Vodafone Bombay HC transfer tax judgment

8/11/2019 Vodafone Bombay HC transfer tax judgment

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ASN 1/53 WP-871-14

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION

WRIT PETITION NO.871 OF 2014

Vodafone India Se !i"e# P!$. %$d. &'a!in( i$# e(i#$e ed offi"e a$ &Vodafone 'o)#e*+o ,o a$e oad* &P a ad Na(a * Off. S. .'i( a &A eda ad-380051* ) a$* India. & .. Pe$i$ione .

!#.

1. nion of India* & T o)( $ e Se" e$a *6ini#$ of Finan"e* & No $ o" *Ne 9e i-110001. &

2. Add . +o i##ione of In"o e Ta: &T an#fe P i"in( II;


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ASN 2/53 WP-871-14

CORAM : MOHIT S. SHAH, C.J. ANDM.S. SANKLECHA, J.

RESERVED ON: 18 SEPTEMBER 2014.

PRONOUNCED ON: 10 OCTOBER 2014.

CAV JUDGMENT P!" C#$!% J&'($)!*:+

A$ $ e e )e#$ of $ e ea ned +o)n#e fo o$ $ e #ide# $ e

,e$i$ion a# $a en ), fo fina di#,o#a .

2 T e Pe$i$ione * Vodafone India Se !i"e# P!$. %$d.* i# a o

o ned #) #idia of a non- e#iden$ "o ,an * Vodafone Te e-Se !i"e# ;India=

'o din(# %i i$ed ;$ e o din( "o ,an =. T e Pe$i$ione e )i ed f)nd# fo

i$# $e e"o )ni"a$ion #e !i"e# , o e"$ in India f o i$# o din( "o ,an

d) in( $ e finan"ia ea 2008-0> i.e. A##e## en$ Bea ;AB= 200>-10. On

21 A)()#$ 2008* $ e Pe$i$ione i##)ed 2*8>*224 e )i$ # a e# of $ e fa"e

!a )e of R#.10/- ea" on a , e i) of R#.8*50>/- ,e # a e $o i$# o din(

"o ,an . T i# e#) $ed in $ e Pe$i$ione e"ei!in( a $o$a "on#ide a$ion ofR#.24/- ,e # a e a# de$e ined $ e Pe$i$ione in

a""o dan"e i$ $ e e$ odo o( , e#" i ed $ e o!e n en$ of India

)nde $ e +a,i$a I##)e# ;+on$ o = A"$* 1>47.

'o e!e * a""o din( $o $ e A##e##in( Offi"e ;AO= and T an#fe

P i"in( Offi"e ;TPO=* $ e Pe$i$ione o)( $ $o a!e !a )ed ea" e )i$ # a e

a$ R#.53*775/- a# a(ain#$ $ e afo e#aid !a )a$ion done )nde $ e +a,i$a

I##)e# ;+on$ o = A"$* 1>47 a$ R#.8*51>/- and on $ a$ a#i# # o $fa in

, e i) $o $ e e:$en$ of R#.45*25


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ASN 3/53 WP-871-14

R#.1308.>1 " o e#. o$ $ e AO and $ e TPO on a,, i"a$ion of $ e T an#fe

P i"in( , o!i#ion# in + a,$e C of $ e In"o e Ta: A"$ 1> i.e. A. B. 200>-10.

A""o din( $o $ e Pe$i$ione * $ e A"$ doe# no$ $a: inf o of

"a,i$a in$o $ e "o)n$ #o a# $o i ,ede i$# "o in( in$o India. No doe# $ e

A"$ " ea$e an e(a fi"$ion $o $ ea$ #)" a e(ed # o $fa in "a,i$a e"ei,$ on

i##)e of e )i$ # a e# an Indian "o ,an $o i$# non- e#iden$ o din(

"o ,an * a# in"o e. T e Pe$i$ione a #o "on$end# $ a$ "on#e )en$ * $ e e

"o) d e no )e#$ion of $ ea$in( $ e a e(ed # o $fa a# a dee ed oan o

$a:in( $ e a e(ed dee ed in$e e#$ on a dee ed oan. T e Pe$i$ione a#*

$ e efo e* o!ed $ i# +o) $ )nde A $i" e 22< of $ e +on#$i$)$ion of India

" a en(in( $ e ) i#di"$ion of $ e e#,onden$-a)$ o i$ie# $o $a: an

In$e na$iona T an#a"$ion #)" a# $ e , e#en$ one i" a# no$ (ene a$ed

an in"o e a# defined )nde $ e A"$. In # o $* $ e Pe$i$ione D# "on$en$ion i#

$ a$ a #en$ in"o e a i#in( f o an In$e na$iona T an#a"$ion* + a,$e C of

$ e A"$ a# no a,, i"a$ion. T e A##e## en$ Bea in!o !ed in $ i# , o"eedin(

i# A. B. 200>-10.

3 T i# ,e$i$ion i# a #e )e $o $ e o de da$ed 2> No!e e 2013

,a##ed $ i# +o) $ in W i$ Pe$i$ion No.1877 of 2013 ;Vodafone-III= fi ed

$ e , e#en$ Pe$i$ione . In Vodafone-III* $ e " a en(e $ e Pe$i$ione

a# $o $ e o de da$ed 28 ?an)a 2013 of $ e TPO ,a##ed in $e # of

Se"$ion >2+A of $ e A"$ and $ e "on#e )en$ d af$ a##e## en$ o de

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ASN 4/53 WP-871-14

da$ed 22 6a " 2013 ,a##ed $ e AO in $e # of Se"$ion 143;3= ead

i$ Se"$ion 144;+=;1= of $ e A"$* e a$in( $o A.B. 200>-10.

4 T e a#i# of $ e " a en(e in Vodafone-III a# $ a$ $ e i##)e

of e )i$ # a e# $ e Pe$i$ione $o i$# o din( "o ,an did no$ (i!e i#e $o

an in"o e f o In$e na$iona T an#a"$ion* #o a# $o a$$ a"$ $ e , o!i#ion# of

+ a,$e C of $ e A"$. T i# on $ e ( o)nd $ a$ a i#in( of in"o e on a""o)n$

of In$e na$iona T an#a"$ion i# a "ondi$ion , e"eden$ fo a,, i"a$ion of

+ a,$e C of $ e A"$. T )#* i$ a# a ) i#di"$iona i##)e. 'o e!e * $ e

) i#di"$iona i##)e a# nei$ e de$e ined $ e TPO o $ e AO in #,i$e of$ e Pe$i$ione a!in( ai#ed i$ efo e o$ $ e A)$ o i$ie#. T i# +o) $ in

Vodafone-III a""e,$ed $ e , ea of $ e Pe$i$ione $ a$ a ) i#di"$iona i##)e of

a,, i"a$ion of + a,$e C of $ e A"$ doe# a i#e and $ e #a e a# no$

"on#ide ed ei$ e $ e TPO o $ e AO. A$ $ a$ $i e* e did no$ dea

i$ $ e ) i#di"$iona i##)e a# $ e +o)n#e fo $ e Re#,onden$-Re!en)e

ef)#ed $o add e## )# on e i$# of $ e ) i#di"$iona i##)e on $ e ( o)nd $ a$

#a e "o) d e ai#ed efo e $ e a)$ o i$ie# )nde $ e A"$. T )#* a# $ e

Pe$i$ione ad a ead fi ed i$# o e"$ion# ;e:" )din( $ e i##)e of

) i#di"$ion= $o $ e 9 af$ A##e## en$ O de * efo e $ e 9i#,)$e Re#o )$ion

Pane ;9RP= )nde Se"$ion 144+;2= of $ e A"$ and i$ a# ,endin(* $ e 9RP

a# di e"$ed $o fi #$ de"ide on $ e ) i#di"$iona i##)e ai#ed $ e

Pe$i$ione a# , e i ina i##)e i$ in $ o on$ # f o $ e da$e on i"

$ e Pe$i$ione fi e# i$# o e"$ion on $ e )e#$ion of ) i#di"$ion. +on#e )en$

$o $ e di e"$ion# of $ i# +o) $ in Vodafone-III* $ e 9RP a# "on#ide ed $ e

i##)e of ) i#di"$ion a# ai#ed $ e Pe$i$ione and an o de da$ed 11

Fe )a 2014 e e"$ed $ e Pe$i$ione D# , e i ina o e"$ion $ e e$o. T i#

,e$i$ion e##en$ia " a en(e# $ e o de da$ed 11 Fe )a 2014 ,a##ed

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ASN 5/53 WP-871-14

$ e 9RP o din( $ a$ $ e Re#,onden$-Re!en)e a# ) i#di"$ion $o $a: $ e

Pe$i$ione D# i##)e of # a e# $o i$# o din( "o ,an a$ a , e i) $o $ e e:$en$

$ e , e i) i# no$ e"ei!ed )nde + a,$e C of $ e A"$* a# in"o e doe#

a i#e in $ e a o!e In$e na$iona T an#a"$ion.

5 Fo $ e ,) ,o#e# of "o , e$ene##* e a e #e$$in( o)$ $ e fa"$#

eadin( $o $ i# Pe$i$ion in fo) ,a $# -

I. Ti ,a##in( of $ e o de TPO.

II. Af$e ,a##in( of $ e o de TPO $i fi in( of $ e , e!io)#

W i$ Pe$i$ion ;Vodafone-III=.

III. O #e !a$ion# ade $ i# +o) $ in Vodafone-III.

IV. 'ea in( efo e 9RP and i ,)(ned 9RP o de da$ed 11

Fe )a 2014.

I. B '$) F )(' :

*224 e )i$ # a e# of a fa"e !a )e of

R#.10/- ea" a$ $ e , e i) of R#.8*51>/- ,e # a e $o i$# o din(

"o ,an . T i# e#) $ed in $ e Pe$i$ione e"ei!in( a$ $ e a$e of

R#.851>/- ,e # a e a $o$a "on#ide a$ion of R#.24


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ASN . T e Fai 6a e$ Va )e of $ e i##)e of e )i$

# a e# a# de$e ined $ e Pe$i$ione in a""o dan"e i$ $ e

e$ odo o( , e#" i ed )nde $ e +a,i$a I##)e# ;+on$ o = A"$ 1>47

;"= On 30 Se,$e e 200>* $ e Pe$i$ione fi ed i$# e$) n of in"o e fo

A##e## en$ Bea 200>-10 i$ $ e e#,onden$- e!en)e. A on( i$

i$# e$) n of in"o e* $ e Pe$i$ione a #o fi ed Fo 3-+E da$ed 28

Se,$e e 200> an A""o)n$an$ in a""o dan"e i$ Se"$ion >2-E

of $ e A"$. In $ e #aid Fo -3+E * $ e $ an#a"$ion of i##)an"e of

e )i$ # a e# $ e Pe$i$ione $o i$# o din( "o ,an a# de" a ed

a# an In$e na$iona T an#a"$ion and a #o $ e A%P of $ e # a e# #o

i##)ed* a# de$e ined. 'o e!e * a no$e a# a,,ended $o i$# Fo

3-+E e,o $ $ e A""o)n$an$ a in( i$ " ea $ a$ $ e $ an#a"$ion of

i##)e of e )i$ # a e# did no$ affe"$ $ e in"o e of $ e Pe$i$ione and

a# ein( e,o $ed on a# a a$$e of a )ndan$ "a)$ion. T e no$e

ead a# )nde -

Note 1:-

The company has issued 289224 equity shares of Rs.10/-each fully paid at a premium of Rs.8 00 per share a!!re!atin! tototal consideration of Rs.2"4#"$8"99"01#. %s per &ection 92'1( ofthe )ncome Ta* %ct" 19#1 any income arisin! shall +e computedha,in! re!ard to the arm s len!th price. This transaction of issueof equity shares does not affect income of the ompany. o e,er"out of a+undant caution" the same is reported here.

