VODAFONE INDIA SERVICES PVT. LTD. vs. COMMISSIONER OF INCOME TAX -3 AND ANR.

2015:BHC-OS:12750-DB
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INCOME TAX APPEAL NO. 82 OF 2015

SRP 1/306
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was placed before us and at the hearing of which we indicated to the
parties that bearing in mind the fact that they intend to canvass
extensive arguments and on questions of law, it would be better to
decide the appeal itself and finally. Parties consented to this course
and, therefore, with their consent and approval, we have taken up this
appeal for hearing and final disposal. Once the appeal itself is
disposed of, we wish to clarify, the application for stay will not
survive.

passed by the Income Tax Appellate Tribunal, Bench at Mumbai,

No.7514/Mum/2013. The assessment year is 2008-09. The appeal
invokes section 260-A of the Income Tax Act, 1961 (for short “IT
Act”) and raises the following substantial questions of law :
(1) Whether the Tribunal had the jurisdiction to
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arrive at a finding that there was transfer of rights,
on a basis that was neither set out in the draft order
of assessment, the order of the TPO, or the order of
the DRP –thereby negating the entire scheme of
assessment created by law in respect of assessees
subjected to transfer pricing assessment?
(2) Whether the Tribunal misread and
mischaracterized the issues decided by the Hon'ble
Supreme Court in VIH BV vs. Union of India &
Anr. (2012) 341 ITR 1, and thereby erred in law in
holding that it is not bound by that judgment?
(3) In the alternative, even assuming that the
issue of transfer of rights did not directly arise
before the Hon'ble Supreme Court in the judgment
aforesaid, whether it was open in law to the Tribunal
to bypass the observations in that judgment and also
ignore the findings of this High Court in its
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judgment dated 6 September 2013 and come to the
conclusion that the judgment of the Hon'ble
Supreme Court was irrelevant?
(4) Whether the Tribunal was misconceived in
law in holding that the Hon’ble Supreme Court has
not dealt with the transfer of call option rights by the
appellant to its associated enterprise when the
Hon’ble Supreme Court has examined the transfer of
67% controlling interest from HTIL to VIH BV and
the same specifically included the 12.25% option
rights that were the subject matter of the appeal
before the Tribunal?

appreciating that the jurisdictional fact before the
Hon’ble Supreme Court and for invoking transfer
pricing provisions in the present case is that there
must be a transfer from the appellant to any other
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person and, therefore, once the Hon’ble Supreme
Court has decided this jurisdictional fact the
Tribunal was bound to follow it?
(6) Whether the Tribunal erred in law in
holding that the call options were transferred vide
the TII Shareholders’ Agreement even though no
nomination was actually made under the said
Agreement and the Tribunal had already rendered a
finding in law that a transfer can only take place
upon actual nomination?

holding that an assignment has taken place under the
TII Shareholders’ Agreement by implication when it
had already rendered a finding that a transfer cannot
be contemplated under Section 2(47) of the Act
unless an actual disposal or actual creation or
parting of an interest in an asset takes place?
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passed in gross violation of natural justice as the
Tribunal has not granted an opportunity of oral
hearing and passed a judgment to the detriment of
the appellant by construing a document that was not
relied upon by any of the parties?

placing reliance on a document that has not been
relied upon, referred or argued by any of the parties
without putting the parties on notice about its
relevance and inviting arguments on it?
(10) Whether the Tribunal was correct in law in
changing the very basis of the Respondent’s case
even when the Respondent did not invite the
Tribunal’s judgment on the TII Shareholders’
Agreement?
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(11) Whether the Tribunal was misconceived in
law in admitting the TII Shareholders’ Agreement
without considering its relevance in view of the
directions of this Hon’ble Court in 359 ITR 133?
(12) Whether the Tribunal failed to appreciate
that the call and put options under the TII
Shareholders’ Agreement were contingent upon the
exercise of the rights vested with the appellant in the
2007 FWAs and, therefore, the rights remained
inchoate and unexercised pending actual exercise
under the 2007 FWAs?
(13) Whether the Tribunal erred in law in
holding that the grant of call option under 2007
FWAs against consideration is an international
transaction as per section 92B read with Section
92F(v) when the Tribunal itself held that there has
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not been any assignment under the 2007 FWAs?

in law as even though it has held that the assignment
is from the appellant to CGP India Investments
Limited it holds that the international transaction is
between the appellant and VIH BV?
(15) Whether the Tribunal erred in law in
holding that the call and put options under the 2007
FWAs are the same when both are distinct rights
vested with different parties?

facts to hold that the fact of exercise of put options
was neither agitated nor brought to the notice of the
Hon’ble Supreme Court and nor considered by it
while rendering its judgment report in 341 ITR 1?
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(17) Whether on the facts and circumstances of
the case, the Tribunal has grossly misconceived the
law by widening the definition of ‘international
transaction’ beyond its scope as defined under
Section 92B(1) of the Act and applying the same to a
transaction entered into between two resident
entities?
(18) Whether on the facts and in the
circumstances of the case, the Tribunal was justified
in holding that the sale of the Call Centre business
by the appellant to HWP India was an international
transaction in terms of section 92B(1) of the Act?

