INCOME TAX ACT, 1961

Section 92A

Transfer pricing - Associated enterprise (AE) - None of the concerned parties had advanced loans more than 51% of book value of total assets of assessee -

Assessee engaged in providing ship management and consultancy services entered into transactions with Sovereign Ship Management Ltd., UK and Premier Ship Management Ltd., UK. TPO held that entities involved in the transaction were AEs within the meaning of section 92A and, therefore ,ALP adjustment was called for. Held: Language of section 92A(2)(c) unambiguous and clear that in order to fall within the ambit of deeming fiction of becoming AEs, either Sovereign Ship Management Ltd., UK or Premier Ship Management Ltd., UK should have independently advanced loan to the assessee-company which more than 51% of book value of total assets of the assessee-company. In the instant case, only if loans advanced by both Sovereign Ship Management Ltd., UK and Premier Ship Management Ltd., UK were combined, the said provision was satisfied.Moreover, advances received by the assessee-company from Sovereign Ship Management Ltd., UK were in the nature of business advances for rendering ship management and consultancy services by assessee-company to said party and hence the same could not be construed as loan advanced to the assessee. Once, same was excluded and loans given by aforesaid two entities were considered independently, it became clear that none of the parties had advanced loans more than 51% of book value of total assets of assessee-company. Hence, it could be safely concluded that aforesaid two entities could not be construed as AEs of assessee within the meaning of section 92A(2) and hence, no adjustment to ALP in respect of transactions carried out was required to be done.

REFERRED :

FAVOUR : in assessee's favour

A.Y. :

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