;d= On 30 A)()#$ 2010* $ e A.O. i##)ed a no$i"e )nde Se"$ion

143;2= of $ e A"$ $o $ e Pe$i$ione fo $ e ,) ,o#e# of "a in( o)$

#" )$in a##e## en$. On 11 ?) 2011* $ e AO efe ed a $ e

$ an#a"$ion# e,o $ed $ e Pe$i$ione in Fo 3-+E

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ASN 7/53 WP-871-14

da$ed 28 Se,$e e 200> $o $ e TPO. T i# a# fo de$e inin( $ e

A%P of $ e e,o $ed In$e na$iona T an#a"$ion# in a""o dan"e i$

Se"$ion >2+A;1= of $ e A"$

;e= On 14 9e"e e 2012* $ e TPO i##)ed a # o "a)#e no$i"e $o $ e

Pe$i$ione . In $ e a o!e no$i"e* in #o fa a# e e!an$ $o $ e#e

, o"eedin(#* $ e Pe$i$ione a# in$e a ia* "a ed ),on $o # o

"a)#e

;i= $ e i##)e , i"e ;in" )din( $ e , e i) = of $ e e )i$# a e# $o i$# o din( "o ,an a# de" a ed $ e Pe$i$ione

# o) d e a""e,$ed fo $ e ,) ,o#e# of "o ,)$in( A%P

)nde $ e A"$ and

;ii= $ e A%P of $ e # a e# i##)ed $ e Pe$i$ione $o i$# o din(

"o ,an e no$ de$e ined on $ e a#i# of i$# Ne$ A##e$

Va )e ;in # o $ GNAVH=* af$e $a in( in$o a""o)n$ $ e

$ an#fe , i"in( ad )#$ en$ fo $ e A##e## en$ Bea # 2007-

08 and 2008-0>. T e a o!e ad )#$ en$ o) d e#) $ in $ e

NAV ein( en an"ed f o R#.12*341.80 i ion# $o

R#.75*55 " o e# $o a i!e a$ $ e A%P of $ e e )i$ # a e#.

;f= T e Pe$i$ione fi ed i$# e, ie# on 24 9e"e e 2012* 7 ?an)a

2013 and 22 ?an)a 2013 $o $ e # o "a)#e no$i"e i##)ed $ e

TPO. T e Pe$i$ione in a i$# e, ie# "on$ended $ a$ + a,$e C

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ASN 8/53 WP-871-14

i.e. T an#fe P i"in( , o!i#ion# do no$ a,, $o $ e i##)e of e )i$

# a e#. T e efo e* i$ a# "on$ended $ a$ $ e no$i"e a# "o , e$e

i$ o)$ ) i#di"$ion a# + a,$e C of $ e A"$ i# ina,, i"a e. I$ a#

a #o " a ified $ a$ $ e e, ie# # o) d no$ e "on#$ )ed a# #) i$$in(

$o ) i#di"$ion )nde + a,$e C of $ e A"$

;(= On 28 ?an)a 2013* $ e TPO ,a##ed $ e i ,)(ned o de * in$e a ia*

e"o din( $ e fo o in(

;i= T e i##)e of e )i$ # a e# i# an In$e na$iona T an#a"$ion(o!e ned + a,$e C of $ e A"$ a# i# e!iden$ f o Fo 3

+E da$ed 28 Se,$e e 200> fi ed $ e Pe$i$ione

;ii= T e $ an#a"$ion a# an In$e na$iona T an#a"$ion a# i#

e!iden$ f o $ e E:, ana$ion ;i=;"= and ;e= $o Se"$ion >2- of

$ e A"$* i" , o!ide# $ a$ "a,i$a finan"in( and e-#$ )"$) in( of )#ine## o) d e #o

;iii= T e i##)e e$ e an In"o e a# a i#en and/o affe"$ed

$ e In$e na$iona T an#a"$ion fo ,) ,o#e# of + a,$e C of

$ e A"$ o) d e de$e ined $ e A.O. T e ) i#di"$ion

e:e "i#ed TPO i# on $o de$e ine $ e A%P of

In$e na$iona T an#a"$ion# and no$ "o ,)$e and/o a##e## $ e

in"o e a i#in( o)$ of #)" In$e na$iona T an#a"$ion#

;i!= T e "on#e )en"e of i##)e of # a e# $ e Pe$i$ione $o

i$# o din( "o ,an a$ a o e , e i) e#) $ed in $ e

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ASN >/53 WP-871-14

Pe$i$ione #) #idi in( $ e , i"e ,a a e $ e o din(

"o ,an . T i# defi"i$ o) d e a oan e:$ended $ e

Pe$i$ione $o i$# o din( "o ,an and #)" oan o) d a!e

ea in( on $ e , ofi$ of $ e a##e##ee in $e # of in$e e#$

;!= T e A%P of $ e i##)e of e )i$ # a e# $ e Pe$i$ione $o i$#

o din( "o ,an a# de$e ined $ e A""o)n$an$ )nde

Se"$ion >2E of $ e A"$ a# e e"$ed. T i# on $ e ( o)nd $ a$

e$ odo o( of !a )a$ion ado,$ed i# no$ #)i$a e $o de i!e

$ e A%P

;!i= T e T an#fe P i"in( ad )#$ en$ fo $ e A.B.# 2007-08 and

2008-0> a!e $o e $a en in$o a""o)n$ $o de$e ine $ e

fai !a )e of $ e Pe$i$ione D# )#ine##

;!ii= Fina * $ e TPO de$e ined $ e A%P of e )i$ # a e# i##)ed

$ e Pe$i$ione $o i$# o din( "o ,an a# )nde -

- ./ D!(!" $ ($ % A" 3' L! (# P"$)!:

T )#* a#ed on $ e a o!e di#")##ion* $ e A%P of e )i$ # a e#

of $ e "o ,an a# on 31-03-2008 i# "o ,)$ed a# e o -

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ASN 10/53 WP-871-14

D!')"$5($ A & (R'. M$66$ *

N& 7!"A & (

R'.*

R! "9'

;a= Ne$- o $ of $ e a##e##ee "o ,ana#ed on a)di$ed a an"e # ee$ a# on

31-03-2008

12341.8 A# ,e $ ea)di$ed a an"e# ee$ of $ ea##e##ee a# on31-03-2008

; = Add Off- a an"e # ee$ i$e # ;fo TPad )#$ en$ ade in $ e ea ie ea #*A%P !a )a$ion of #a e of "a "en$ e

)#ine## and A%P of a##i(n en$ of"a o,$ion#=i S o $fa ;ne$ of $a:e#= in " a (in(fo , o!i#ion of IT ena ed #e !i"e#

fo FB 2002 A# ,e $ e o deof $ e TPO fo$ e FB 2008-0>*a# odified $ e di e"$ion#(i!en 9RP-I*6) ai.

;d= iii. S o $fa in " a (in( foa##i(n en$ of "a o,$ion# d) in( FB2007-08.

;e= %e## P o!i#ion fo $a: on # o $fa in" a (in( fo #a e of "a "en$ ed) in( FB 2007-08 J 22.>K

21002.02 A# di#")##eda o!e

;(= To$a Ne$ A##e$ P e#en$ Va )e 51515.87

; = No. of E )i$ S a e# a# on 31-03-2008

>*57*>>2

;i= A%P Va )e of ea" e )i$ S a e a#on 31-03-2008

;(= L ; = M 53*775

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11/53

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ASN 11/53 WP-871-14

C 5&( ($ % ALP

9e#" i,$ion N) e /A o)n$;R#.=

;a= A%P Va )e of ea" e )i$ # a e# a#on 31-03-2008=

53*775

; = Va )e of e )i$ # a e# a# ,e $ ea##e##ee

8*51>

;"= 9efi"i$ a o)n$ ,e # a e ;"= M ;a=-; =

45*25*224;e= P i"e " a (ed $ e a##e##ee 24>*011*21*344/-

Pe iod < on$ #

A D# %en($ In$e e#$ Ra$e 13.50K ,.a.

A D# %en($ P i"e J 13.>7K ,.a. R#.88*35*15*1/-

.2./ P"$)! R!)!$;!< ;$'+A+;$' (#! A" 3' L! (# P"$)!:

The price char!ed +y the assessee at Rs. 5il in the form ofinterest char!ea+le on the de+ts delayed from its %ssociated

6nterprise is compared to the %rm s 7en!th rice or interest asunder

A D# %en($ In$e e#$ R#.88*35*15*1/-

In$e e#$ e"ei!ed R#. Ni

S o $fa ein( ad )#$ en$ )/#>2+A

R#.88*35*15*1/-

The a+o,e amount of Rs.88"$ "1 "#91/- is treated as anad ustment u/s 92 % for the price char!ea+le as interest on thedeemed loan to its %6 for the :. ;. 2008-09.

10 S& "= % TP &'( ! ('

T e $ an#fe , i"in( ad )#$ en$# ade in $ i# o de i##) a i ed a# e o -

S .No.

Na$) e of In$e na$iona T an#a"$ion# Ad )#$ en$ A o)n$;R#.=

1 S o $fa in , i"e of # a e# i##)ed $oAE

1308*>1*21*344

2 In$e e#$ on dee ed oan 88*35*15*1

TOTA% - 13>7*2


13/53

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ASN 13/53 WP-871-14

Thus the a+o,e total amount of Rs.1$9


14/53

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ASN 14/53 WP-871-14

$ e A.O. on $ e ( o)nd $ a$ in $e # of Se"$ion >2-+A ;4= of $ e A"$*

$ e A.O. a# $o "o ,)$e $ e $o$a in"o e in "onfo i$ i$ $ e A%P

de$e ined $ e TPO. In !ie of $ e a o!e* $ e A.O. added $ e

en$i e a o)n$ of R#.13>7.2< + o e# de$e ined $ e TPO $o $ e

Pe$i$ione D# in"o e

;d= On 2< A, i 2013 $ e Pe$i$ione fi ed i$# o e"$ion $o $ e d af$

A##e## en$ O de da$ed 22 6a " 2013 i$ $ e 9RP )nde

Se"$ion 144+ of $ e A"$. In i$# o e"$ion# $o 9RP $ e Pe$i$ione

ade i$ " ea $ a$ $ e o e"$ion a# fi ed a# no$ i$ e(a d $o$ e i##)e of ) i#di"$ion )$ a# on e#$ i"$ed $o "o ,)$a$ion/

!a )a$ion/ )an$ifi"a$ion of A%P in e#,e"$ of $ e i##)e of # a e# $o

i$# o din( "o ,an

;e= So fa a# $ e i##)e of ) i#di"$ion i# "on"e ned* $ e Pe$i$ione fi ed

Vodafone-III Pe$i$ion ;W. P. No.1877 of 2013= in $ i# +o) $. In $ e

a o!e Pe$i$ion* $ e ) i#di"$ion of $ e Re#,onden$-Re!en)e $o $a:

$ e i##)e of e )i$ # a e# $o i$# o din( "o ,an )nde + a,$e C

of $ e A"$ a# " a en(ed. Af$e ea in( $ e ,a $ie#* on 2>

No!e e 2013* $ i# +o) $ ,a##ed an o de a""e,$in( $ e !ie $ a$ a

) i#di"$iona i##)e a i#e# fo "on#ide a$ion.

III. H$ # C &"( "

8 In $ e a o!e o de da$ed 2> No!e e 2013* $ i# +o) $ ade

$ e fo o in( o #e !a$ion# in ,a a( a, 32 -

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ASN 15/53 WP-871-14

32 . )t is clear that in ,ie of &ection 92'1( " theremust +e income arisin! and/or affected or potentially

arisin! and/or affected +y an )nternational Transactionfor the purpose of application of hapter =. Thisould appear to +e in the nature of urisdictional

requirement and the %ssessin! officer must +e satisfiedthat there is an income or a potential of an incomearisin! and/or +ein! affected on determination of an

%7 +efore he proceeds further in determinin! the %7or referrin! the issue to the T > to determine the %7 .

)n this case" e find that the etitioner has from the ,ery+e!innin! +een challen!in! the urisdiction to apply

hapter = on the !round that no income arises and/oris affected or potentially arises and/or is affected onaccount of issue of its shares to its holdin! company.The %ssessin! officer does not deal ith thiso+ ection/issue +efore referrin! the matter to the T >.The T > does not deal ith the a+o,e o+ ection on the!round that in terms of &ection 92 %" his mandate isonly to compute the %7 in relation to the )nternationalTransaction. The T > in the impu!ned order dated 28

?anuary 2012 meets the etitioner s o+ ection +y statin!that the same ould +e dealt ith +y the %ssessin!>fficer. o e,er" hen the same o+ ection as raised+efore the %ssessin! >fficer post the order of the T >"the %ssessin! >fficer does not consider the same in theimpu!ned draft assessment order dated 22 @arch 201$on the !round that in ,ie of &ection 92 % '4(" the

%ssessin! >fficer is o+li!ed to pass an order inconformity ith the %7 determined +y the T >. This

urisdictional issue has to +e dealt ith either +y theT > or the %ssessin! >fficer hen specifically raised+y the etitioner/assessee.