the case, the impugned order passed by the Tribunal
in respect of section 92B(1) suffers from gross non
application of mind and non-consideration of the
criteria laid down in respect of applicability of
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doctrine of lifting of corporate veil and doctrine of
substance over form by the Hon’ble Supreme Court
in the case of Vodafone International Holding BV
vs. UOI & Anr [(2012) 6 SCC 631].

upholding the action of the DRP in treating the
transaction as an international transaction in terms of
section 92B(1) when the TPO had sought to treat the
transaction as an international transaction in terms of
section 92B(2) of the Act?

circumstances of the case and in law, the Tribunal
was justified in holding that the arm’s length price
for the transfer of the Call Centre business was to be
determined by adopting a valuation for the Call
Centre business based upon the Discounted Cash
Flow method which was agreed upon by both the
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parties.?”

they indeed being substantial questions of law, require answer and
opinion by this Court. Hence, this appeal is admitted on the above
substantial questions of law. Respondents waive service.

under the name and style of 3 Global Services Private Limited (for
short “3GSPL”) as a wholly owned subsidiary of a Mauritian entity,
namely, Hutchison Teleservices (India) Holdings Limited. The said
HTIL was in turn a wholly owned subsidiary of CGP Investment
Holdings Limited, Cayman Islands (CGPC).

Limited, a company incorporated in British Virgin Islands which in
turn was ultimately controlled by Hutchison Telecommunication
International Limited, Cayman Island (for short “HTIL”).
Accordingly, the appellant was an entity of the Hutchison group of
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companies, which was carrying on business of telecommunication in
India through its subsidiary since 1992. A copy of the shareholding
structure chart of HTIL i.e. Hutchison Telecommunication Limited,
Cayman Islands is annexed as Annexure B to the Memo of Appeal.

subsidiary of HTIL, a company whose shares were listed in the Stock
Exchange in Hongkong in 2007. Further, HTIL was an indirect
subsidiary of Hutchison Whampoa Limited (for short “HWL”) which
was a company whose shares were also listed on the Stock Exchange
in Hongkong in 2007. The appellant was engaged since April, 2003,

the HWL group and specifically to two group companies viz.
Hutchison 3G Australia Private Limited and Hutchison 3G UK
Limited in terms of the Managed Service Agreement for Contact
Centre Services between Hutchison Call Centre Holdings Limited,

(for short “FDI”) norms in India, the ceiling in the telecom centre was
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49% and which was enhanced to 74% in November, 2005. In order to
acquire further equity interest as and when the FDI ceiling in the
telecom sector were relaxed, Hutchison group looked for Indian
investors who would be independent, but not hostile and would hold
the interests till the sector was opened up. These would make a gain
at a subsequent point of time when they exit the investment. The
Hutchison group, therefore, identified three investors being Analjit
Singh (for short “AS”), who was one of the leading industrialists of
the company and a promoter of Hutchison Max Telecom Limited –
Mumbai Telecom Circle and had formerly sold his investment to
Hutchison. The other one was identified as Asim Ghosh (for short
“AG”). He was associated with this group for a long time and was a
Chief Executive Officer of Hutchison Essar. The third was the IDFC
Group of Investors, leading players in the field of financial
investments. These investors required credit support for the
investment and the appellant and its then holding company HTIL
agreed to procure credit support for them. In consideration thereof, in

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group companies and AS and his group companies. These agreements
were styled as Framework Agreements and shall hereinafter be
referred to as “2006 FWA” for short. These enabled the acquisition of
the above rights over the shares of Asim Ghosh group company and
Analjit Singh group company. These companies indirectly or directly
held 12.25% equity shares in the Indian telecom operating company,
Vodafone India Limited (for short “VIL”) and earlier known as
Hutchison Essar Limited (for short “HEL”). Under the 2006
Framework Agreements, the appellant was also conferred an option to
subscribe itself or to assign and affiliate the rights to subscribe to
equity in certain identified group companies of AS and AG which
companies held directly or indirectly, equity shares in the Indian
telecom operating company VIL. In addition to the call option rights
in favour of the appellant, AS and AG had the put option right which
obligated the appellant to purchase the shares of AS and AG group
company upon exercise of such put option rights by AS and AG.
Annexures C and D to the appeal paper-book are copies of these
Framework Agreements with the AS and AG group of companies.
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between the shareholders in Telecom Investments India Private
Limited (for short “TII”) i.e. Nadal Trading Company Pvt. Ltd. (for
short “Nadal”) , ND Callus Info Services Private Limited (for short
“ND Callus”) and CGP India Investments Limited (for short “CGP
India”). TII was an Indian company holding directly or indirectly
19.54% stake in VIL. This agreement granted call option rights to
CGP India and put options to Nadal and ND Callus in respect of
shares held by the ND Callus and Nadal in TII. Annexure C is a copy
of this agreement. In addition to the 2006 Framework Agreements
with Asim Ghosh and Analjit Singh and their respective group
companies, the appellant entered into a Framework Agreement dated

joint venture company SMMS Investments Private Limited (for short
“SMMS”) indirectly held 2.77% shares in the operating company VIL.
The options in regard to this agreement styled as 2006 IDFC
Framework Agreement are referred to in paragraph 20 of the Memo of
Appeal. The effect of these options and exercise thereof would mean
that the appellant acquiring the entire issued share capital of SMMS
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and obtaining an indirect stake or holding in VIL. Annexure F is this
agreement.

of a possible sale of its entire equity interest in the Indian telecom
company VIL. The Vodafone group, therefore, solicited its interest in
acquiring the Indian telecom business held by the Hutch Group.

