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Facts
The assessee, M/s Square Dotcom Private Limited, appealed an order from the Assessing Officer related to the Assessment Year 2016-17. The assessee contended that issuing equity shares to its Associated Enterprises (AE) in lieu of share capital was not an international transaction and thus not subject to transfer pricing adjustments.
Held
The Tribunal held that a legal plea can be raised at any stage of appellate proceedings if material facts are on record. The Tribunal admitted the assessee's plea and remitted the matter back to the TPO to examine the nature of the transaction.
Key Issues
Whether the issuance of equity shares to an Associated Enterprise (AE) in lieu of share capital received constitutes an international transaction for transfer pricing purposes, and if a new plea can be raised at the appellate stage.
Sections Cited
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Income Tax Appellate Tribunal, DELHI BENCH ‘H’: NEW DELHI
(ASSESSMENT YEAR 2016-17) M/s Square Dotcom Private Asst. Commissioner of Limited, Income Tax, 9th Floor, Good Earth Business Vs. Circle-24(1), Bay, Sector-58, C.R. Building, Gurgaon, Harayan-122011 New Delhi. PAN-AAUCS8074R (Appellant) (Respondent) Assessee by Shri Prabhakar Kumar, CA Department by Shri S. K. Jadhav, CIT-DR Date of Hearing 23/07/2025 Date of Pronouncement 30/07/2025 O R D E R
PER PRAKASH CHAND YADAV, JM:
The present appeal of the assessee is arising out from the order of Ld. Assessing Officer dated 13th February, 2021 having DIN No. ITBA/AST/S/143(3)2020-21/1030628110(1) and relates to Asst. Year 2016-17.
At the outset, Ld. Counsel for the assessee pointed out that the transaction between assessee and its AE’s was out of the purview of international transaction in as much as the assessee has only issued equity share to its associated enterprises (AE), in lieu of the share capital received from AE. It is the contention of the assessee that this transaction does not have any bearing on the profits of the company and, therefore, it is out of the purview of international transaction and hence, no transfer pricing adjustment can be made qua this transaction.
Per contra, Ld. CR relied pointed out that this plea of the assessee is completely new plea and has not been raised before the lower authorities. Ld. Square Dotcom Private Limited vs. ACIT, Circle-24(1) DR was pointed out that before the lower authorities, the assessee has disputed the method of valuation applied towards the value of equity shares. Ld DR averted that since it is new plea it cannot be entertained herewith as new facts are to be brought on record.
We have heard the rival submission and perused the material available on record. So far as the contention of the DR vis-à-vis admissibility of new plea, we are of the view that a legal plea can be raised at any time of the appellate proceedings, provided all material facts should be on record. In this case the only fact is required to be seen is whether the assessee has actually issued shares only to its AE. Therefore, we are admitting this aspect and remitting the matter back to the file of Ld. TPO for deciding this plea. Ld. TPO will examine the nature of the transaction entered with its AE and then decide the issue in accordance with law. Needless to say, that TPO will provide meaningful opportunities to the assessee before passing any order.