T e eaf$e in ,a a( a, 52* $ i# +o) $ e"o ded a# )nde -

52:- The assessee is entitled to ha,e its preliminaryo+ ections 'a!ainst char!e-a+ility of the alle!ed short

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ASN 1


17/53

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ASN 17/53 WP-871-14

'C( The AR shall decide the issue of urisdiction+efore considerin! issue of ,aluation / quantificationraised +y the etitioner in its o+ ections filed +efore the

AR " this of course su+ ect to the additional !rounds on urisdiction +ein! filed +y the etitioner ithin t o eeBsfrom today. The AR shall decide the issue of urisdictionas a preliminary issue ithin t o months from the date on

hich the etitioner files its o+ ections on the question of urisdiction.

' ( De maBe it clear that since the question of

urisdiction for applica+ility of hapter = for the %ssessment ;ear 2009-10 is raised independently of thechallen!e to the orders of the T > and the %> for the

%ssessment ;ear 2008-09" the AR shall decide the preliminary issue a+out applica+ility of hapter = to theassessment for the %ssessment ;ear 2009-10" ithouta aitin! for decision on the dispute relatin! to the

%ssessment ;ear 2008-09.

'A( De further maBe it clear that in case the decision ofthe AR on the a+o,e preliminary issue is ad,erse to the

etitioner" it ould +e open to the etitioner to challen!ethe order of the AR on the preliminary issue in a rit

petition if a case is made out at that sta!e that thedecision of the AR is patently ille!al" not ithstandin!the a,aila+ility of alternati,e remedy of filin! an appeal+efore the )ncome Ta* %ppellate Tri+unal.

IV. H! "$ 7!% "! DRP < $ 5& !< " No!e e

2013 of $ i# +o) $ in Vodafone-III* $ e Pe$i$ione fi ed i$# , e i ina

o e"$ion# on 12 9e"e e * 2012 and < ?an)a 2014 i$ $ e 9RP. In i$#

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ASN 18/53 WP-871-14

, e i ina o e"$ion#* Pe$i$ione o e"$ed $o $ e ) i#di"$ion of $ e Re!en)e

$o a,, + a,$e C of $ e A"$* , i a i on $ e ( o)nd $ a$ no in"o e

a i#e# on i##)e of e )i$ # a e# Pe$i$ione $o i$# o din( "o ,an .

T i# on $ e a#i# $ a$ #)" i##)e of # a e# nei$ e (i!e# i#e $o in"o e and/o

i ,a"$# $ e in"o e of $ e Pe$i$ione . T e TPO a #o fi ed i$# #) i##ion on

31 ?an)a * 2014 efo e $ e 9RP. T e TPO in i$# #) i##ion "on$e#$ed $ e

Pe$i$ione D# #) i##ion $ a$ in $ e fa"$# of $ e , e#en$ "a#e* + a,$e C of $ e

A"$ i# ina,, i"a e. T e eaf$e * fina ,e #ona ea in( a# ( an$ed on 2

Fe )a * 2014 a$ i" $i e* $ e Pe$i$ione fi ed i$# i$$en #) i##ion in

#),,o $ of i$# , e i ina o e"$ion# on $ e i##)e of ) i#di"$ion.

10 oad * $ e " ): of $ e o e"$ion# $o ) i#di"$ion $a en $ e

Pe$i$ione efo e $ e 9RP* e e a# )nde -

;i= + a,$e C of $ e A"$ i no$ a,, a# $ e i##)e of e )i$ # a e#

$ e Pe$i$ione $o i$# o din( "o ,an doe# no$ (i!e i#e $o an

in"o e

;ii= + a,$e C of $ e A"$ i no$ a,, a# no e:,endi$) e i# in") ed $ a$

i ,a"$# "o ,)$a$ion of $ e $a:a e in"o e

;iii= + a,$e C of $ e A"$ i no$ a,, a# i##)e of # a e# i# $ an#a"$ion

on "a,i$a a""o)n$ and $ )# doe# no$ i ,a"$ "o ,)$a$ion of

in"o e and

;i!= O$ e i##)e# ai#ed e e i$ e(a d $o no ) i#di"$ion $o #, i$ a

#in( e $ an#a"$ion of i##)e of # a e# in$o i##)e of # a e# and ( an$

of finan"ia a""o oda$ion. T i# e-" a a"$e i in(/ e-" a##if in(

a )#ine## $ an#a"$ion i# no$ ,e i$$ed.

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ASN 1>/53 WP-871-14

11 So fa a# $ e e!en)e i# "on"e ned* $ e a#i# of i$# )#$ifi"a$ion

$o e:e "i#e ) i#di"$ion )nde + a,$e C of $ e A"$* $a en $ e TPO efo e

$ e 9RP* e e a# )nde -

;i= + a,$e C of $ e A"$ i# a #e,a a$e "ode i$#e f and $ e diffe en"e

in !a )a$ion e$ een A%P and $ e "on$ a"$/$ an#a"$ion , i"e

o) d (i!e i#e $o in"o e

;ii= In"o e a# defined in Se"$ion 2;24= of $ e A"$ i# in" )#i!e defini$ion

and i$ doe# no$ , o i i$ $a:in( "a,i$a e"ei,$# a# in"o e

;iii= T e fo (oin( of , e i) on $ e ,a $ of $ e Pe$i$ione a o)n$# $o

e:$in()i# en$/ e in )i# en$ of a i( $ $o e"ei!e fai a e$

!a )e. T e efo e* $ e i##)e of # a e# i# a $ an#fe i$ in $ e eanin( of

Se"$ion 2;47= of $ e A"$ and

;i!= T e eanin( of In$e na$iona T an#a"$ion a# (i!en in " a)#e# ;"= and

;e= of $ e E:, ana$ion ;i= $o Se"$ion >2 of $ e A"$ o) d in" )de

i$ in i$# #"o,e e!en "a,i$a a""o)n$ $ an#a"$ion.

12 T e eaf$e * on 11 Fe )a * 2014* $ e 9RP ,a##ed $ e

i ,)(ned o de . $ e a o!e i ,)(ned o de * i$ a# e d $ a$ $ e non-

e"ei,$ of $ e , e i) $o $ e e:$en$ no$ e"ei!ed* i# an in"o e a i#in( f o

i##)e of # a e#. T )#* $ e i ,)(ned o de o d# $ a$ $ e AO a# ) i#di"$ion

$o in!o e + a,$e C of $ e A"$.

13 T e i ,)(ned o de da$ed 11 Fe )a * 2014* o d# $ a$

Se"$ion >2;1= of $ e A"$* anda$e# "o ,)$a$ion of in"o e a i#in( o)$ of

In$e na$iona T an#a"$ion e de$e ined* a!in( e(a d $o $ e A%P. I$ f) $ e

o d# $ a$ $ e $e DIn"o eD a# no$ een defined in + a,$e C of $ e A"$

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20/53

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ASN 20/53 WP-871-14

)n i e In$e na$iona T an#a"$ion. T e efo e* $ e i ,)(ned o de o d# $ a$

$e DIn"o eD i# $o e "on#$ )ed in a oad anne e a"in( a $ ,e# of

e"ei,$# o in"o in(#. In #),,o $* e ian"e i# , a"ed ),on Se"$ion 2;24=

of $ e A"$ i" define# in"o e in an in" )#i!e anne and "a,i$a e"ei,$#

i" o) d o$ e i#e no$ e "o!e ed $ e $e DIn"o eD o) d a #o

#$and in" )ded in $ e defini$ion. T e efo e* a in"o in(# o) d fa i$ in

$ e "on"e,$ of in"o e. T e i ,)(ned o de i e a""e,$in( $ e fa"$ $ a$ $ e

$e DIn"o eD "o) d e"ei!e a na o eanin( a# "an!a##ed $ e

Pe$i$ione * e$ a""e,$# $ e oade eanin( of In"o e "an!a##ed on e a f

of $ e e#,onden$- e!en)e on $ e a#i# $ a$ $ e oade in$e , e$a$ion of $ e

o d DIn"o eD o) d ad!an"e $ e o e"$ of + a,$e C of $ e A"$ and o) d

e ,) ,o#i!e in$e , e$a$ion of $ e #$a$)$o , o!i#ion. Fo $ i# ,) ,o#e*

#),,o $ a# d a n f o $ e defini$ion of In$e na$iona T an#a"$ion a# (i!en

in Se"$ion >2 of $ e A"$ and in ,a $i") a $o E:, ana$ion ;i=;"= $ e e$o

i" , o!ide# $ a$ $ e e:, e##ion DIn$e na$iona T an#a"$ionD in" )de#

"a,i$a finan"in( i e ,) " a#e of a e$a e #e") i$ie#. If $ e no aeanin( of In"o e a# "an!a##ed $ e Pe$i$ione i# ado,$ed* $ en ,) " a#e

of a e$a e #e") i$ie#* "o) d ne!e (i!e i#e $o In"o e* ende in( $ e

, o!i#ion o$io#e. Si i a * i ,)(ned o de a #o d a # #),,o $ f o " a)#e

;e= $o E:, ana$ion ;i= of Se"$ion >2 of $ e A"$ i" in" )de# a $ an#a"$ion

of )#ine## e#$ )"$) in( o eo (ani a$ion en$e ed in$o a# an In$e na$iona

T an#a"$ion. T i# , o!i#ion* a""o din( $o $ e i ,)(ned o de ena e# $ e

A.O. $o in( $o $a: in"o e fo (one i e e#$ )"$) in( / eo (ani in( $ e

)#ine##. In #)" a "a#e* $ o)( $ e e i# no fo a $ an#fe of #o) "e of

in"o e o $an(i e#* e$ $ e in"o e fo (one o) d e no$iona in"o e

ia e $o $a: )nde $ e , o!i#ion# of + a,$e C of $ e A"$. On $ e afo e#aid

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ASN 21/53 WP-871-14

ana #i#* $ e i ,)(ned o de o d# $ a$ # a e , e i) no$ e"ei!ed on i##)e

of # a e# i# In"o e a i#in( f o In$e na$iona T an#a"$ion.

14 T e i ,)(ned o de f) $ e o d# $ a$ a# a "on#e )en"e of $ e

Pe$i$ione D# no$ e"ei!in( $ e A%P on $ e i##)e of # a e#* e#) $ed in e##e

, e i) ein( (a ne ed $ e Pe$i$ione . T i# o) d e#) $* in $ e

Pe$i$ione a!in( e## i )id f)nd# a!ai a e a$ i$# "o and i" in $) n

"o) d a!e ed)"ed i$# de $# o $ e e:"e## f)nd# "o) d a!e een in!e#$ed $o

ea n in"o e. T )#* $ e a o)n$ no$ e"ei!ed "o) d a!e en an"ed i$#

,o$en$ia in"o e. In !ie of $ e a o!e* $ e i ,)(ned o de a #o o d# $ a$$ e # a e , e i) fo (one a# i ,a"$ed ,o$en$ia in"o e. T )#*

a,, o, ia$e (i!in( i#e $o a,, i"a$ion of + a,$e C of $ e A"$ $o $ e

$ an#a"$ion of i##)e# of # a e.

15 In "on" )#ion* $ e i ,)(ned o de a$ ,a a( a, 44 o d# a#

)nde -

)n the li!ht of the ela+orate discussion a+o,e" thedirections !i,en +y the on +le Com+ay i!h ourt in its orderdated 29.11.201$" stands disposed off. The AR s findin!s aresummariEed as under

a. >n a +roader and harmonious construction ofthe term income in &ection 92'1(" %.>. has

urisdiction to in,oBe hapter = as share premium isan income arisin! from issue of shares 'para 21(

+. 6,en if the term income is not !i,en a +roadinterpretation" the %.>. has urisdiction to in,oBe

hapter = as there is income potentially arisin! oraffected +y the short receipt of share premium 'para24(

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ASN 22/53 WP-871-14

PETITIONER3S SUBMISSIONS: -

1< On $ e afo e#aid fa"$#* 6 . 'a i# Sa !e* ea ned S . +o)n#e

a,,ea in( in #),,o $ of $ e Pe$i$ion* #) i$# a# )nde -

;a= + a,$e C of $ e A"$ i# a #,e"ia , o!i#ion# e a$in( $o a!oidan"e of

$a:. Se"$ion >2 of $ e A"$ , o!ide# fo "o ,)$a$ion of in"o e

a i#in( f o In$e na$iona T an#a"$ion* a!in( e(a d $o A%P.