Holdings B.V. (for short “VIH BV”) entered into a Share Purchase
Agreement (for short “SPA”) whereby HTIL agreed to procure the
consent of HTI (BVI) Holdings to transfer the share capital of CGPC
and assign certain loan interests to VIH BV. As a result of this SPA

interest in VIL and in the manner set out hereinbelow :

Mauritius subsidiary of CGPC;
(ii) 9.62% through Indian companies, Telecom Investments India
Pvt. Ltd (“TII”) and Omega Telecom Holdings Private Limited on a
pro-rata basis indirectly held by CGPC;
(iii) 15.03% options through the appellant under the Framework
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Agreements with AS, AG and IDFC Investors. Annexure G is a copy
of this SPA.

of the telecom operations of the Hutch Group by the Vodafone Group

July, 2007, merely for reasons of commercial expediency. The further
claim is that the appellant's right of call options and the obligations
undertaken qua the put options and the rights of AS and AG under the
put options and their obligations under the call options were retained
entirely. They were thus intact. The further plea is that the reason for
the Framework Agreements with Asim Ghosh and Analjit Singh being
re-drawn in July, 2007 was that following the course of the Foreign
Investment Promotion Board (for short “FIPB”) process undergone by
VIH BV in connection with the SPA, a new consideration was agreed

confirmed to the FIPB regarding the revision of the consideration to
be paid under the revised Framework Agreement. Annexures H, I and
J are the copies of the above referred documents.
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that the re-writing of the 2007 Framework Agreements and
particularly the amended clause 4.4 relating to call options are relevant
for the purpose of the present statutory appeal. Under this amended
clause 4.4, prospective nominee was included and the appellant
retained the sole discretion to appoint a nominee to acquire the shares
held by AS and AG in their group companies that indirectly held stake
in the operating company, namely, VIL.

also re-written consequent to the acquisition of the equity interest in

July, 2007, was entered into wherein VIH BV was made a confirming

July, 2007. The arrangement with IDFC group of companies and the

paragraph 25 of this appeal paper-book.
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Rs.10,64,71,720/- alongwith Form 3CEB wherein international
transactions were reported. That is income earned by the appellant
during the relevant financial year from providing Call Centre services
to Hutchison Call Centre Holdings Limited and issuance of 908,500
equity shares of the appellant to Vodafone Teleservices (India)
Holdings Limited, a Mauritius company at a premium of Rs.13,529/-
per share aggregating to a total consideration of Rs.1229,99,99,800/-.
It was clarified that the issuance of equity shares did not affect income
of the company but was reported merely out of abundant caution.

assessment proceedings declaring total income of Rs.15,52,48,000/-.
The Assessing Officer referred the matter to the Transfer Pricing

