INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Determination of ALP - AO seeking to tax notional income under Chapter X -

AO noticed that Raj Kundra (husband of assessee) made a decision to buy shares of EMHSL, Mauritius through his intermediary company M/s. Kuki Investments. Accordingly, a share purchase agreement [SPA] was entered into between Raj Kundra (husband), the assessee, EMHSL (Mauritius) and M/s. Kuki Investment Ltd. Although assessee was neither a buyer nor a seller of shares but still she was a signatory to the agreement and said agreement bound her to render certain services without any charge to 100% subsidiary of EMSHL Mauritius, i.e., JIPL by virtue of the fact that her husband, Raj Kundra, through his intermediary company got the shares of EMSHL, Mauritius. In the said background, AO formed an opinion that assessee and EMHSL were Associated Enterprises [AE] within the meaning of section 92A(1) and services rendered by the assessee to JIPL was an international transaction within the meaning of section 92B to be benchmarked on the principle of Arm's Length Price [ALP] as envisaged by law. Held: Chapter X pre-supposes existence of 'income' and lays down machinery provision to compute ALP of 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 income which is otherwise not chargeable under the Act. Accordingly, since no income had accrued to or received by assessee under section 5, no notional income could be brought to tax under section 92.

Supported by:Dana Corporation (2010) 321 ITR 178 (AAR) : 2010 TaxPub(DT) 1079 (AAR) -- Pg. 192 & 193, Amiantit International Holding Ltd. (2010) 322 ITR 678 (AAR) : 2010 TaxPub(DT) 1570 (AAR) -- Pg. 682, 683 and 692, Praxair Pacific Ltd. (2010) 326 ITR 276 (AAR) : 2010 TaxPub(DT) 2133 (AAR) -- Pg. 279 and 286, Deere & Co (2011) 337 ITR 277 (AAR) : 2012 TaxPub(DT) 0465 (AAR) -- Pg. 280 & 284, Venenburg Group B.V (2007) 289 ITR 464 (AAR) : 2007 TaxPub(DT) 0964 (AAR) - Para 15 at Pg. 472, Goodyear Tire & Rubber Co. (2011) 334 ITR 69 (AAR) : 2011 TaxPub(DT) 1013 (AAR) -- Para 10 at Pg. 78, Vodafone India Services (P.) Ltd. v. UOI (2013) 361 ITR 531 (Bom-HC) : 2013 TaxPub(DT) 2677 (Bom-HC) -- Para 32 at Pg. 564, Vodafone India Services (P.) Ltd. v. UOI (2014) 368 ITR 1 (Bom-HC) : 2014 TaxPub(DT) 3959 (Bom-HC) -- Para 24 (Pg. 30), 40 (Pg. 37-38), Vodafone India Services (P.) Ltd. v. UOI (2015) 369 ITR 511 (Bom-HC) : 2014 TaxPub(DT) 4282 (Bom-HC) -- Para 8 at Pg. 515 and Vodafone India Services (P.) Ltd. v. CIT (2016) 385 ITR 169 (Bom-HC) : 2016 TaxPub(DT) 1746 (Bom-HC) 312 and 320.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12

INCOME TAX ACT, 1961

Section 14A

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