Professional Documents
Culture Documents
[Appellant] [Respondent]
ORDER
2013-14.
case records carefully perused and with the assistance of the ld.
record in the form of Paper Book in light of Rule 18(6) of ITAT Rules.
sum turnkey and lump sum service contracts in the field of refineries,
petrochemicals, oil & gas, fertilizers, chemicals & other allied fields.
price of Rs. 396.42 per share and, accordingly, Technip India became
assets situated in India, the appellant offered the income arising from
sale of such shares to long term capital gains tax in terms of section 45
of the Act.
5
assessee.
officer made a reference u/s 92CA of the Act to the Transfer Pricing
Officer [TPO]. The TPO, vide order dated 26.10.2016, rejected the
the DRP but the DRP, vide order dated 07.08.2017, confirmed the
elsewhere.
17. The ld. counsel for the assessee vehemently stated that the
the say of the ld. counsel for the assessee that the capital gains arising
his contention, the ld. counsel for the assessee placed reliance on
decision of the Hon'ble High Court of Delhi in the case of CIT vs. Herbal
Life International P. Ltd.: 384 ITR 276 supported by the decision of the
257/Agr/2013.
8
nationality alone. The ld. DR further stated that the contention of the
assessee that it was discriminated vis a vis residents also does not
support its cause, since every Sovereign State reserves its rights to
far as the decision of the Hon'ble Delhi High Court in the case of
Herbal Life International Pvt. Ltd and other related judgments relied
upon by the ld. counsel for the assessee are concerned, the ld. DR
stated that these judgments were delivered in the facts and issues
19. We have heard the rival submissions and have given thoughtful
resident.
conditions.
5. In this Article, the term "taxation" means taxes which are the
20. Article 3 contains the general definition and in clause J, the term
deriving its status from the law in force in the contracting state.
state [i.e. India] in the same circumstances and under same conditions
nationals in the same circumstances and under the same conditions are
23. This means that if an Indian national [legal person], enters into
and, therefore, do not fall within the purview of Article 25 of the India
judicial decisions relied upon by the ld. counsel for the assessee as
they are totally different from the facts of the case in hand. Thus, the
24. The next objection of the appellant is that the Assessing Officer
25. The ld. Counsel drew our attention to the provisions of section
45(1) of the Act and pointed out that section 48 prescribes the mode of
computation of capital gains. It is the say of the ld. counsel for the
received or accruing on transfer of the asset. The ld. counsel for the
assessee further pointed out that the Courts have unanimously and
several judicial decisions of the Hon'ble Supreme Court and the Hon'ble
directions from the DRP. Section 92 of the Act provides that any
Assessing Officer may compute the total income having regard to the
ALP so determined. This means that after determining the ALP, the
appellant is also thrust upon the department by the CBDT vide its
has been upheld by the Hon'ble Supreme Court in the case of CIT vs
Bharti Cellular Limited 330 ITR 239. However, we find that the AO/
at pages 200 to 208 of the paper book, which is the valuation report of
S.S. Kothari Mehta & Co. which has adopted the valuation approach as
under:
paper book, which is why SPA Capital Advisors Ltd., which has also
applied discounted cash flow method, determined the fair value as per
as per the appellant and share valuation as per the TPO can be
WACC 18.12%
0.85 0.72 0.61 0.51 ^0.43 0.43
127.90 108.08 106.85 90.41 76.37
Value of Explicit Period (A) 509.57
'
Particulars .
Remarks
Risk Free Rate of Based on reported YTMs of long term government bonds
8.54
Return (with 10 year maturity)
Based on performance of the sensex over past 32 years
Market Risk Premium
8.09 i.e. from 1979 to 2011
Based on reported beta of selected listed companies
providing engineering, procurement and construction
Specific Company Risk services to Oil and gas, refinery industries
...........................
Discounting rate 18.12
17
Aggregate of PV of the
explicit forecast period (A) 635,986,300
PV of terminal value (B) 470,000,000
Cash and bank balance (’C) 237,274,474
Enterprise value (A+B+C) 1,343,260,77
4
Number of shares 2,900,000
Rate Remarks
Particulars
Risk Free Rate of Return 8.54 Rate adopted by the appellant accepted by the TPO
Not accepted by the TPO and recomputed based on
Market Risk Premium 4.63 performance of the sensex since year of incorporation of
the company i.e. from 1998
33. Two distinguishing features are vivid from the aforesaid share
396.42 whereas that of the TPO is 463.19 and, secondly, the market
risk premium adopted by the assessee is 8.09, whereas the same has
that the shares of the appellant company are highly ill-liquid and,
15%, which comes to 202.88. However, the TPO has not deducted any
illiquidity discount alone is considered, then the fair value as per the
share of the assessee would be more than the fair value per share
35. Further, the TPO has considered the financial data on financial
year. Moreover, the TPO has taken the market risk premium of
i.e. 1998 whereas the independent valuers have taken the market risk
1979 to 2011.
19
the extra return that would be demanded by investors for shifting their
in the market. The amount of the premium will vary as the risk in a
37. We find that market risk premium for various countries is also
computes market risk premium from time to time for various countries
and posts the same on his website/ in public domain. We find that in
the market risk premium. Considering the facts of the case in totality,
18.12% and if the same is taken, then again also, the fair value per
share taken by the assessee will be higher than the fair value per share
61.74 crores.
40. It seems that the TPO has been carried away with the
share capital of Technip India from SPIC for a total consideration of Rs.
Euros, equivalent to Rs. 61.74 crores. Taking a leaf out of this, the
addition of Rs. 61.74 crores was made by the TPO to amount of sale
41. We are of the considered opinion that when the fair value is
being the base for determination of value under the DCF approach.
of goodwill.
fact that cash flows of business already factor the benefits accruing
44. In our considered view, the AO/ TPO have failed to appreciate the
including the same while determining the fair market value under DCF
methodology.
46. Accordingly, fair valuation of Rs. 396.42 per share of Technip India
48. As per the share purchase agreement placed at pages 217 to 218
of the paper book, the aggregate purchase price for all the shares is
to be deleted.
49. Considering the facts of the case in totality, from all possible
be deleted. Ground No. 2 and 3 with all its sub grounds are allowed
50. In so far as levy of interest u/s 234B of the Act is concerned, the
ld. counsel for the assessee submitted that a similar issue was
advance tax u/s 208 of the Act will be liable to interest u/s 234B
of the Act if he fails to pay such tax or advance tax paid by him
section 208 r.w.s 209(1) of the Act, advance tax payable has to
tax liability is the advance tax payable under section 208 of the
Act.
[[[
Packaged Power Inc. 373 1TR 65, held that no interest under
was upon the payer to deduct the tax at source before making
reproduced hereunder:
26
27. For the above reasons, this Court finds that no interest is
195(2) of the Act. The failure of the payers to do so does not leave
delineated in that provision will visit the payer. The appeal of the
It may be pointed out that the Finance Act, 2012, w.e.f. 1.4.2012
added proviso below section 209(1)(d) of the Act. But the said
prospective in operation.
resident company to levy of interest u/s 234B of the Act for the
51. Since in the present case the income has been received by the
Act.
28
Sd/- Sd/-
VL/
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar,
ITAT, New Delhi
29
Date of dictation
Date on which the typed draft is placed before the
dictating Member
Date on which the typed draft is placed before the Other
Member