the appellants. The copies of the return for revised computation are
Annexures O and P respectively to this appeal paper-book.
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which had the effect of VIH BV acquiring 66.98% equity interest in
VIL, led to a separate litigation between the Income Tax Department
and VIH BV, in which proceedings the Hon’ble Supreme Court in SLP
rd
(C) No. 464 of 2009 vide Order dated 23 January, 2009 of the
Hon’ble Supreme Court directed the Income Tax Department to first
determine the issue of jurisdiction to proceed against VIH BV in
respect of the said transaction executed under the SPA. Accordingly,
the Assistant Director of Income Tax (International Taxation) vide
st
o rder dated 31 May, 2010, held that it had jurisdiction to proceed
against VIH BV in respect of the transaction of sale of share capital of
th
CGPC under the SPA dated 11 February, 2007, and thus proceeded to
treat VIH BV as an assessee-in-default under Section 201(1) of the
Act for (alleged) non-deduction of tax at source under Section 195 of
st
the Act. Against the said order dated 31 May 2010 of ADIT, VIH BV
filed a Writ Petition No. 1325 of 2010 before this Hon’ble Court. The
Income tax Department’s case was that HTIL transferred 66.98%
equity interest in the Indian telecommunications company in India and
was therefore, liable to capital gains tax and that the said 66.98%
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included, 15.03% interest through call options held by the appellant.
th
This Hon’ble Court vide its order and judgment dated 8 September,
2010, held that the transfer of the share capital of CGPC and the
related controlling rights was a transfer of a capital asset outside India,
but that some rights and entitlements, particularly, the call and put
options under the Framework Agreements with AS, AG and IDFC
Group were transferred in India and were part of the consideration
paid by VIH BV to HTIL and therefore, constituted capital assets
situate in India, and thus upheld the jurisdiction of the Income Tax
Department to proceed against VIH BV. A copy of the judgment of
th
this Hon’ble Court dated 8 September, 2010 is Annexure-Q to the
appeal paper-book .
15 Thereafter, in the same proceedings, VIH BV filed a Special
Leave Petition, being SLP (Civil) No. 26529 of 2010 against the
th
aforesaid Order dated 8 September, 2010 of this Hon’ble Court. By an
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interim order dated 27 September, 2010 in the said SLP, the Hon’ble
Supreme Court directed the Assessing Officer to quantify the tax liability
of VIH BV under section 201 of the Act. Pursuant to the said direction,
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the Assessing Officer called upon VIH BV to make its submissions on
quantification of various rights and entitlements, including the 12.25%
call options under the AS and AG Framework Agreements which were
th
held by this Hon’ble Court in its judgment dated 8 September, 2010 to
th
have been transferred to VIH BV. A copy of the interim order dated 27
September, 2010, is Annexure R to the appeal paper-book .
th
16 VIH BV in its submissions vide, inter alia, letter dated 19
October, 2010, to the Assessing Officer in the quantification
proceedings, had submitted that the put options under the same 2007
FWAs were subsequently partly exercised in 2009 by Analjit Singh and
Asim Ghosh and due taxes were paid by them. Along with the said
letter, VIH BV had filed the Share Purchase Agreements between CGP
India Investments Limited and AS and AG and their group companies
and the corresponding FIPB Approvals in relation to purchase of shares,
nd
upon exercise of put option by AS and AG. Thereafter, on 22 October
2010, the Assessing Officer passed an order quantifying the liability of
VIH BV under Section 201 of the Act, whereby the Assessing Officer
specifically held that the 15% options were transferred under the 2007
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acquisition of 66.98% equity interest in VIL by VIH BV and factored
into capital gains tax liability of Rs. 7900 crores for the transfer of
66.98% equity interest in VIL and computed a total tax and interest
nd
liability of Rs.11,218 crores. The order dated 22 October, 2010, was
challenged before the Hon’ble Supreme Court of India by way of an
th
amendment dated 25 October, 2010 (IA No.6) to the SLP, which
amendment was permitted by the Hon’ble Supreme Court of India by its
th
order dated 26 November, 2010. All documents and submissions filed
by VIH BV before the Assessing Officer during quantification of
liability against VIH BV (pursuant to the direction of the Hon’ble
Supreme Court), which included the Valuation Reports obtained from
two independent valuers namely, KPMG and S.R. Dinodia in relation to
valuation of options under the Framework Agreements, the Share
Purchase Agreement in relation to the purchase of shares of AS and AG
group companies by CGP India Investments Ltd, pursuant to the exercise
of put option by AS and AG in 2009 and the approvals obtained from
FIPB in relation to the same, were all filed before the Hon’ble Supreme
Court and a specific pleading in relation to the subsequent exercise of
put option was made before the Supreme Court in the amended SLP.
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Also, filed before the Hon’ble Supreme Court was a presentation of
Goldman Sachs which was presented before the FIPB at the time of
seeking approval to the transaction under the SPA, wherein VIH BV had
specifically undertaken to revise the Framework Agreements based on
the fair market value determined in the Goldman Sachs presentation.
th
Copies of VIH BV’s submissions dated 19 October, 2010 alongwith the
FIPB approvals and the Share Purchase Agreements, Assessing Officer’s
nd
quantification order dated 22 October, 2010, Hon’ble Supreme Court’s
th
order dated 26 November, 2010, VIH BV’s Application for urging
additional facts and amendment of the SLP are Annexures S (Colly.), T,
U and V , respectively to the appeal paper-book.
17 During the course of the hearing of the aforesaid SLP, the main
case of the Income Tax Department was that there was a transfer of the
same 12.25% call option rights from HTIL to VIH BV. As a matter of
fact, the Income-tax Department specifically invited the attention of the
Hon’ble Supreme Court to decide upon the issue of assignability of call
options in favour of VIH BV by examining the 2007 FWAs. Pertinently,
detailed submissions were advanced by both the parties on the issue of
assignment of call options under the revised Framework Agreements of
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2007 and other agreements specifically including the TII Shareholders’
Agreement, which were duly examined by the Hon’ble Supreme Court.
Copies of the written submissions advanced on behalf of the Income Tax
Department and VIH BV before the Hon’ble Supreme Court in relation
to the Framework Agreements are Annexures W (Colly) and X (Colly),
to the appeal paper-book.
18 Meanwhile, while the proceedings before the Hon’ble Supreme
Court in SLP(C) No. 26520 of 2010 filed by VIH BV were pending,
assessment proceedings for AY 2008-09 of the appellant had commenced
and hearings in relation to certain issues were held.
th
19 On 18 October, 2011, the TPO issued a show cause notice to the
appellant, inter alia, stating that under 2006 Framework Agreement, the
call option could only be exercised by the appellant, however, under
Clause 4.4 of the revised 2007 Framework Agreements, this right has
been given to the wholly owned subsidiaries of Vodafone Group, which
amounts to assignment of call option. The TPO vide the said show cause
notice asked the appellant to show cause as to why the alleged
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assignment of right of call option was not disclosed as an international
transaction and required the appellant to prove the arm’s length nature of
the alleged transaction and to provide valuation of rights conferred on its
Associated Enterprise (for short “AE”). Therefore, it is imperative to
note here that the show cause notice of the TPO was restricted to the re-
writing of clause 4.4 of the revised 2007 FWAs. A copy of the show
th
cause notice dated 18 October, 2011, is Annexure Y to the appeal paper-
book .
st th
20 The appellant vide its letters dated 21 October, 2011, and 25
October, 2011, inter alia, submitted that under clause 4.4 of the 2007
Framework Agreements, the right of call option remained with the
appellant and therefore, since there was no assignment of the call option
right by the appellant, there was no question of proving arm’s length in
respect of the alleged transaction and/or valuation of the rights of the
appellant allegedly transferred by the appellant. The TPO, rejecting the
submissions of the appellant and without providing any opportunity to
the appellant of the comparable it sought to rely on for computing the
arm’s length price of the alleged transaction, passed the transfer pricing
st
order on 31 October, 2011, holding that in the 2007 Framework
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Agreements, VIH BV became a party and Clause 4.4. was also changed
and any wholly owned subsidiary of Vodafone Group Plc was added,
which clearly shows that the rights for call options have been assigned to
appellant’s associated enterprise. The TPO used the valuation of options
under the assignment of cashless option by IDFC Investors to the
appellant (whereby the appellant acquired the right over 0.1234% of VIL
shares) for a consideration of Rs. 62.24 Crores as the internal CUP for
valuation of alleged assignment of call option by the appellant and
computed the arm’s length price of the alleged transaction of assignment
of call option as Rs. 6178,88,26,177 by extrapolating the figures of Rs.
62.24 Crores (in respect of direct 0.1234% of VIL shares) to determine
arm’s length consideration for 12.25% indirect equity held cumulatively
by Asim Ghosh and Analjit Singh in VIL. It is the appellant’s case that
the assignment of cashless option by IDFC Investors in favour of the
appellant is not at all comparable to the alleged assignment of call
options by the appellant to VIH BV under clause 4.4 of the 2007 FWAs.
st th
Copies of the submissions dated 21 October, 2011 and 25 October,
st
2011 and the TPO’s order dated 31 October, 2011 are Annexures Z, AA ,
and BB respectively to the appeal paper-book.
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21 Pursuant to the TPO’s order, the AO issued a show cause notice
th
dated 16 November, 2011 to the appellant seeking explanation as to
why the adjustment of ALP recommended by TPO should not be made to
the total income of the appellant. Since during this time, the proceedings
before the Supreme Court in SLP(C) No. 26529 of 2010, wherein the
issue of assignment of call options was in issue, had been completed and
the judgment was reserved, the appellant while giving its preliminary
th
submissions on 28 November, 2011, requested the AO to await the
decision of the Hon’ble Supreme Court as parallel collateral proceedings
on the same issue would not be merely inappropriate, but also amount to
th
interference with the course of justice. The appellant on 15 December,
2011 filed detailed submissions and documents, inter alia, submitting
that the revision of the Framework Agreements in 2007 does not
constitute assignment of call options. In fact, at Para JJJJ, it was
specifically pointed out that in April 2009, put options with regard to
49% shares of AS and AG Group companies, were exercised and
therefore, prior to such exercise, no transaction can be said to have
th
occurred. Further vide appellant’s letter dated 19 December, 2014,
certain documents, including the SPA and the 2006 and 2007 Framework
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Agreements as requisitioned by the AO were submitted.

