON ALP DETERMINAT ION. 17. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD, JUDGMENTS RELIED UPON AND ORDERS PASSED BY REVENUE AUTHORITIES, WE FIND THAT NONE OF THE 3 DECISIONS CITED BY THE LD. DR CA N BE APPLIED IN ASSESSEE'S CASE, AS THE FACTS OF THE CITED CASES ARE DISTINGUISHABLE FROM T HAT OF ASSESSEE'S CASE AS UNDER I) IN BMW'S CASE (SUPRA), BMW INDIA HAD INCURRED EX PENSES ON MARKETING AND PROMOTIONAL ACTIVITIES ON BEHALF OF ITS FOREIGN HOLDING COMPANY , AGAINST WHICH IT HAD NOT OFFERED ANY INCOME. IT WAS FOUND BY THE HON'BLE ITAT THAT THE AGREEMENT BETWEEN THE PARTIES PROVIDED FOR RE- IMBURSEMENT OF MARKETING AND PROMOTIONAL EXPENSES B Y FOREIGN HOLDING CO. AND CERTAIN AMOUNT WAS, IN FACT, REIMBURSED TO THE INDIAN CO. T HEREFORE, IT WAS NOT A CASE WHERE THE PRICE OF THE TRANSACTION WAS NOT DISCLOSED AND THE DEPART MENT HAD ASSUMED CERTAIN PRICE TO SUBSTITUTE IT WITH THE ALP, UNLIKE THE CASE OF THE ASSESSEE. II. IN INSTRUMENTARIUM'S CASE, THE ASSESSEE HAD AD VANCED AN INTEREST FREE LOAN TO ITS AE. THE HON'BLE SPECIAL BENCH OBSERVED THAT 'CONSIDERATION OF LOAN, I.E. INTEREST, IS INHERENTLY IN THE NATURE OF INCOME '. THE TRIBUNAL, THEN, HELD THAT 'WHEN NO INCOME IS REPORTED IN RESPECT OF AN ITEM I N THE NATURE OF INCOME, SUCH AS INTEREST, BUT THE SUBSTITUTION OF TRANSACTION PRICE BY ARM'S LENG TH PRICE RESULTS IN AN INCOME, IT CAN VERY WELL BE BROUGHT TO TAX.' THE TRANSACTION OF SERVICES PROVIDED BY THE ASSESS EE TO JICPL, AS AGAINST RIGHTS GRANTED TO HER, CANNOT BE EQUATED WITH THAT OF INTEREST FREE L OAN TO AN AE. IN ASSESSEE'S CASE, THE DEPOSIT OF MONEY BY KUKI WAS THE PRICE PAID FOR SHARES TO B E ISSUED BY EMSHL. THE ASSESSEE OBTAINED A RIGHT TO APPEAR AGAINST A RECIPROCAL OBL IGATION TO APPEAR AS AND WHEN MATCHES WERE HELD. THE DEPOSIT OF MONEY WAS NOT CONSIDERATION FO R THE RIGHT TO APPEAR. ALSO, IN THIS CASE THE HON'BLE SPECIAL BENCH DID NO T CONSIDER MARUTI SUZUKI'S DECISION (SUPRA) AND TO THAT EXTENT WAS PER-INCURIAM. III. IN SABRE ASIA'S CASE (SUPRA), THE COUNSEL OF T HE ASSESSEE HAD CONCEDED THE CONTENTION THAT THE TRANSACTION OF INTEREST FREE LOAN IS SUBJECTED TO TRANSFER PRICING ADJUSTMENTS AND AS SUCH THE CONTENTIONS RAISED BY THE ASSESSEE BEFORE THE HON'B LE BENCH WAS NOT CONSIDERED IN THAT CASE. 18. AS FAR AS THE OBJECTION OF ASSESSEE WITH REGARD TO THE APPLICABILITY OF CHAPTER 10, WHEN NO INCOME HAS ARISEN IS CONCERNED. IN THIS RESPECT, TH E LD. AR SUBMITTED THAT CHAPTER X PRE- SUPPOSES EXISTENCE OF 'INCOME' AND LAYS DOWN MACHIN ERY PROVISIONS TO COMPUTE ALP OF SUCH INCOME, IF IT ARISES FROM AN 'INTERNATIONAL TRANSAC TION'. SEC. 92 IS NOT AN INDEPENDENT CHARGING SECTION TO BRING IN A NEW HEAD OF INCOME OR TO CHAR GE TAX ON INCOME WHICH IS OTHERWISE NOT CHARGEABLE UNDER THE ACT. ACCORDINGLY, SINCE NO INC OME HAD ACCRUED TO OR RECEIVED BY THE