Se"$ion >2;1= of $ e A"$ i" a,, ie# $o $ e $ e , e#en$ fa"$#*

di e"$# $ a$ an in"o e a i#in( f o an In$e na$iona T an#a"$ion

# o) d e "o ,)$ed* a!in( e(a d $o $ e A%P. T )#* $ e #ine- )a-

non* fo a,, i"a$ion of Se"$ion >2;1= of $ e A"$ i# $ a$ in"o e

# o) d a i#e f o an In$e na$iona T an#a"$ion. In $ i# "a#e* i$ i#

#) i$$ed $ a$ no in"o e a i#e# f o i##)e of e )i$ # a e#

$ e Pe$i$ione $o i$# o din( "o ,an

; = T e i ,)(ned o de da$ed 11 Fe )a * 2014 af$e "o e"$o din( $ a$ $ e o d DIn"o eD a# no$ een #e,a a$e defined fo

$ e ,) ,o#e of + a,$e C of $ e A"$* e$ , o"eed# $o (i!e i$# o n

eanin( $o $ e o d DIn"o eD. T i# i# " ea no$ ,e i##i e. T e

o d DIn"o eD o) d a!e $o e )nde #$ood a# defined

o$ e , o!i#ion# of $ e A"$ #)" a# Se"$ion 2;24= of $ e A"$. A

fi#"a #$a$)$e a# $o e #$ i"$ in$e , e$ed ),on i$# o n $e # and

$ e eanin( of o dina o d# "anno$ e e:,anded $o (i!e

,) ,o#ef) in$e , e$a$ion

;"= + a,$e C of $ e A"$ i# no$ de#i(ned $o in( $o $a: a #) #

in!o !ed in a $ an#a"$ion* i" a e o$ e i#e no$ $a:a e. T e

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ASN 23/53 WP-871-14

,) ,o#e and o e"$i!e i# no$ $o $a: diffe en"e e$ een $ e A%P and

$ e "on$ a"$ed/ oo !a )e of #aid $ an#a"$ion )$ $o ea" $ e fai

, i"e/ "on#ide a$ion. T e efo e* efo e an $ an#a"$ion "o) d e

o)( $ $o $a:* a $a:a e in"o e )#$ a i#e. T e in$e , e$a$ion in

$ e i ,)(ned o de $o $a: an a o)n$# in!o !ed in In$e na$iona

T an#a"$ion $an$a o)n$ $o i ,o#in( a ,ena $ fo en$e in( in$o

a $ an#a"$ion ;no a (i!in( i#e $o $a:a e in"o e= a$ a !a )e i"

$ e e!en)e de$e ine# on a,, i"a$ion of A%P

;d= T e i ,)(ned o de i$#e f de on#$ a$e# $ e fa"$ $ a$ $ e # a e, e i) on i##)e of # a e# i# ,e #e no$ $a:a e. T i# i# #o a# $ e

a o)n$# e"ei!ed $ e Pe$i$ione on a""o)n$ of # a e , e i)

a# no$ een $a:ed and on $ e a o)n$ of # a e , e i) i"

i# dee ed no$ $o a!e een e"ei!ed on a,, i"a$ion of A%P* a#

a one een o)( $ $o $a:

;e= In "a#e of i##)e of # a e#* i$ "o e# in$o e:i#$en"e fo $ e fi #$ $i e

on en # a e# a e a o$ed. I$ i# $ e " ea$ion of $ e , o,e $

fo fi #$ $i e. T i# i# diffe en$ f o $ e $ an#fe of an e:i#$in(

, o,e $ . An i##)e of # a e# i# a , o"e## of " ea$ion of # a e#

and no$ a $ an#fe of # a e#. T e efo e* $ e e i# no $ an#fe of # a e#

#o a# $o a e Se"$ion 45 of $ e A"$ a,, i"a e. I$ a# #) i$$ed

$ a$ if $ e "on$en$ion of $ e Re!en)e i# "o e"$* $ en e!ei##)e of # a e# an +o ,an o) d e #) e"$ed $o $a:

;f= T e i##)e of # a e# $ e Pe$i$ione $o i$# o din( "o ,an and

e"ei,$ of "on#ide a$ion of $ e #a e i# a "a,i$a e"ei,$ )nde $ e

A"$. +a,i$a e"ei,$# "anno$ e o)( $ $o $a: )n e##

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ASN 24/53 WP-871-14

#,e"ifi"a / e:, e## o)( $ $o $a: $ e A"$. I$ i# e #e$$ ed $ a$

"a,i$a e"ei,$# do no$ "o e i$ in $ e a i$ of $ e o d

DIn"o eD )nde $ e A"$* #a!e en #o e:, e## , o!ided a# in $ e

"a#e of Se"$ion 2 ;24= ;!i= of $ e A"$. T i# in(# "a,i$a (ain#

" a (ea e )nde Se"$ion 45 of $ e A"$* $o $a: i$ in $ e

eanin( of $ e o d DIn"o eD

;(= A$$en$ion a# d a n $o $ e defini$ion of In"o eD in Se"$ion 2;24=

;:!i= of $ e A"$ i" in" )de# in i$# #"o,e a o)n$# e"ei!ed

a i#in( o a"" )in( i$ in $ e , o!i#ion# of #e"$ion 52 of $ e A"$ $o "on" )de $ e In"o e

a i#e#. I$ i# #) i$$ed $ a$ E:, ana$ion ;i=;"= $o Se"$ion >2 of

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ASN 25/53 WP-871-14

$ e A"$ on #$a$e# $ a$ "a,i$a finan"in( $ an#a"$ion #)" a#

o o in( one and/o endin( one $o AE o) d e an

In$e na$iona T an#a"$ion. 'o e!e * a$ i# o)( $ $o $a: i# no$

$ e )an$) of a o)n$ en$ and/o o o ed )$ $ e i ,a"$ on

In"o e d)e $o #)" endin( o o o in(. T i# i ,a"$ i# fo)nd

in ei$ e )nde e,o $in(/ o!e e,o $in( $ e in$e e#$ ,aid/in$e e#$

e"ei!ed e$".* Si i a * E:, ana$ion ;i=;e= $o Se"$ion >2 of $ e A"$*

i" "o!e # )#ine## e#$ )"$) in( o) d on a!e a,, i"a$ion if

#aid e#$ )"$) in(/ eo (ani in( i ,a"$# in"o e. If $ e e i# an i ,a"$

of in"o e on a""o)n$ of )#ine## e#$ )"$) in(/ eo (ani in(* $ en

#)" in"o e o) d e #) e"$ed$o $a: a# and en i$ a i#e# e$ e

in , e#en$ o in f)$) e. In $ i# "a#e* #)" a "on$in(en" doe# no$ a i#e

a# $ e e i# no i ,a"$ on In"o e i" o) d e " a (ea e $o $a:

d)e $o i##)e of # a e#.

RESPONDENTS3 SUBMISSIONS -

17;a= A# a(ain#$ $ e a o!e* 6 . Ran i$ @) a * ea ned So i"i$o

ene a a,,ea in( on e a f of $ e e#,onden$- e!en)e #o)( $ $o #),,o $

$ e i ,)(ned o de da$ed 11 $ Fe )a * 2014 on "o , e$e ne ( o)nd#

i.e. ( o)nd# "o , e$e diffe en$ f o $ e ( o)nd# in $ e i ,)(ned o de .

'o e!e * a# $ e ne ( o)nd# e e ein( "an!a##ed on on e(a i##)e#* e

e e of $ e !ie $ a$ $ e #a e "o) d e "an!a##ed efo e )# a$ e $ en

#endin( i$ $o $ e 9RP fo f e# "on#ide a$ion. T i# !ie a# $a en )# a #o

ea in( in ind $ a$ in Vodafone-III* $ e e!en)e ef)#ed $o a e an

#) i##ion on e i$# of ) i#di"$iona i##)e on $ e ( o)nd $ a$ i$ o) d

e "on#ide ed $ e A)$ o i$ie# )nde $ e A"$

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26/53

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ASN 22;1= of $ e A"$ i# $o e ead

i$ Se"$ion >2;2= of $ e A"$. I$ i# #$a$ed $ a$ a "on oin$ eadin( of $ o, o!i#ion# o) d indi"a$e $ a$ a$ i# ein( o)( $ $o $a: )nde + a,$e

C of $ e A"$ i# no$ # a e , e i) )$ i# $ e "o#$ in") ed $ e Pe$i$ione

in ,a##in( on a enefi$ $o i$# o din( "o ,an i##)e of # a e# a$ a

, e i) e## $ an A%P. T i# enefi$ i# $ e diffe en"e e$ een $ e A%P and

$ e , e i) a$ i" $ e # a e# e e i##)ed. I$ i# #) i$$ed in $ e affida!i$

$ a$ i##)e of # a e# $ e Pe$i$ione $o i$# o din( "o ,an * e#) $ed in

$ e fo o in( enefi$# $o i$# o din( "o ,an -

'a( cost incurred +y the )ndian o. for a correspondin!+enefit !i,en to the oldin! o. %fter all" the oldin!

o. has actually !ot shares orth Rs. $"


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ASN 27/53 WP-871-14

;a= T e Pe$i$ione doe# no$ " a en(e $ e "on#$i$)$iona !a idi$ of

+ a,$e C of $ e A"$ o an of $ e Se"$ion# $ e ein. T e Pe$i$ione

ai#e# on an i##)e of in$e , e$a$ion. 6o eo!e * $ e fa"$ $ a$ $ e

Pe$i$ione -+o ,an and i$# o din( "o ,an a e AE# i$ in $ e

eanin( of + a,$e C of $ e A"$ i# a #o no$ di#,)$ed. T e efo e*

$ e , o!i#ion# of + a,$e C of $ e A"$ a e f) #a$i#fied and

a,, i"a e $o $ e fa"$# of $ e , e#en$ "a#e

; = T e Pe$i$ione i$#e f ad #) i$$ed $o $ e ) i#di"$ion of + a,$e C

of $ e A"$ fi in(/#) i$$in( Fo 3-+E * de" a in( $ e A%P.T )#* $ e e#,onden$- e!en)e e e )nde an o i(a$ion $o#" )$ini e

$ e #a e and en fo)nd $ a$ $ e A%P de$e ined $ e Pe$i$ione -

+o ,an i# no$ "o e"$* $ e AO and $ e TPO e e anda$ed $o

a,, + a,$e C of $ e A"$ and "o ,)$e $ e "o e"$ A%P. T e efo e*

$ e Pe$i$ione # o) d e e e(a$ed $o $ e a $e na$e e ed of

a,, oa" in( $ e A)$ o i$ie# )nde $ e A"$

;"= T e i##)e of + a,$e C of $ e A"$ ein( a,, i"a e i# no on(e e#

in$e( a a# iden$i"a , o!i#ion a# fo)nd in Se"$ion >2 of $ e A"$ a#

a!ai a e in Se"$ion 42;2= of $ e In"o e Ta: A"$* 1>22

;1>22 A"$=. T e S), e e +o) $ in Mazagaon Dock Ltd. v/s. CIT

(195 ! 3" IT# 3$ L ), e d $ e a"$ion of e!en)e in #ee in( $o

$a: a e#iden$ in e#,e"$ of , ofi$ i" e o) d a!e no aade )$ did no$ a e e"a)#e of i# " o#e a##o"ia$ion i$ a

non- e#iden$. F) $ e * $ e +o) $ o #e !ed $ a$ i$ i# o,en $o $a:

no$iona , ofi$# and a #o i ,o#e a " a (e on $ e e#iden$. T e

afo e#aid , o!i#ion of Se"$ion 42;2= of $ e 1>22 A"$ e e

in"o ,o a$ed in i$# ne a!$a a# Se"$ion >2 of $ e #aid A"$. I$ a#

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ASN 28/53 WP-871-14

$ )# e , a#i ed $ a$ $ e e(i# a$i!e i#$o #),,o $# $ e #$and of $ e

e#,onden$- e!en)e $ a$ e!en in $ e a #en"e of a"$)a in"o e* a

no$iona in"o e "an e o)( $ $o $a:

;d= Se"$ion >2;1= of $ e A"$ )#e# $ e o d DAn in"o e a i#in( f o

an In$e na$iona T an#a"$ionD. T i# indi"a$e# $ a$ $ e in"o e of

ei$ e ,a $ $o $ e $ an#a"$ion "o) d e #) e"$ a$$e of $a: and

no$ $ e in"o e of e#iden$ on . F) $ e * i$ i# #) i$$ed $ a$ fo $ e

,) ,o#e of + a,$e C of $ e A"$* ea in"o e "on"e,$ a# no

a,, i"a$ion* o$ e i#e $ e o d# o) d a!e een Da"$)a In"o eD.T e efo e* $ e diffe en"e e$ een A%P and $ e "on$ a"$ed , i"e

o) d e added $o $ e $o$a In"o e

;e= I$ a# ne:$ #) i$$ed )nde $ e A"$ a$ i# $a:a e i# in"o e

en i$ a"" )e# o a i#e# o en i$ i# dee ed $o a"" )e o a i#e and

no$ on en i$ i# e"ei!ed. T e efo e* e!en if an a o)n$ i# no$

a"$)a e"ei!ed* e$*in "a#e in"o e a# a i#en o dee ed $o

a i#e* $ en $ e #a e i# " a (ea e $o $a:. T )#* $ e diffe en"e

e$ een A%P and "on$ a"$ , i"e i# an in"o e i" a# a i#en )$

no$ e"ei!ed. T )#* in"o e fo (one i# a #o #) e"$ $o $a:

;f= + a,$e C of $ e A"$ i# a "o , e$e "ode i$#e f and no$ e e

a a" ine , o!i#ion $o "o ,)$e $ e A%P. + a,$e C of $ e A"$

a,, ie# e e!e $ e A%P i# $o e de$e ined $ e A.O. I$ i# $ e

idden enefi$ in $ e $ an#a"$ion i" i# ein( " a (ed $o $a:.

T e efo e* $ e " a (in( #e"$ion i# in e en$ in + a,$e C of $ e A"$

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ASN 2>/53 WP-871-14

;(= E!en if $ e e i# no #e,a a$e ead of in"o e )nde Se"$ion 14 of $ e

A"$ in e#,e"$ of In$e na$iona T an#a"$ion* #)" ,a##in( on of

enefi$ $ e Pe$i$ione $o i$# o din( "o ,an o) d fa )nde

$ e ead DIn"o eD f o o$ e #o) "e# )nde Se"$ion 5 I$ a#* $ e efo e* in e oinde $ a$ $ e Pe$i$ione ad $o add e##

)# on $ e ne ( o)nd $a en $o #),,o $ $ e i ,)(ned o de a# #$a$ed in $ e

f) $ e affida!i$ da$ed > Se,$e e * 2014 fi ed $ e e!en)e. I$ a#

,oin$ed o)$ $ a$ Se"$ion >2;2= of $ e A"$ i a!e no a,, i"a$ion in $ e

, e#en$ fa"$# a# i$ dea # i$ "o#$# o e:,endi$) e a o"a$ed o a,,o $ionede$ een $ o o o e AE. T e o e"$i!e of Se"$ion >2;2= of $ e A"$ i# on

$o en#) e $ a$ , ofi$# a e no$ )nde #$a$ed no o##e# o!e #$a$ed di#" o#in(

i( e "o#$ o e:,endi$) e* $ en $ e enefi$ e"ei!ed. T e efo e* i$ i#

#) i$$ed $ a$ Se"$ion >2;2= of $ e A"$ a# no a,, i"a$ion $o $ e , e#en$

fa"$#.

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ASN 30/53 WP-871-14

20 T e eaf$e * e ad o) ned $ e ea in( $o ena e $ e e#,onden$-

e!en)e $o e#,ond $o $ e a o!e #) i##ion $ e Pe$i$ione i" e e in

$ e na$) e of e, $o $ e ne ( o)nd $a en ), $ e e!en)e* in i$# e, a$

$ e ea in(. 'o e!e * $ e e#,onden$- e!en)e " o#e $o fi e $ ei i$$en

#) i##ion#. T e i$$en #) i##ion# a!e een fi ed and #) i##ion#

$ e ein a!e a ead een $a en no$e of e ein a o!e.

STATUTORY PROVISIONS -

21 efo e "on#ide in( i!a #) i##ion* i$ o) d e )#ef) $o #e$

o)$ $ e e e!an$ , o!i#ion of $ e A"$ i" o) d a!e ea in( $o de"ide $ e

"on$ o!e # i" a i#e# efo e )# a# )nde -

S!)($ 2 24* @ I (#$' A)(, & 6!'' ( ) (! ( (#!" $'! "! &$"!':+

;1= . . . . $o

;23= . . . .

; 2"! )ncome includes -'i( profits and !ains"'ii( F to ',( F. F.',i( any capital !ains char!ea+le under section 4 and

.e.f. '*,i( any consideration recei,ed for issue of shares as1-4-201$ G e*ceeds the fair marBet ,alue of the shares referred to

G in clause ',ii+( of su+-section '2( of section #.

I ) ! %" (#!" ' &")!' .

%ect&on 5$'1( )ncome of e,ery Bind hich is not to +ee*cluded from the total income under this %ct shall +echar!ea+le to income-ta* under the head income from othersources " if it is not char!ea+le to )ncome-ta* under any ofthe heads specified in section 14" items % to 6.'2( )n particular and ithout pre udice to the!enerality of the pro,isions of su+-section '1(" the follo in!

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ASN 31/53 WP-871-14

incomes" shall +e char!ea+le to income-ta* under the headincome from other sources namely -.................',ii+(H Dhere a company" not +ein! a company in hichthe pu+lic are su+stantially interested" recei,es" in any

pre,ious year" from any person +ein! a resident"any consideration for issue of shares that e*ceeds the face,alue of such shares" the a!!re!ate consideration recei,edfor such shares as e*ceeds the fair marBet ,alue of the shares. H .e.f. 1.4.201$. 'emphasis supplied(

S!)($ 2 + C 5&( ($ % $ ) ! %" I (!" ($ 6 T" ' )($

# ;$ "! "< ( " 3' 6! (# 5"$)!.

G>2 ;1= An in"o e a i#in( f o an In$e na$ionaT an#a"$ion # a e "o ,)$ed a!in( e(a d $o $ e a D# en($, i"e.

E 56 ($ :+ Fo $ e e o!a of do) $#* i$ i# e e " a ified$ a$ $ e a o an"e fo an e:,en#e o in$e e#$ a i#in( f o anIn$e na$iona T an#a"$ion # a a #o e de$e ined a!in( e(a d$o $ e a D# en($ , i"e.

;2= W e e in an In$e na$iona T an#a"$ion o #,e"ifieddo e#$i" $ an#a"$ion&* $ o o o e a##o"ia$ed en$e , i#e# en$ein$o a )$)a a( ee en$ o a an(e en$ fo $ e a o"a$ion oa,,o $ion en$ of* o an "on$ i )$ion $o* an "o#$ o e:,en#ein") ed o $o e in") ed in "onne"$ion i$ a enefi$* #e !i"eo fa"i i$ , o!ided o $o e , o!ided $o an one o o e of #)"en$e , i#e#* $ e "o#$ o e:,en#e a o"a$ed o a,,o $ioned $o* o *a# $ e "a#e a e* "on$ i )$ed * an #)" en$e , i#e # a ede$e ined a!in( e(a d $o $ e a D# en($ , i"e of #)"

enefi$* #e !i"e o fa"i i$ * a# $ e "a#e a e.

;2A= . . .

;3= . .

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ASN 32/53 WP-871-14

M! $ % I (!" ($ 6 T" ' )($ .

- %ect&on 92' (1! - :or the purposes of this section and#e"$ion# >2" >2+ " 92A and 926" I)nternational Transacti onImeans a transaction +et een t o or more associatedenterprises" either or +oth of hom are non-residents" in thenature of purchase" sale or lease of tan!i+le or intan!i+le

property" or pro,ision of ser,ices" or lendin! or +orro in!money" or any other transaction ha,in! a +earin! on the profits"income" losses or assets of such enterprises" and shall include amutual a!reement or arran!ement +et een t o or moreassociated enterprises for the allocation or apportionment of"or any contri+ution to" any cost or e*pense incurred or to +e

incurred in connection ith a +enefit" ser,ice or facility pro,ided or to +e pro,ided to any one or more of suchenterprises.

'2( % transaction entered into +y an enterprise ith a personother than an associated enterprise shall" for the purposes ofsu+-section '1(" +e deemed to +e a transaction entered into+et een t o associated enterprises" if there e*ists a priora!reement in relation to the rele,ant transaction +et een suchother person and the associated enterprise" or the terms of therele,ant transaction are determined in su+stance +et een suchother person and the associated enterprise.

6*planation J :or the remo,al of dou+ts" it is here+y clarified that-'i( the e*pression international transaction shall include-'a( F. F. F.'+( F. F. F.'c( capital financin!" includin! any type of lon!-term or short-

term +orro in!" lendin! or !uarantee" purchase or sale ofmarBeta+le securities or any type of ad,ance" payments ordeferred payment or recei,a+le or any other de+t arisin!durin! the course of +usiness

;d= . . .

'e( a transaction of +usiness restructurin! or reor!aniEation"entered into +y an enterprise ith an associated enterprise"irrespecti,e of the fact that it has +earin! on the profit" income"losses or assets of such enterprises at the time of thetransaction or at any future date.

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ASN 33/53 WP-871-14

Se"$ion >2 ;f= ;i= . . .

'ii( arm s len!th price means a price hich is applied or proposed to +e applied in a transaction +et een persons other

than associated enterprises" in uncontrolled conditions.

22 + a,$e C of $ e A"$ in $ e , e#en$ fo e, a"ed $ e e #$ i e

Se"$ion >2 of $ e A"$ Se"$ion >2 $o >2F of $ e A"$ i$ effe"$ f o A. B.

2002-03. E #$ i e Se"$ion >2 of + a,$e C of $ e A"$ did dea i$ " o##

o de $ an#a"$ion# ,e i$$in( ad )#$ en$# of , ofi$# ade a e#iden$ in

"a#e of $ an#a"$ion# i$ non- e#iden$ ;$ o en$i$ie# a!in( " o#e "onne"$ion=

if $ e , ofi$# of $ e e#iden$ e e )nde #$a$ed. T i# and Se"$ion 40A;2= of

$ e A"$ i" (o!e ned a a##e##ee* did (i!e #o e ,o e $o $ e AO $o

en#) e $ e "o e"$ , ofi$# a e o)( $ $o $a: in "a#e of " o## o de

$ an#a"$ion#. 'o e!e * in $ e i( $ of Indian E"ono o,enin( ), and

e"o in( ,a $ of $ e ( o a e"ono * eadin( $o a #,a$e of fo ei(n

"o ,anie# ;6) $ina$iona En$e , i#e#= e#$a i# in( )#ine## in India ei$ e

i$#e f o $ o)( i$# #) #idia ie# o oin$ !en$) e#. Si i a * Indian+o ,anie# !en$) ed a oad* o,e a$in( ei$ e i$#e f o $ o)( i$#

#) #idia ie# o oin$ !en$) e "o ,anie#. T e#e ) $ina$iona en$e , i#e# ad

$ an#a"$ion e$ een $ e #e !e# and $ e#e $ an#a"$ion# no$ ein( #) e"$ $o

a e$ fo "e#* $ e "on#ide a$ion e e fi:ed i$ in $ e ( o), $o en#) e

$ an#fe of in"o e f o one $a: ) i#di"$ion $o ano$ e a# a,,ea ed

, ofi$a e $o $ e . T )#* $ e ne Se"$ion# >2 $o >2F of $ e A"$ e e

in$ od)"ed i$ effe"$ fo A. B. 2002-03 a# a ,a $ of + a,$e C of $ e A"$.