order under Section 144C of the Act. The AO in his draft assessment
order also held that since the AE of the appellant, i.e., VIH BV
became a party to the 2007 Framework Agreements and the call option
clause 4.4 was also changed and any wholly owned subsidiary of
Vodafone Group Plc was added in the new framework agreement of
2007, the appellant has clearly assigned its right to call option to its

the cost of acquisition at US$ 16.5 million (=Rs. 73,44,15,000), the
amount paid by VIH BV towards option fee under clause 4.4 of the
2007 Framework Agreement and thereby computed short capital gain
of Rs.6105,44,11,177/-. It is important to note here that the case of the
AO was also restricted to the mere re-writing of the 2007 FWAs and
the fact of exercise of the put options by AS and AG was specifically
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book.

Court of India delivered its judgment reversing that of this Court in

rely on the said judgment to urge that all the agreements noted
hereinabove have been referred extensively in the judgment of the
Supreme Court of India. Therefore, once the Supreme Court holds
that there is no transfer of asset but a transfer of share and that there is
no assignment of any call options, then, these findings bind this Court
even in the present proceedings. More so, when a review petition filed
by the Revenue seeking review of the Hon'ble Supreme Court
judgment also raised such issues. Relying on this judgment of the
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Hon'ble Supreme Court, the appellants claimed that they challenge the

issue that the Transfer Pricing Officer (for short “TPO”) and the
Assessing Officer (for short “AO”) did not have the jurisdiction to
make transfer pricing adjustments on the same transaction. The
appellants also pursued a statutory remedy by filing objections before
the Dispute Resolution Panel (for short “DRP”) under section 144C of

and without prejudice to the filing of a writ petition bearing No.488 of
2012 on jurisdictional issues. In the meanwhile, the review petition
filed by the Revenue in the Supreme Court of India was also

