Topsgrup Electronic Systems v ITO (ITAT Mumbai)

SECTION(S): , , ,
DATE: February 19, 2016 (Date of pronouncement)
DATE: April 5, 2016 (Date of publication)
AY: 2009-10
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Transfer Pricing - alleged excess investment in share capital of wholly owned subsidiary cannot be termed as loan and notional interest charged thereon

The Tribunal deleted TP addition on account of

a) alleged excess consideration paid on investment in share capital of wholly owned subsidiary re-characterized as loan

b) and notional interest thereon on the ground that

i. Chapter X of the Act is inapplicable to an international transaction on capital account which does not result in income chargeable to tax and

ii. Re-characterisation of the transaction is not permitted under the Act, and

iii. That potential income, to qualify as income subject to transfer pricing under the Act, should arise from the impugned international transaction which is before the TPO for consideration and not out of a hypothetical transaction that may or may not take place in the future.

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