INCOME TAX ACT, 1961

Section 92C Article 25

Transfer pricing - Determination of ALP - Adjustment on account of capital gains arising on sale of shares by appellant foreign company to another non-resident AE -

The issue was whether the transfer pricing adjustment made qua capital gains arising on sale of shares by the assessee foreign company to another non-resident associated enterprise, being violative of the non discrimination clause under article 25(1) of the India-Italy Tax Treaty ('the Treaty') calls for being deleted. Appellant company was a company incorporated under the laws of Italy and was engaged in the business of construction, design and engineering and implementation services to Oil & Gas, Power, Pharmaceuticals and Infrastructure industries. Technip India Limited is a company incorporated in June 1998 under the Companies Act, 1956, as a joint venture between M/s. Southern Petrochemical Industries Corporation Ltd. (SPIC) and the assessee. In March 2010, the assessee acquired balance 50% stake of SPIC in Technip India and, accordingly, Technip India became a wholly-owned subsidiary of the assessee company. During the year under consideration, the appellant entered into a Share Purchase Agreement (SPA) with Technip France SAS (now known as Technip France SA) and, accordingly, Technip India became 100% subsidiary of Technip France. Since the said transfer of shares entailed transfer of capital assets situated in India, the assessee offered the income arising from sale of such shares to long term capital gains tax in terms of section 45. During the course of the assessment proceedings, the AO made a reference under section 92CA to the Transfer Pricing Officer (TPO).Held: Under Article 25 of this India Italy DTAA and an Italian national shall not be subjected to in India to any taxation or any requirement connected therewith to which Indian nationals in the same circumstances and under the same conditions are or may be subjected which is more burdensome to Italian national. This means that if an Indian national (legal person), enters into any international transactions with its Associated Enterprises, will it not be subjected to transfer pricing proceedings? The answer is 'YES'. The Indian national will be subjected to transfer pricing proceedings. Therefore, the transfer pricing proceedings taken in the case of the assessee company was not at all discriminating and, therefore, did not fall within the purview of Article 25 of the India Italy DTAA as claimed by the assessee.

Distinguished:CIT v. Herbal Life International (P) Ltd. 92016) 384 ITR 276 (Del) : 2016 TaxPub(DT) 2514 (Del-HC) and ,I.Gupta Overseas ITA No. 257/Agr/2013.

REFERRED :

FAVOUR : Against the assessee/appellant.

A.Y. : 2013-14

INCOME TAX ACT, 1961

Section 92C

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