Resolution Panel referred above continued and without prejudice to
their contentions and the stand taken in the writ petition. The
appellants filed their submissions on merits before the DRP. In

raised the stand extensively set out in paragraphs 43 and 44 of this
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appeal paper-book. The appellants also point out as to how the
Assessing Officer passed the final assessment order under section
143(3) read with section 144C(13) of the IT Act computing the short
term capital gains as Rs.6178,88,26,177/- in respect of the alleged
transaction of assignment of call options under the 2007 Framework
Agreements but this order was not served on the appellants in view of
the directions of this Court in its order passed in writ petition No.488

2013 and that disposed of Writ Petition No.488 of 2012. This Court
relegated the appellants to exercise of its statutory remedy of appeal

noting the arguments of the learned senior counsel appearing on
behalf of the appellants.

passed by this Court, the appellants filed their appeal to the Tribunal.
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the said appeal:

Group Plc, various Shareholders Agreements and Supplement(s) to the
Framework Agreements. The respondent sought to file these

that the factum of subsequent exercise of put options in 2009 and the
documents in relation thereto have been received from FIPB in
February-March 2014 and before that the Revenue was not aware of

of exercise of put options was disclosed by the appellant before the

objections filed before the DRP. In addition, the same fact was
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disclosed before the AO of VIH BV and the Hon’ble Supreme Court
in VIH BV’s case. Further, this fact was also disclosed in the transfer
pricing report of the appellant filed before the TPO for AY 2010-11

2014 alongwith the corresponding documents filed in 4 volumes are

documents in relation to the nomination of CGP India Investments Ltd
pursuant to the exercise of put option in 2009 by AS and AG under the
2007 Framework Agreements. Copy of the index of the documents
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objected to the admission of additional documents filed by the

call option by rewriting of Framework Agreements in the AY 2008-09.

the Revenue for the first time alleged that the judgment of Hon’ble

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material facts of put options had not been disclosed before either of

requested the Tribunal to direct the Revenue to file a detailed
application/affidavit describing the nature of fraud and how such fraud
had been committed. In response thereto the Revenue filed a response

subsequent exercise of put options had not been disclosed before any
of the Courts or the authorities below. Upon the request of the
appellant to rebut the blatantly false allegations of the Revenue the
appellant filed various documents establishing that the fact of
subsequent exercise of put options in 2009 had been duly pleaded and
placed on record before the Hon’ble Supreme Court of India, this
Hon’ble Court, the Assessing Officer and the DRP in the appellant’s

respectively to the appeal paper-book.
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FIPB proceedings in 2009 in relation to the acquisition of shares of AS
and AG Group companies by CGP India Investments Ltd. pursuant to
the exercise of put options, subsequent exercise of put option in 2009
and the following nomination of CGP India Investments Ltd. to
establish that the Revenue had all through known about the
subsequent exercise of the put option in 2009, as it had objected to the
approval being granted by the FIPB. Copy of index of documents
obtained from the FIPB alongwith the documents containing minutes
of FIPB proceedings are Annexures NNN and OOO (Colly.) to the
appeal paper-book.

to the alleged gain arising from the transfer of the CGP share to VIH
BV. The Revenue contended that the consideration in the SPA was not
limited to the value of the share but related to other ancillary
transactions, at least some of which occasioned the transfer of an asset
situate in India, and it was in that context the Revenue relied on the
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reworking of the Framework Agreements to contend that the reworked
agreements were an integral part of the transaction embodied in the
SPA, and these Framework Agreements brought about assignment/
extinction of valuable rights and thereby resulted in the transfer of an
asset in India. The issue whether the transfer actually took place at a
later point in time would be a matter of no relevance to this issue.

of a downstream Indian company, Telecom Investments India Ltd.,
however, no arguments were advanced by the Revenue in support of
the same and the case of the Revenue throughout was that upon
rewriting of the Framework Agreements in 2007, the appellant had
assigned its call option rights to it’s A.E. under Clause 4.4. Revenue’s
reliance on the fact of subsequent exercise of put option was restricted
to contend that such fact was not placed before the Hon’ble Supreme
Court and hence, the finding of the Hon’ble Supreme Court that the
call options continued to vest with the appellant was not conclusive.
Detailed submissions and arguments were advanced by both the
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appellant and Revenue before the Tribunal on the issue of assignment
of call option and the valuation of the call option allegedly assigned
and the Tribunal concluded the hearing and reserved its order on the

(Colly). Further, copies of detailed submissions advanced by the

August, 2014 are Annexures QQQ (Colly) to this appeal paper-book.

