NOTIFICATION

Notification No :  77

India notifies DTAA with Maldives

CASE LAWS

2016-TII-03-SC-INTL

ADIT Vs P & O NEDLLOYD LTD: SUPREME COURT OF INDIA (Dated: September 2, 2016)

Income Tax - Rule 44H(1)(i).

Keywords - MAP - settled position - communication - acceptance or rejection - infructuous issue - special leave petition.

Whether when the assessee, whose case was brought under Mutual Agreement Procedure resolution, has given his assent with regard to the same, it is still open for the Revenue to agitate such issue before the Apex Court through a SLP - NO: SC

The assessee is a non resident company. The present special leave application has been filed before the Apex Court by the Revenue regarding the Mutual agreement procedure of assessment of the non resident company.

The Apex Court held that,

+ the issue raised by the Revenue now stands settled in view of the decision taken by the Government of India itself which is contained in communication No. DCIT(IT)/2(1)/Kol/P&O Nedlloyd / 2016-17/130 dated 24.08.2016 addressed by the Office of the Deputy CIT(IT), to the assessee. Counsel for the assessee(s) submitted that the assessee has given its acceptance to the terms contained in the MAP resolution order dated 02.08.2016. In view thereof, the present special leave petitions do not survive and are dismissed as having become infructuous.

Revenue's appeal dismissed

2016-TII-203-ITAT-MAD-INTL

VISTEON ASIA HOLDINGS INC Vs DCIT: CHENNAI ITAT (Dated: August 24, 2016)

Income Tax - Sections 139(1), 139(4), 142, 143, 147 & 234A.

Keywords: valuation of shares - DCF method - computation of ALP - valuation certificate of CA - average share price - NAV - Profit earning capacity - reassessment - LTCG - interest.

Whether the fluctuation in the market rate and value of capital asset of the company have to be taken into consideration for the purpose of valuing the shares under DCF method, Due to time gap, thus value adopted for the AY 2007-08 cannot be the same for AY 2013-14 - YES: ITAT

Whether merely because no assessment was made originally on the assessee, the same cannot be a reason to find fault with the Assessing Officer for reopening the assessment - YES: ITAT

Whether if the exact date of return filing is not available on record, the matter warrants reconsideration by the AO for ascertaining the exact date on which the return of income was filed by the assessee - YES: ITAT

The assessee company incorporated in USA, was holding 9% of shares in Visteon Powertrain Control Systems India Pvt. Ltd. The assessee sold 73,66,765 equity shares at face value of Rs.10/- to M/s Visteon International Holdings Mauritius Ltd. at Rs.10.32 per share. Since the shares were sold to the subsidiary company of the assessee, AO found that the transaction was between AEs and hence the sale proceeds has to be determined by ascertaining the ALP. The AO found that the average value of shares was considered at Rs.22.50 per share as on 31.03.2007 by the CA. The assessee, however, claimed that the valuation was made by independent CA in accordance with the guidelines issued by Controller of Capital Issues at Rs.10.32 per share. The primary issue which arises for consideration was regarding valuation of shares held in Visteon Powertrain Control Systems India Pvt. Ltd. Assessee's counsel submitted that for the purpose of transfer of shares held by the assessee in Visteon Powertrain Control Systems India Pvt. Ltd., the assessee valued the same at Rs.10.32 per share. However, the AO estimated the valuation at Rs.36.31 per share. Referring to the order of this Tribunal dated 12.11.2013 in I.T.A. No.17(Mds)/2012 in M/s VIHI, LLC, the counsel submitted that VIHI was also one of the co-transferors. In that case, the Tribunal accepted the valuation made by the assessee at Rs.10.32 per share. Therefore, CIT(A) ought to have followed the order of Tribunal in VIHI, LLC. It had further submitted that the TPO in M/s Visteon International Holdings Inc, held that the AO himself had taken the value of share as determined by TPO in the case of Visteon Powertrain Control Systems India Pvt. Ltd., while computing the long term capital gains. Therefore, according to the counsel, the CIT(A) ought to have followed the order of this Tribunal in I.T.A. No.17/Mds/2012 dated 12.11.2013.

Having heard the matter, the Tribunal held that,

+ in the case of VIHI, LLC in I.T.A. No.17/Mds/2012. the assessee, VIHI transferred the shares of Visteon Powertrain Control Systems India Pvt. Ltd. to M/s Visteon International Holdings Singapore Pte Ltd. and to M/s Visteon International Holdings Mauritius Ltd. for Rs.10.32 per share. The assessee has obtained valuation certificate from M/s Delloite Haskins & Sells, CAs. However, AO determined the ALP of value of shares at Rs.36.31 per share. This Tribunal after examining the facts of the case, ultimately found that the computation of ALP shall be made in DCF method. In fact, the order of this Tribunal in I.T.A. No.17/Mds/2012 relates to AY 2007-08. The issue under consideration is for AY 2013-14. CIT(A) found that the capital gain cannot be determined on the basis of sale price admitted by the assessee in the return of income. The valuation of share at the initial stage was made on NAV method and Profit Earning Capacity Value method. The average value of shares was arrived at Rs.20.50 per share as on 31.03.2007, which is proximate to the date of first sale, i.e. 27.03.2007. However, the assessee claims that the sale was at Rs.10.32 per share. When the CA found that the value was Rs.20.50 per share as on 31.03.2007, the valuation adopted by the assessee at Rs.10.32 per share is not justified. In fact, the CIT(A) found that at the initial stage, the share was valued at NAV method and Profit Earning Capacity Value method. Ultimately, the share was valued at DCF method. When AO valued the shares by following DCF method, this Tribunal is of the considered opinion that the assessee cannot have any grievance at all. Even for AY 2007-08, this Tribunal accepted the valuation made by the assessee under DCF method. The valuation made for AY 2007-08 in respect of VIHI cannot be adopted for the AY 2013-14 when the assessee transferred the same. Due to time gap, the fluctuation in the market rate and value of capital asset of the company have to be taken into consideration for the purpose of valuing the shares under DCF method. Therefore, the valuation made for the assessment year 2007-08 cannot be the same for AY 2013-14. Since the AO has followed DCF method, this Tribunal is of the considered opinion that the CIT(A) has rightly confirmed the order of AO. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed;

Reopening of assessment u/s 147

+ the grievance of the assessee appears to be that no original assessment was made, therefore, the assessment cannot be reopened. This Tribunal is of the considered opinion that even though no original assessment was made, for the purpose of assessing the taxable income, the Assessing Officer can always reopen the assessment under Section 147. Therefore, merely because no assessment was made originally that cannot be a reason to find fault with the Assessing Officer for reopening the assessment;

Levy of interest u/s 234A

+ the only objection of the assessee appears to be that the return of income was filed within the time limit provided u/s 139(1), therefore, there cannot be any levy of interest u/s 234A. We have carefully gone through the provisions of Section 234A. When the return of income was filed after the due date prescribed u/s 139(1) or 139(4) or due date prescribed in the notice u/s 142, a simple interest at the rate of one per cent is levied for every month or part of the month comprised in the period commencing on the date immediately following the due date on the amount of the tax on the total income as determined under sub-section (1) of Section 143 and where a regular assessment is made and the total income determined under regular assessment as reduced by the tax paid by the assessee either as advance tax or otherwise. Since the exact date of filing of return of income is not available on record, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the AO for ascertaining the exact date on which the return of income was filed. Accordingly, the issue of levy of interest u/s 234A is remitted back to the file of the AO. AO shall find out the exact date of filing of return of income by the assessee and thereafter decide the issue in accordance with law after giving a reasonable opportunity to the assessee. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.

Case remanded