ASSESSEE U/S. 5, NO NOTIONAL INCOME CAN BE BROUGHT TO TAX U/S. 92. IN THIS REGARD, LD. AR RELIED UPON THE FOLLOWING JUDGMENTS:- I. DANA CORPORATION [2010] 321 ITR 178 (AAR) - PG. 192 & 193 II. AMIANTIT INTERNATIONAL HOLDING LTD [2010] 322 I TR 678 (AAR) - PG. 682, 683 AND 692 26 I.T.A. NO. 2445/MUM/2014 SHILPA SHETTY III. PRAXAIR PACIFIC LTD [2010] 326 ITR 276 (AAR) - PG. 279 AND 286 IV. DEERE & CO [2011] 337 ITR 277 (AAR) - PG. 280 & 284 V. VENENBURG GROUP B.V [2007] 289 ITR 464 (AAR) - P ARA 15 AT PG. 472 VI. GOODYEAR TIRE & RUBBER CO. [2011] 334 ITR 69 (A AR) - PARA 10 AT PG. 78 10 ITA NO.5433/MUM/2017 SHILPA SHETTY ASSESSMENT YEAR-2011-12 VII. VODAFONE INDIA SERVICES (P.) LTD. V. UNION OF INDIA [2013] 361 ITR 531 (BORN HC) - PARA 32 AT PG. 564 VIII. VODAFONE INDIA SERVICES (P.) LTD. V. UNION OF INDIA [2014] 368 ITR 1 (BORN HC) - PARA 24 (PG. 30), 40 (PG. 37-38) IX. VODAFONE INDIA SERVICES (P.) LTD. V. UNION OF INDIA [2015] 369 ITR 511 (BORN HC) - PARA 8 AT PG. 515 X. VODAFONE INDIA SERVICES (P.) LTD. V. CIT [2016] 385 ITR 169 (BORN HC) - PG. 312 AND 320 THE LD. AR FURTHER SUBMITTED THAT WHEN THE MACHINER Y PROVISIONS FAIL, THEN THE CHARGING PROVISIONS CANNOT BE APPLIED. IN THIS RESPECT, LD. AR RELIED UPON THE DECISION IN THE CASE OF CIT V. B.C. SRINIVASA SETTY [1981] 128 ITR 294 (SC) AND CIT V. OFFICIAL LIQUIDATOR, PALAI CENTRAL BANK LTD. [1979] 117 ITR 676 (KER. HC) 19. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER S PASSED BY REVENUE AUTHORITIES AND THE DECISION IN THE CASE OF INSTRUMENTARIUM'S CASE (SUP RA) TO CONTEND THAT THE PRICE WAS ZERO AND THE PROVISIONS OF CHAPTER X WOULD APPLY ACCORDINGLY . 20. AFTER HEARING BOTH THE PARTIES AT LENGTH, WE FI ND THAT SINCE WE HAVE ALREADY REBUTTED THE LD. DRS RELIANCE ON INSTRUMENTARIUM'S CASE ABOVE IN DE TAIL, THEREFORE THE SAME ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AND WE ARE OF THE VIEW THAT SINCE CHAPTER 10 PRE-SUPPOSES THE EXISTENCE OF INCOME AND LAYS DOWN MACHINERY PROVISION TO COMPUTE ALP O F SUCH INCOME, IF IT ARISES FROM AN INTERNATIONAL TRANSACTION . SECTION 92 IS NOT AN INDEPENDENT CHARGING SECTION TO BRING IN A NEW HEAD OF INCOME OR TO CHARGE TAX ON I NCOME WHICH IS OTHERWISE NOT CHARGEABLE UNDER THE ACT. ACCORDINGLY, SINCE NO INCOME HAD ACC RUED TO OR RECEIVED BY THE ASSESSEE U/S 5, NO NOTIONAL INCOME CAN BE BROUGHT TO TAX U/S 92 OF THE ACT. WE DRAW STRENGTH FROM THE FOLLOWING JUDGMENTS IN THE CASE OF :- I. DANA CORPORATION [2010] 321 ITR 178 (AAR) - PG. 192 & 193 II. AMIANTIT INTERNATIONAL HOLDING LTD [2010] 322 I TR 678 (AAR) - PG. 682, 683 AND 692 III. PRAXAIR PACIFIC LTD [2010] 326 ITR 276 (AAR) - PG. 279 AND 286 IV. DEERE & CO [2011] 337 ITR 277 (AAR) - PG. 280 & 284 V. VENENBURG GROUP B.V [2007] 289 ITR 464 (AAR) - P ARA 15 AT PG. 472 VI. GOODYEAR TIRE & RUBBER CO. [2011] 334 ITR 69 (A AR) - PARA 10 AT PG. 78 VII. VODAFONE INDIA SERVICES (P.) LTD. V. UNION OF INDIA [2013] 361 ITR 531 (BORN HC) - PARA 32 AT PG. 564 VIII. VODAFONE INDIA SERVICES (P.) LTD. V. UNION OF INDIA [2014] 368 ITR 1 (BORN HC) - PARA 24 (PG. 30), 40 (PG. 37-38) IX. VODAFONE INDIA SERVICES (P.) LTD. V. UNION OF I NDIA [2015] 369 ITR 511 (BORN HC) - PARA 8 AT PG. 515 X. VODAFONE INDIA SERVICES (P.) LTD. V. CIT [2016] 385 ITR 169 (BORN HC) - PG. 312 AND 320 AND KEEPING IN VIEW OF OUR ABOVE FINDING, WE ALLOW THESE GROUNDS AND DIRECT THE AO TO DELETED THE ADDITIONS. 21. SINCE WE HAVE ALREADY DELETED THE ADDITIONS BY ABOVE REASONED ORDER, THEREFORE THERE IS NO NEED TO ADJUDICATE OTHER GROUNDS ON MERITS IN VI EW OF OUR ABOVE FINDINGS AS THE SAME BECOME INFRUCTOUS. 11 ITA NO.5433/MUM/2017 SHILPA SHETTY ASSESSMENT YEAR-2011-12 NOTHING HAS BEEN BROUGHT ON RECORD TO ESTABLISH THA T THE AFORESAID RULING IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE BEF ORE US. FACTS AND CIRCUMSTANCES BEING PARI-MATERIA THE SAME, RESPECTFULLY FOLLOWING THE BINDING JUDICIAL PRECEDENT, WE DIRECT FOR DELETION OF IMPUGNED TP ADJUSTMENT. GROUND NO. 1 STANDS ALLOWED WHICH MAKES OTHER GROUNDS II TO IV INFRUCTUOUS. 5.1 THE SECOND DISALLOWANCE U/S 14A STEM FROM THE F ACT THAT THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS.9.16 L ACS DURING THE IMPUGNED AY AND HELD INVESTMENT OF RS.668.69 LACS. SINCE NO DISALLOWANCE WAS OFFERED BY THE ASSESSEE AGAINST TH E SAME, LD. AO COMPUTE EXPENSE DISALLOWANCE OF RS.3.21 LACS, BEING 0.5% OF AVERAGE INVESTMENTS, IN TERMS OF RULE 8D(2)(III). THE SAME UPON, CONFIRMATION BY LD. FIRST APPELLATE AUTHORITY IS UNDER APPEAL BEFORE US . THE LD. CIT(A) HAS DIRECTED LD. AO TO EXCLUDE THOSE INVESTMENTS WHICH MAY NOT BE CAPABLE OF YIELDING EXEMPT INCOME TO THE ASSESSEE. 5.2 THE LD. AR, BRIEFLY SUBMITTED THAT KEEPING IN V IEW THE DECISION OF DELHI TRIBUNAL (SPECIAL BENCH) RENDERED IN ACIT VS. VIREET INVESTMENT (P.) LTD. [82 TAXMANN.COM 415], LD. AO MAY BE DIRECTED TO TAKE INTO CONSIDERATION ONLY THOSE INVESTMENTS WHICH HAVE ACT UALLY YIELDED ANY EXEMPT INCOME DURING THE YEAR. CONCURRING WITH THE SAME, WE DIRECT LD. AO TO TAKE INTO CONSIDERATION ONLY THOSE INVESTMENTS W HICH HAVE ACTUALLY YIELDED ANY EXEMPT INCOME DURING THE YEAR. THE ASSE SSEE IS DIRECTED TO PROVIDE REQUISITE INFORMATION, IN THIS REGARD. THIS GROUND STAND PARTLY ALLOWED. 12 ITA NO.5433/MUM/2017 SHILPA SHETTY ASSESSMENT YEAR-2011-12 6. RESULTANTLY, THE APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JUNE, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 25/06/2019 SR.PS:-JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. #' / THE APPELLANT 2. ()#' / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. * +(, , , , / DR, ITAT, MUMBAI 6. + ./0 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.