T e ai ein( $o a!e e defined ) e# $o $a: $ an#a"$ion# e$ een AE#

and no$ ef$ $o $ e di#" e$ion of $ e A.O. and in( o)$ )nifo i$ in

$ ea$ en$ $o $a: of In$e na$iona T an#a"$ion e$ een AE#. T e E:, ana$o

No$e# $o $ e Finan"e A"$* 2001 in(# o)$ $ e o e"$i!e# a# indi"a$ed in $ e

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ASN 34/53 WP-871-14

+i ") a No.14 of 2001 i" ead a# )nde -

55.3:- Dith a ,ie to pro,ide a detailed statutory

frame orB hich can lead to computation of reasona+le" fairand equita+le profits and ta* in )ndia. )n the case of suchmultinational enterprises" the %ct has su+stituted section 92

ith a ne section and has introduced ne sections 92% to 92:in the )ncome-ta* %ct" relatin! to computation of incomefrom an )nternational Transaction ha,in! re!ard to the arm slen!th price" meanin! of associated enterprise" meanin! of

)nternational Transaction" computation of arm s len!th price"maintenance of information and documents +y personsenterin! into )nternational Transactions" furnishin! of a reportfrom an accountant +y persons enterin! into )nternationalTransactions and definitions of certain e*pressions occurrin!in the said sections.

55.":- The ne ly su+stituted section 92 pro,ides thatincome arisin! from an )nternational Transaction +et een %6shall +e computed ha,in! re!ard to the arm s len!th price. %nye*pense or out!oin! in an )nternational Transaction is also to+e computed ha,in! re!ard to the arms len!th price. Thus in

the case of a manufacturer" for e*ample" the pro,isions illapply to e*ports made to the %6 as also to imports from thesame or any other associated enterprise. The pro,ision is alsoapplica+le in a case here the )nternational Transactioncomprises only an out!oin! from the )ndian assessee.

55.5:- The ne section further pro,ides that the cost ore*penses allocated or apportioned +et een t o or more %6under a mutual a!reement or arran!ement shall +e at arm slen!th price. 6*amples of such transactions could +e hereone associated enterprise carries out centraliEed functions

hich also +enefit one or more other %6" or t o or more %6a!ree to carry out a oint acti,ity" such as research andde,elopment" for their mutual +enefit.

55.$:- The ne pro,ision is intended to ensure that profits ta*a+le in )ndia are not understated 'or losses are noto,erstated( +y declarin! lo er receipts or hi!her out!oin!s

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ASN 35/53 WP-871-14

than those hich ould ha,e +een declared +y personsenterin! into similar transactions ith unrelated parties in thesame or similar circumstances. The +asic intention underlyin!the ne transfer pricin! re!ulations is to pre,ent shiftin! out of

profits +y manipulatin! prices char!ed or paid in )nternationalTransactions there+y erodin! the country s ta* +ase. The nesection 92 is" therefore" not intended to +eapplied in cases here the adoption of the arm s len!th pricedetermined under the re!ulations ould result in a decrease inthe o,erall ta* incidence in )ndia in respect of the partiesin,ol,ed in the )nternational Transaction.

23 T )# $o (e$ o!e $ an#fe i#-, i"in(/ ani,) a$ion/a )#e $ a$

$ e a e$ a#ed $ an#fe , i"in( a# in$ od)"ed* no n a# A%P. T e efo e*

i$ i# " ea $ a$ + a,$e C of $ e A"$ no e:i#$in( a# $o en#) e $ a$ )a

In$e na$iona T an#a"$ion e$ een AE#* $ e , ofi$# a e no$ )nde #$a$ed no

o##e# o!e #$a$ed a )#e of ei$ e # o in( e##e "on#ide a$ion o i( e

e:,en#e# e$ een AE# $ an o) d e $ e "on#ide a$ion e$ een $ o

inde,enden$ en$i$ie#* )ninf )en"ed e a$ion# i,. I$ did no$ e, a"e $ e

"on"e,$ of In"o e o E:,endi$) e a# no a )nde #$ood in $ e A"$ fo $ e

,) ,o#e# of + a,$e C of $ e A"$. T e o e"$i!e of + a,$e C of $ e A"$

i# "e $ain no$ $o ,)ni# 6) $ina$iona En$e , i#e# and/o AE# f o doin(

)#ine## in$e #e. 'o e!e * e a e "on#"io)# of $ e fa"$ $ a$ in fi#"a

#$a$)$e#* a$e!e a e $ e in$en$ of $ e Pa ia en$* $ e +o) $# a!e $o

"on#$ )e $ e #$a$)$e #$ i"$ on $ e a#i# of a$ i# #$a$ed in $ e A"$. We a e

(o!e ned $ e off )o$ed ,a##a(e of Ro a$$ ?. $o $ e fo o in( effe"$

)n a ta*in! %ct" one has to looB merely at hat is clearlysaid. There is no room for any intendment. There is no equitya+out ta*. There is no presumption as to ta*. 5othin! is to +eread in nothin! is to +e implied. >ne can only looB fairly atthe lan!ua!e employed .

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ASN 32;1= of $ e A"$ !e " ea in(#

o)$ $ a$ in"o e a i#in( f o a In$e na$iona T an#a"$ion i# a "ondi$ion

, e"eden$ fo a,, i"a$ion of + a,$e C of $ e A"$. T i# a# a ead een #o

e d $ e o de da$ed 2> No!e e 2013 of $ i# +o) $ in Vodafone-III.We "o) d a!e #$ ai( $ a e d $ a$ $ e i##)e of e:a inin( $ e ) i#di"$ion

$o a,, + a,$e C of $ e A"$ #$and# "on" )ded $ e o de in Vodafone-

III.

25 )$ e a!e e:a ined $ e i##)e af e# . T e o d in"o e fo

$ e ,) ,o#e of $ e A"$ a# a e )nde #$ood eanin( a# defined in Se"$ion

2;24= of $ e A"$. T i# e!en en $ e defini$ion in Se"$ion 2;24= of $ e A"$ i#

an in" )#i!e defini$ion. I$ "anno$ e di#,)$ed $ a$ in"o e i no$ in i$#

no a eanin( in" )de "a,i$a e"ei,$# )n e## i$ i# #o #,e"ified* a# in

Se"$ion 2;24= ;!i= of $ e A"$. In #)" a "a#e* +a,i$a ain# " a (ea e $o $a:

)nde Se"$ion 45 of $ e A"$ a e* defined $o e in"o e. T e a o)n$# e"ei!ed

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ASN 37/53 WP-871-14

on i##)e of # a e "a,i$a in" )din( $ e , e i) i# )ndo) $ed on "a,i$a

a""o)n$. S a e , e i) a!e een ade $a:a e a e(a fi"$ion )nde

Se"$ion 5


38/53

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ASN 38/53 WP-871-14

e $ ea$ed a# in"o e. In o$ e o d#* "a,i$a (ain# no$" a (ea e $o $a: )nde #e"$ion 45 fa o)$#ide $ edefini$ion of $ e o d Gin"o eH in #e"$ion 2;24= of $ eA"$. I$ i# $ )e $ a$ #e"$ion 2;24= of $ e A"$ i# an in" )#i!edefini$ion 'o e!e * in $ i# "a#e* e a e e )i ed $oa#"e $ain $ e #"o,e of Se"$ion 2;24=;!i= and fo $ a$,) ,o#e e a!e $o ead $ e #) #e"$ion #$ i"$ . We"anno$ iden $ e #"o,e of #) #e"$ion #a in( $ a$ $ edefini$ion a# a o e i# in" )#i!e and no$ e: a)#$i!e. In$ e , e#en$ "a#e* $ e o d# G" a (ea e )nde #e"$ion 45Ha e !e i ,o $an$. T e a e no$ ein( ead $ e9e,a $ en$. T e#e o d# "anno$ e o i$$ed. In fa"$* $ e, io i#$o # o # $ a$ "a,i$a (ain# e e no$ " a (ea e

efo e 1>42;1= in + a,$e C

of $ e A"$. T e ( o)nd fo)nd in $ e i ,)(ned o de a# #) #$i$)$ed

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ASN 3>/53 WP-871-14

/ e, a"ed a$ $ e ea in( i$ a ne ( o)nd !i enefi$ (i!en $ e

Pe$i$ione $o i$# o din( "o ,an on a,, i"a$ion of Se"$ion >2;2= of $ e A"$.

'o e!e * on f) $ e "on#ide a$ion $o "o , e en#i!e di#,o#e of $ e

, o"eedin(#* e de"ided $o dea i$ o$ i.e. $ e ( o)nd# fo)nd in $ e

i ,)(ned o de a# e a# $ e ea#on#/( o)nd# ) (ed in #),,o $ of $ e

i ,)(ned "on" )#ion# $ e ea ned So i"i$o ene a a$ $ e ea in( efo e

)#* a# #) i##ion# ade in $ e a $e na$i!e.

27 T e fi #$ "on$en$ion on e a f of $ e e!en)e i# $ a$ no )e#$ion

of e!en e:a inin( $ e i##)e of ) i#di"$ion $o a,, + a,$e C of $ e A"$

a i#e# in $ i# "a#e* a# $ e Pe$i$ione i$#e f ad fi ed Fo 3+E fo ,) ,o#e#

of + a,$e C of $ e A"$. T e "on$en$ion a# $o e #$a$ed $o e e e"$ed. 6 .

Sa !e i( $ #) i$$ed $ a$e* a+undanti cautela" $ e Pe$i$ione ad

#) i$$ed Fo 3+E and info ed $ e e#,onden$- e!en)e a o)$ $ e

In$e na$iona T an#a"$ion of i##)e of # a e "a,i$a * i e den in( an

in"o e a i#e# f o $ e In$e na$iona T an#a"$ion. Af$e a""e,$in( $ e a o!edefen"e of $ e Pe$i$ione * $ i# +o) $ in Vodafone-III i$# o de da$ed 2>

No!e e 2012 "on" )ded $ a$ $ e i##)e of ) i#di"$ion a# ai#ed $ e

Pe$i$ione of in"o e a i#in(* i# a "ondi$ion , e"eden$ fo a,, i"a i i$ of

Se"$ion >2;1= of $ e A"$. We di e"$ed $ e a o!e i##)e of ) i#di"$ion e

, a"ed efo e 9RP $o e:a ine $ e #a e a# a , e i ina i##)e of

) i#di"$ion.

28 We # a fi #$ dea i$ $ e ( o)nd# e"o ded in $ e i ,)(ned

o de $o )#$if $ e "on" )#ion $ a$ $ e Re!en)e a# ) i#di"$ion $o a,,

+ a,$e C of $ e A"$ $o $ e $ an#a"$ion of i##)e of # a e# $ e Pe$i$ione $o

i$# o din( "o ,an . T i# "on" )#ion a# een ea" ed on a,, i"a$ion of

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ASN 40/53 WP-871-14

Se"$ion >2;1= of $ e A"$. Se"$ion >2 of $ e A"$ , o!ide# fo "o ,)$a$ion of

in"o e f o In$e na$iona Ta:a$ion a!in( e(a d $o A%P. Se"$ion >2;1= of

$ e A"$ #$a$e# $ a$ i e de$e inin( /"o ,)$in(/a##e##in( in"o e f o an

In$e na$iona Ta:a$ion e(a d # a e ad $o A%P. T e i ,)(ned o de

"o e"$ o d# $ a$ a $ o)( $ e o d# In$e na$iona Ta:a$ion a# een

defined in Se"$ion >2 of $ e A"$ fo $ e ,) ,o#e# of + a,$e C of $ e A"$*

$ e o d# DIn"o eD a# no$ een defined. T e eaf$e * $ e i ,)(ned o de

#ee # $o iden $ e eanin( of $ e o d GIn"o eH $o in" )de a in"o in(#.

T i# i# #o)( $ $o e #),,o $ed $ e in$en$/o e"$ of + a,$e C of $ e A"$*

,a $i") a $ e defini$ion of In$e na$iona T an#a"$ion (i!en in Se"$ion >2

of $ e A"$. T e i ,)(ned o de in #),,o $ of in$e , e$a$ion on $ e a#i#

of ,) ,o#e/in$en$ of $ e e(i# a$ion e ie# ),on $ e de"i#ion of $ e S), e e

+o) $ in M &6 $ H&'' $ H >$ A7" #$ V'. S( (! % G&> " ( < "'.