the order, the Tribunal listed the appellant’s appeal for clarification on

was filed by the Respondent, yet neither of the parties addressed any
argument on the said agreement. Accordingly, the Tribunal directed
both the parties to file written submissions on the said shareholder’s
agreement.
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submitted that the TII’s Shareholders Agreement has no relevance or
bearing on the issue of assignment of call options under the 2007
FWAs and that the option rights under the TII’s Shareholders
Agreement are inchoate rights as they are conditional upon the
exercise of call/put options under the 2007 FWAs. On the other hand
the Revenue in its submission in respect of the said shareholder’s
agreement submitted that the introduction of VIH BV as a party to the
Framework Agreement as well as Shareholders Agreement for the first
time is a clear evidence of the fact that VIH BV acquired the option
rights by signing the Framework Agreement and secured its value by
entering into the Shareholders Agreement simultaneously. Therefore,
nowhere did the Revenue contend that by execution of the
Shareholders Agreement, the call options were transferred in favour of

November, 2014, filed by the respondent in response to the
clarifications sought by the Tribunal respectively are Annexures RRR
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for pronouncement before the Tribunal and the impugned order was
passed. The Tribunal ruled in favour of the appellant on the original
case that was framed against the appellant from the inception of the
proceedings culminating in the final assessment order. The Tribunal,
after considering arguments of both the parties over a period of 6
months and examining all the covenants of the 2006 and 2007

has been made under the 2007 FWAs. The Tribunal held that the
inclusion of a prospective nominee does not amount to assignment/
transfer of the call option rights by the appellant. The Tribunal also

detail the applicability of the amended provisions of Section 2(47) of
the Act and held that the essence of transfer even in the amended
provisions remains that actual disposal or actual creation or parting
with an interest in an asset. Accordingly, since no actual disposal or
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actual creation / parting in an interest occurred as no nomination was
made, the Tribunal held in favour of the appellant.

transfer can take place unless an actual nomination happens, the
Tribunal held that the call option rights have been transferred and
vested in CGP India Investments Limited by virtue of the TII
Shareholders’ Agreement. Further the Tribunal held that the Hon’ble
Supreme Court judgment is not binding on the issue of assignment of
call options as the issue whether call options were assigned by VISPL
to VIH BV was not an issue before the Supreme Court of India and
that the Supreme Court, according to the Tribunal, proceeded on
undisputed facts.

that the call options have been assigned / transferred to CGP India by
virtue of the 2007 TII SHA without providing the appellant an
opportunity of hearing on the implications of the 2006 and 2007 TII

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before the Tribunal under Section 254(2) of the Act. In the said
miscellaneous application (M.A. No.443/Mum/2014) the appellant

from a mistake apparent on the face of the record as findings have
been arrived at without providing an opportunity of hearing to the
appellant and accordingly the impugned order is violative of the
principles of natural justice. In addition, certain other errors apparent
from the record were pointed out for rectification. A copy of the

UUU, respectively to the appeal paper-book.

miscellaneous application filed by the appellant is pending
consideration by the Tribunal.

business of Hutchison Essar Limited (hereinafter referred to as
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“HEL”), HTIL entered into an SPA with VIH BV whereby VIH BV
acquired the entire equity share capital of CGP. By virtue of the above
transaction, the appellant (3GSPL) which was indirectly owned by
CGPC, became part of VIH BV. As VIH BV did not want the Call
Centre business, which the appellant had been operating since 2003
and was providing services to its overseas AEs, the Call Centre
business was hived-off from the appellant. The intent of hiving off the
Call Centre business was reflected in the SPA between VIH BV and
HTIL.

(part of the HTIL Group at the time of sale) to Hutchison Whampoa
Properties (India) Pvt. Ltd. (‘HWP India’), an Indian resident
company (part of the HWL Group). HWP India was incorporated in
January 2006 to pursue the real estate business in India. However, this
business did not materialize and HWP India was, therefore, a clean
HWL-owned company that was readily available to acquire the Call
Centre business; hence for good commercial, regulatory and legal
reasons, the Call Centre business was transferred to HWP India.
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the Business Transfer Agreement (hereinafter referred to as “BTA”)
between the appellant (3GSPL at the relevant time) and HWP India
(both associated enterprises (‘AE’) by virtue of being part of the HWL
Group) and subsequently, the transaction of sale of the Call Centre

2007, is Annexure VVV to the appeal paper-book.

in Board of Directors’ meeting of the appellant, the parties wished to
delay signing the BTA until just prior to completion of the SPA, so
that the execution of BTA and completion of SPA could be announced
to the public at the same time in accordance with stock exchange
requirements.

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facilitate practical matters such as early payment of sales
consideration, commencement of negotiations with landlord of
premises (where Call Centre was operating) for transfer of lease and

paragraph 6(b) of the MoU, HWP India paid Rs 64 crores to 3GSPL
on 30 April 2007.

number of other conditions precedent, the acquisition of the CGPC

the appellant (3GSPL at the relevant time) which was indirectly
owned by HTIL became a part of VIH BV. Consequently, the name of
3GSPL was changed to Vodafone India Services Pvt. Ltd. (“VISPL”),
i.e. the appellant herein. It is pertinent to state that the appellant was
referred to as 3GSPL (part of HTIL Group) before the completion of
the SPA and on completion of the SPA, the name of the appellant was