2004 AIR SC* 4 ende ed in $ e "on$e:$ of P e!en$ion of Te o i#$

A"$i!i$ie# A"$ 2002 ;POTA=. T i# $ an#a"$ion of i##)e of # a e# $ e

Pe$i$ione "o ,an $o i$# o din( "o ,an a# no$ in( $o do e!ene o$e i$ $e o i# . In fa"$* i e in$e , e$in( a fi#"a /$a:in( #$a$)$e* $ e

in$en$ o ,) ,o#e i# i e e!an$ and $ e o d# of $ e $a:in( #$a$)$e a!e $o e

in$e , e$ed #$ i"$ .

2> In "a#e of $a:in( #$a$)$e#* in $ e a #en"e of $ e , o!i#ion

i$#e f ein( #)#"e,$i e $o $ o o o e eanin(#* i$ i# no$ ,e i##i e $o

fo (o $ e #$ i"$ ) e# of in$e , e$a$ion i e "on#$ )in( i$. T e S), e e

+o) $ in Mat ,a+ ga,4a) s. %tate o6 M.7. 1999( ! %CC $$ ad aid

do n $ e fo o in( $e#$ fo in$e , e$in( a $a:in( #$a$)e a# )nde -

G T e in$en$ion of $ e e(i# a$) e in a $a:a$ion #$a$)$ei# $o e (a$ e ed f o $ e an()a(e of $ e , o!i#ion#,a $i") a e e $ e an()a(e i# , ain and

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ASN 41/53 WP-871-14

)na i()o)#. In a $a:in( A"$ i$ i# no$ ,o##i e $o a##) ean in$en$ion o (o!e nin( ,) ,o#e of $ e #$a$)$e o e$ a$ a$ i# #$a$ed in $ e , ain an()a(e. I$ i# no$ $ ee"ono i" e#) $# #o)( $ $o e o $ained a in( $ e, o!i#ion i" i# e e!an$ in in$e , e$in( a fi#"a #$a$)$e.E )a i ,e i##i e i# an in$e , e$a$ion i" doe#no$ fo o f o $ e , ain* )na i()o)# an()a(e of $ e#$a$)$e. Wo d# "anno$ e added $o o #) #$i$)$ed #o a# $o(i!e a eanin( $o $ e #$a$)$e i" i #e !e $ e #,i i$and in$en$ion of $ e e(i# a$) e. T e #$a$)$e # o) d " eaand )na i()o)# "on!e $ e $ ee "o ,onen$# of $ e$a: a i.e. $ e #) e"$ of $ e $a:* $ e ,e #on o i# ia e$o ,a $ e $a: and $ e a$e a$ i" $ e $a: i# $o e ,aid.

If $ e e i# an a i()i$ e(a din( an of $ e#ein( edien$# in a $a:a$ion #$a$)$e $ en $ e e i# no $a: ina . T en i$ i# fo $ e e(i# a$) e $o do $ e needf) in $ ea$$e .H

30 In !ie of $ e a o!e* i$ i# " ea $ a$ i$ a# no$ o,en $o 9RP $o

#ee aid of $ e #),,o#ed in$en$ of $ e %e(i# a$) e $o (i!e a ide eanin(

$o $ e o d DIn"o eD.

31 Si i a * $ e e ian"e $ e e!en)e ),on $ e defini$ion of

In$e na$iona Ta:a$ion in $ e #) " a)#e ;"= and ;e= of E:, ana$ion ;i= $o

Se"$ion >2 of $ e A"$ $o "on" )de $ a$ In"o e a# $o e (i!en a oade

eanin( $o in" )de no$iona in"o e* a# o$ e i#e + a,$e C of $ e A"$

o) d e ende ed o$io#e i# fa fe$" ed. T e i##)e of # a e# a$ a , e i)

doe# no$ e: a)#$ $ e )ni!e #e of a,, i"a i i$ of + a,$e C of $ e A"$. T e e

a e $ an#a"$ion# i" o) d o$ e i#e )a if $o e "o!e ed $ e

defini$ion of In$e na$iona T an#a"$ion. T e $ an#a"$ion on "a,i$a a""o)n$

o on a""o)n$ of e#$ )"$) in( o) d e"o e $a:a e $o $ e e:$en$ i$ i ,a"$#

in"o e i.e. )nde e,o $in( of in$e e#$ o o!e e,o $in( of in$e e#$ ,aid o

" ai in( of de, e"ia$ion e$". I$ i# $ a$ in"o e i" i# $o e ad )#$ed $o $ e

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ASN 42/53 WP-871-14

A%P , i"e. I$ i# no$ a $a: on $ e "a,i$a e"ei,$#. T i# a#,e"$ a,,ea # $o a!e

een "o , e$e o#$ #i( $ of in $ e i ,)(ned o de .

32 T e o$ e a#i# in $ e i ,)(ned o de i# $ a$ a# a "on#e )en"e

of )nde !a )a$ion of # a e#* $ e e i# an i ,a"$ on ,o$en$ia in"o e. T e

ea#onin( i# $ a$ if $ e A%P e e e"ei!ed* $ e Pe$i$ione o) d e a e $o

in!e#$ $ e #a e and ea n in"o e* , o"eed# on a e e #) i#e/a##) ,$ion.

T i# "anno$ e $ e a#i# of $a:a$ion. In an "a#e* $ e en$i e e:e "i#e of

" a (in( $o $a: $ e a o)n$# a e(ed no$ e"ei!ed a# # a e , e i) fai #*a# no $a: i# ein( " a (ed on $ e a o)n$ e"ei!ed a# # a e , e i) .

+ a,$e C i# in!o ed $o en#) e $ a$ $ e $ an#a"$ion i# " a (ed $o $a: on on

o in( o)$ $ e in"o e af$e a i!in( a$ $ e A%P of $ e $ an#a"$ion. T i# i#

on $o en#) e $ a$ $ e e i# no ani,) a$ion of , i"e#/"on#ide a$ion e$ een

AE#. T e en$i e "on#ide a$ion e"ei!ed o) d no$ e a #) e"$- a$$e of

$a:a$ion. I$ a,,ea # fo $ e a o!e ea#on $ a$ $ e ea ned So i"i$o ene a

did no$ #ee $o defend $ e "on" )#ion in $ e i ,)(ned o de on $ e a#i# of

$ e ea#on# fo)nd $ e ein* )$ #o)( $ $o #),,o $ $ e "on" )#ion i$ ne

ea#on#.

33 efo e dea in( i$ $ e #) i##ion# ad!an"ed $ e ea ned

So i"i$o ene a in i# e, * $o #),,o $ $ e i ,)(ned o de on ( o)nd#

diffe en$ f o $ o#e fo)nd $ e ein* i$ o) d e ne"e##a $o no$e $ a$ $a:in(of , e i) no$ e"ei!ed a# $ e ( o)nd in $ e i ,)(ned o de i# (i!en ),

and $ e ) i#di"$ion $o $a: a $ an#a"$ion of i##)e of # a e# i# on $ e a#i# of

enefi$ (i!en $o $ e o din( "o ,an . T e a#i#/ )#$ifi"a$ion of $ e

i ,)(ned o de i# a#ed ),on Se"$ion >2;1= of $ e A"$* i e efo e )# $ e

ea ned So i"i$o ene a , a"e# e ian"e ),on Se"$ion >2;2= ead i$ >2;1=

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ASN 43/53 WP-871-14

of $ e A"$ $o #) e"$ $ e $ an#a"$ion $o $a: on $ e a#i# of $ e "o#$ of $ e

enefi$ ,a##ed. T e efo e* an of $ e de"i#ion# "i$ed $ e Pe$i$ione in

i$# o,enin( #) i##ion# a e no on(e e e!an$ and $ e efo e* no$ dea $ i$

in $ i# o de .

FINDINGS ON SUBMISSIONS OF SOLICITOR GENERAL -

34 T e ea ned So i"i$o ene a #) i$$ed $ a$ Se"$ion >2;1= a#

$o e ead i$ Se"$ion >2;2= of $ e A"$ and a "on oin$ eadin( o) d

indi"a$e $ a$ $ e "o#$ in") ed in ,a##in( on $ e enefi$ $o $ e o din(

"o ,an i# ein( #) e"$ed $o $a: and no$ $ e # a e , e i) no$ e"ei!ed.

T e diffe en"e e$ een $ e A%P and $ e , i"e " a (ed fo i##)e of # a e# i#

$ e enefi$ "onfe ed ),on $ e o din( "o ,an . T )# ,a##in( of enefi$ $o

o din( "o ,an * i# $ e "o#$ $o $ e Pe$i$ione * i" i# ein( o)( $ $o

$a:. I$ i# #) i$$ed $ a$ $ e enefi$ a"" )ed $o $ e o din( "o ,an a# #e$

o)$ in $ e affida!i$ da$ed > Se,$e e * 2014 in $ e fo o in( anne -

;a= +o#$ in") ed Pe$i$ione fo a "o e#,ondin(

enefi$ $o o din( "o ,an i.e. i$ (e$# # a e# o $

R#.53*775 ea" a$ a , i"e of R#.851>/- ea" and

; = T e !a )a$ion of o din( "o ,an (oe# ), in

In$e na$iona 6a e$ d)e $o o din( of )nde !a )ed# a e# of $ e Pe$i$ione .

In #),,o $ $ e ea ned So i"i$o ene a an$ed )# $o ead

Se"$ion >2;2= of $ e A"$ in $ e fo o in( anne -

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ASN 44/53 WP-871-14

G 2 2*W e ein an In$e na$iona T an#a"$ion...* $ o oo e a##o"ia$ed en$e , i#e# en$e in$o a )$)a.a an(e en$ fo .. an "on$ i )$ion $o* an

"o#$..in") ed ..in "onne"$ion i$ a en efi$*....., o!ided... $o an one o o e of #)" en$e , i#e#* $ e"o#$....* "on$ i )$ed * an #)" en$e , i#e # a ede$e ined a!in( e(a d $o $ e a D# en($ , i"e of#)" enefi$...

;T e do$$ed o d# a e o i$$ed fo $ e ,) ,o#e of

"on#$ )"$ion/in$e , e$a$ion=.

35 T i# indeed i# a )ni )e a of eadin( a , o!i#ion i.e. $o o i$o d# in $ e Se"$ion. T i# anne of eadin( a , o!i#ion

i(no in(/ e e"$in( "e $ain o d# i$ o)$ an findin( $ a$ in $ e a #en"e of

#o e e"$in(* $ e , o!i#ion o) d e"o e )n o a e* i# "e $ain no$ a

,e i$$ed ode of in$e , e$a$ion. I$ o) d ead $o ) ia of $ e #e$$ ed e(a

,o#i$ion $ a$ a , o!i#ion # o) d e ead a# a o e* i$ o)$ e e"$in( and/o

addin( o d# $ e e$o. T i# e e"$in( of o d# in a #$a$)$e $o a" ie!e a

, ede$e ined o e"$i!e i# no$ ,e i##i e. T i# o) d a o)n$ $o ed af$in(

$ e e(i# a$ion i" i# e ond/o)$#ide $ e ) i#di"$ion of +o) $#.

3< e $ a$ a# i$ a * Se"$ion >2;2= of $ e A"$ dea # i$ a

#i$)a$ion e e $ o o o e AED# en$e in$o an a an(e en$ e e $ e

a e $o e"ei!e an enefi$* #e !i"e o fa"i i$ $ en $ e a o"a$ion*

a,,o $ion en$ o "on$ i )$ion $o a d# $ e "o#$ o e:,endi$) e i# $o ede$e ined in e#,e"$ of ea" AE a!in( e(a d $o A%P. T )#* $o i )#$ a$e*

$ e "o#$ of e#ea " "a ied on an AE fo $ e enefi$ of $ ee AED#* $ en

$ e "o#$ i e di#$ i )$ed i.e. a o"a$ed* a,,o $ioned o "on$ i )$ed

de,endin( ),on $ e A%P of #)" enefi$ $o e e"ei!ed $ e a##e##ed AE.

I$ o) d a!e no a,, i"a$ion in $ e "a#e# i e $ e , e#en$ one* e e $ e e

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ASN 45/53 WP-871-14

i# no o""a#ion $o a o"a$e* a,,o $ion o "on$ i )$e an "o#$ and/o e:,en#e#

e$ een $ e Pe$i$ione and $ e o din( "o ,an . T e efo e* e find no

#) #$an"e in $ e a o!e #) i##ion.

37 T e ea ned So i"i$o ene a ne:$ "on$ended $ a$ $ e i##)e i#

no on( e# in$e ( a a# $ e i##)e #$and# "o!e ed $ e de"i#ion of $ e

A,e: +o) $ in 6a (aon 9o" %$d. ;#), a= i e in$e , e$in( Se"$ion 42;2=

of 1>22 A"$. I$ i# #) i$$ed $ a$ $ e a o!e Se"$ion 42;2= of $ e 1>22 A"$

dea $ i$ $ an#fe , i"in(. In $ e a o!e "a#e* $ e A,e: +o) $ e d $ a$ )nde

Se"$ion 42;2= of $ e 1>22 A"$* $ e $a: i# " a (ed on $ e e#iden$ in e#,e"$of , ofi$# i" e o) d a!e no a ade )$ no$ ade* e"a)#e of a

)#ine## a##o"ia$ion i$ a non e#iden$. T e e#iden$ a# #) e"$ed $o $a:

on no$iona , ofi$# in e#,e"$ of i$# )#ine## dea in( i$ a non e#iden$ i$

o e ad " o#e "onne"$ion. Se"$ion 42;2= of $ e 1>22 A"$ ead# a#

)nde -

G W e e a ,e #on no$ e#iden$ o no$ o dina ie#iden$ in $ e $a:a e $e i$o ie# "a ie# an )#ine##i$ a ,e #on e#iden$ in $ e $a:a e $e i$o ie#* and i$

a,,ea # $o $ e In"o e Ta: Offi"e $ a$ o in( $o $ e" o#e "onne"$ion e$ een #)" ,e #on#* $ e "o) #e of

)#ine## i# #o a an(ed $ a$ $ e )#ine## done $ ee#iden$ ,e #on i$ $ e ,e #on no$ e#iden$ o no$

o dina i e#iden$ , od)"e# $o $ e e#iden$ ei$ e no, ofi$# o e## $ an $ e o dina , ofi$# i" i( $ ee:,e"$ed $o a i#e in $ a$ )#ine##* $ e , ofi$# de i!ed$ e ef o * o i" a ea#ona e dee ed $o a!e

een de i!ed $ e ef o * # a e " a (ea e $o in"o e$a: in $ e na e of $ e e#iden$ ,e #on o # a edee ed $o e* fo a $ e ,) ,o#e of $ i# A"$* $ ea##e##ee in e#,e"$ of #)" in"o e $a:.H

;e , a#i# #),, ied=

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ASN 42 $ e eof* i$ o) d e

no$i"ed $ a$ $ e " )"ia o d#shall +e char!ea+le to income ta* i"

a e fo)nd in Se"$ion 42;2= of $ e 1>22 A"$ a e a #en$ in + a,$e C of $ e

A"$. We ,oin$ed o)$ $ i# diffe en"e in $ e $ o , o!i#ion# $o $ e ea ned

So i"i$o ene a and e a( eed $ a$ $ e a o!e diffe en"e e:i#$#. 'o e!e *

a""o din( $o i $ i# a# in !ie of $ e fa"$ $ a$ Se"$ion# 4* 5* 14 and 5< of

$ e A"$ doe# " ea$e a " a (e $o in"o e $a: on dee ed in"o e ea ned f o

In$e na$iona $a:a$ion. T e efo e* i$ i# " ea $ a$ $ e dee ed in"o e i"

a# " a (ed $o $a: )nde Se"$ion 42;2= of $ e 1>22 A"$ a# done a a i$

)nde $ e A"$. T e " a (e of In"o e no a# $o e fo)nd in Se"$ion 4 of

$ e A"$. If i$ i# in"o e i" i# " a (ea e $o $a:* )nde $ e no a

, o!i#ion of $ e A"$* $ en a one + a,$e C of $ e A"$ "o) d e in!o ed.

Se"$ion# 4 and 5 of $ e A"$ in(# /" a (e# $o $a: $o$a in"o e of $ e

, e!io)# ea . T i# o) d $a e )# $o $ e eanin( of $ e o d in"o e )nde

$ e A"$ a# defined in Se"$ion 2;24= of $ e A"$. T e a o)n$# e"ei!ed oni##)e of # a e# i# ad i$$ed a "a,i$a a""o)n$ $ an#a"$ion no$ #e,a a$e

o)( $ i$ in $ e defini$ion of In"o e* e:"e,$ in "a#e# "o!e ed Se"$ion

5


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ASN 47/53 WP-871-14

;"= a$e a$ i" $a: i# $o e ,aid* and

;d= ea#) e o !a )e on i" $ e a$e i# $o e a,, ied.

T )#* $ e e i# diffe en"e e$ een a " a (e $o $a: and $ e

ea#) e of $a: ;a= Q ;d= a o!e. T i# di#$in"$ion i# o)( $ o)$ $ e

S), e e +o) $ in 'o+8a T ,es Ind&a Ltd. s. n&on o6 Ind&a ,e o,ted &n

19 " (1! %CC "$ e ein i$ a# e d $ a$ $ e " a (e of e:"i#e d)$ i# on

an)fa"$) e i e $ e ea#) e of $ e $a: i# $ e #e in( , i"e of $ e

an)fa"$) ed (ood#. In $ i# "a#e a #o $ e " a (e i# on in"o e a# )nde #$ood

in $ e A"$* and e e in"o e a i#e# f o an In$e na$iona T an#a"$ion* $ en

$ e ea#) e i# $o e fo)nd on a,, i"a$ion of A%P #o fa + a,$e C of $ e A"$

i# "on"e ned. T e a i!in( a$ $ e $ an#a"$iona !a )e/ "on#ide a$ion on $ e

a#i# of A%P doe# no$ "on!e $ non-in"o e in$o in"o e. T e $a: "an e

" a (ed on on in"o e and in $ e a #en"e of an in"o e a i#in(* $ e i##)e

of a,, in( $ e ea#) e of A%P $o $ an#a"$iona !a )e/"on#ide a$ion i$#e f

doe# no$ a i#e. T e in( edien$ ;a= a o!e i# no$ #a$i#fied i.e. #) e"$ of $a: i#

in"o e i" i# " a (ea e $o $a:. T e i##)e of # a e# a$ a , e i) i# a"a,i$a a""o)n$ $ an#a"$ion and no$ in"o e. T e " a##i"a di#$in"$ion

e$ een in"o e and "a,i$a i# $ a$ i" e:i#$# e$ een f )i$# and $ ee.

In"o e i# a f o i e "a,i$a i# a f)nd. T e P i! +o)n"i in CIT v/s.

% a4 a))ace ; Co.< Ltd. $ ITC 1 (7C! a# "o o) f) #$a$ed GT )#

in"o e a# een i ened ,i"$o ia $o $ e f )i$ of a $ ee o $ e " o, of a

fie d. I$ i# e##en$ia $ e , od)"e of #o e$ in( i" i# of$en oo#e

#,o en of a# "a,i$a .H

40 I$ a# "on$ended $ e Re!en)e $ a$ in !ie of + a,$e C of

$ e A"$* $ e no$iona in"o e i# $o e o)( $ $o $a: and ea in"o e i

a!e no , a"e. T e en$i e e:e "i#e of de$e inin( $ e A%P i# on $o a i!e

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48/53

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ASN 48/53 WP-871-14

a$ $ e ea in"o e ea ned i.e. $ e "o e"$ , i"e of $ e $ an#a"$ion* # o n of

$ e , i"e a i!ed a$ e$ een $ e ,a $ie# on a""o)n$ of $ ei e a$ion# i, !i .

AE#. In $ i# "a#e* $ e e!en)e #ee # $o e "onf)#in( $ e ea#) e $o a

" a (e and "a in( $ e ea#) e a no$iona in"o e. We find $ a$ $ e e i#

a #en"e of an " a (e in $ e A"$ $o #) e"$ i##)e of # a e# a$ a , e i) $o

$a:.

41 We a #o find e i$ in $ e #) i##ion on e a f of $ e

,e$i$ione # $ a$ .e.f. 1 A, i 2013* $ e defini$ion of in"o e )nde Se"$ion

2;24=;:!i= of $ e A"$ in" )de# i$ in i$# #"o,e $ e , o!i#ion# of Se"$ion5


49/53

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ASN 4>/53 WP-871-14

+ a,$e C of $ e A"$ (i!e i#e $o in"o e i# i#, a"ed. T e A%P i# ean$

$o de$e ine $ e ea !a )e of $ e $ an#a"$ion en$e ed in$o e$ een AE#.

I$ i# a e-"o ,)$a$ion e:e "i#e $o e "a ied o)$ on en in"o e a i#e# in

"a#e of an In$e na$iona $ an#a"$ion e$ een AE#. I$ doe# no$ a an$ e-

"o ,)$a$ion of a "on#ide a$ion e"ei!ed /(i!en on "a,i$a a""o)n$. I$ ,e i$#

e-"o ,)$a$ion of In"o e a i#in( o)$ of a +a,i$a A""o)n$ T an#a"$ion* #)"

a# in$e e#$ ,aid/ e"ei!ed on oan# $a en/(i!en* de, e"ia$ion $a en on

a" ine e$". A $ e a o!e o) d e "a#e# of in"o e ein( affe"$ed d)e

$o a $ an#a"$ion on "a,i$a a""o)n$. T i# i# no$ $ e e!en)eD# "a#e e e.

T e efo e* a $ o)( Se"$ion 5


50/53

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ASN 50/53 WP-871-14

"a,i$a a""o)n$ $ an#a"$ion* $ e efo e* a# no$ in( $o do i$ in"o e. We*

$ )# do no$ find #) #$an"e in $ e a o!e #) i##ion.

44 I$ a# a #o "on$ended $ a$ + a,$e C of $ e A"$ i# a "o , e$e

"ode i$#e f and no$ e e a a" ine , o!i#ion $o "o ,)$e $ e A%P. I$

i# a idden enefi$ of $ e $ an#a"$ion i" i# ein( " a (ed $o $a: and $ e

" a (in( Se"$ion i# in e en$ in + a,$e C of $ e A"$. I$ i# e #e$$ ed

,o#i$ion in a $ a$ a " a (e $o $a: )#$ e fo)nd #,e"ifi"a en$ioned in

$ e A"$. In $ e a #en"e of $ e e ein( a " a (in( Se"$ion in + a,$e C of

$ e A"$* i$ i# no$ ,o##i e $o ead a " a (in( , o!i#ion in$o + a,$e C of $ e

A"$. We "an do no e$$e $ an efe $o $ e fo o in( o #e !a$ion# of $ e fi!e

6e e en" of $ e A,e: +o) $ in CIT v/s. at&ka To4ns & 7 Ltd. 3$

IT# "$$ -

Ta* la s are clearly in dero!ation of personal ri!hts and property interests and are" therefore" su+ ect to strict

construction" and any am+i!uity must +e resol,ed a!ainstimposition of the ta*. )n Cillin!s ,. K. &" the &upreme ourt clearly acBno led!ed this +asic and lon!-standin! rule ofstatutory construction Ta* &tatutes F. should +e construed" and" if anyam+i!uity +e found to e*ist" it must +e resol,ed in fa,our of thecitiEen. 6idman ,. @artineE 184 K.&.


51/53

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ASN 51/53 WP-871-14

%s 7ord airns said many years a!o in artin!ton ,. %ttorney-Meneral %s ) understand the principle of all fiscalle!islation it is this )f the person sou!ht to +e ta*ed comes

ithin the letter of the la he must +e ta*ed" ho e,er" !reat thehardship may appear to the udicial mind to +e. >n the otherhand" if the ro n" seeBin! to reco,er the ta*" cannot +rin! thesu+ ect ithin the letter of the la " the su+ ect is free" ho e,erapparently ithin the spirit of the la the case mi!ht other iseappear to +e.

In $ i# "a#e* e a e no$ in $ e one of )n"e $ain$ efe ed $o

a o!e. T e e i# no " a (e e:, e## o i , ied* in e$$e o in #,i i$ $o $a:

i##)e of # a e# a$ a , e i) a# in"o e.

45 + a,$e C of $ e A"$ i# a a" ine , o!i#ion $o a i!e a$

$ e A%P of a $ an#a"$ion e$ een AE#. T e #) #$an$i!e " a (in(

, o!i#ion# a e fo)nd in Se"$ion# 4* 5* 15 ;Sa a ie#=* 22 ;In"o e f o

o)#e , o,e $ =* 28 ;P ofi$# and (ain# of )#ine##=* 45 ;+a,i$a (ain= and 5

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