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transferred on slump sale basis for a consideration of Rs. 64 crores.
The said price of Rs. 64 crores was arrived at based on a valuation

registered Chartered Accountant firm. The valuation report
determined the value of the Call Centre business by using a weighted
average of the Net Asset Value (for short “NAV”) method and the
Profit Earning Capacity Method (for short “PECV”) or Earning
Capitalization method. This valuation methodology was in
accordance with the principles laid down by the Hon’ble Supreme

case of a slump sale transaction is provided for in section 50B of the
IT Act. It is stated that the net worth of the Call Centre amounting to
Rs.86,49,50,364/- was duly certified by a firm of Chartered
Accountants, namely, Bansi Mehta & Co. which had also the issued
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same. Accordingly in the computation of income, a long- term capital
loss in respect of the sale of the Call Centre business was computed in
the following manner:

treated the transaction of sale the of Call Centre business, which was
admittedly between two domestic entities, as an ‘international
transaction’ under section 92B(2) of the Act. The TPO disregarded the
valuation report of Dalal & Shah and valued the Call Centre business
based on an average Price Earnings Multiple method and arrived at an

2011. The Assessing Officer accepted the valuation adopted by the

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the Call Centre business between the two resident entities was not an
international transaction, accordingly, the appellant challenged the
jurisdiction of the TPO vide writ petition No. 488 of 2012 before this

2013 upheld the jurisdiction of the TPO in this regard.

aforestated draft assessment order which in turn was based on the
order of the TPO before the DRP, which objection was disposed of by

the objections of the appellant, the DRP in addition to upholding the
transaction as a deemed international transaction under section
92B(2), which was applied by the TPO/AO, also alternatively suo
moto applied section 92B(1) of the Act. The DRP while issuing
directions under section 144C of the Act at Para 10.2.2 erroneously
lifted the corporate veil of HWP India and applied the ‘substance over
form’ doctrine and, accordingly, held that the sale of the Call Centre
business is an ‘international transaction’ effectively between the
appellant (a resident entity) and HWL (a non-resident entity being the
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parent of HWP India) thus falling within the scope of section 92B(1)
of the Act. The DRP also alleged that HWP India was interposed only
to evade tax by avoiding transfer pricing compliance. This was in
complete disregard to the fact that the call centre business was
transferred to HWP India for good commercial, regulatory and legal
reasons. So far as the determination of the arm’s length price is
concerned, the DRP upheld the valuation based on the PE multiple
methodology adopted by the TPO/AO but reduced the arm’s length
price of the Call Centre business to Rs 1408 crores by (i) eliminating 2
out of 3 comparables selected by the TPO/ AO; (ii) directing the TPO
to consider the TP adjustment made in the earlier year post-tax to
work out the EPS; and (iii) directed the TPO to give relief for cash of
Rs.622,427,849 which was not transferred by the assesse to HWP

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accepted the appellant’s contention that section 92B(2) of the Act is
inapplicable on the facts and circumstance of the case i.e. that the
appellant and HWP India were associated enterprises, but, however,
upheld the alternative contention of the revenue that transaction of
sale of Call Centre business was an “international transaction” under
section 92B(1) of the Act.

The Tribunal in appeal for AY 2004-05 gave a categorical finding at
page 9 of its order that the appellant was engaged in the "customer
care BPO" segment and that the TPO had selected data of companies
which functioned in an entirely different segment and which was not
comparable with the appellant’s case. A copy of the Tribunal’s order

Tribunal for AY 2004-05 has been accepted by the Department and no
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appeal has been filed in this Hon’ble Court. It is also pertinent to note
that there is no change in the business model of the appellant as well
as nature of services in the subsequent years.

services rendered by the assessee. It is only after finding out exact
nature of services rendered by the assessee can a comparative
uncontrolled transaction can be brought to the picture. We, therefore,
set aside the order of the CIT(A) and restore the issue to the TPO/AO

AEs. Clause 6 of each MSA read with Schedule I thereto and a letter

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a service fee of 107% of the total cost. Clause 3 of Schedule 1 to the
MSA made it clear that the service fee shall be calculated by reference
to the total cost plus an appropriate margin and that the margin shall
aim to be an arm’s length price on a total cost over a financial period
(April to March) adequate to compensate for all the functions
performed, assets employed and risk assumed by the appellant and
would be determined in accordance with internationally accepted
arm’s length standard.

International transactions entered into by it with its Associated
Enterprises. The said report set out the details of the various
International transactions and certified that they were at arm’s length.
The appellant had also prepared a detailed Study Note justifying the
arm’s length price for the services rendered by it. A copy of the
computation of income and the transfer pricing study are Annexures

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which were engaged in providing ITeS (Annexure III of this note).
Out of this, the appellant selected 11 companies which were engaged
in providing voice based call centre services, being functionally
comparable to the appellant and which met with all the criteria
specified in the Act for being treated as a comparable (Annexure IV of
this note). The appellant adopted the Transactional Net Margin
Method (“TNMM") and computed the arithmetic mean of the PBIT:
operating cost of the said 11 companies at 3.51%. The appellant
computed its own effective PBIT as a percentage of operating cost at
7.12% (Annexure V of this note). As the appellant’s PBIT to
operating cost was higher than that of the comparables, the appellant
concluded that the price charged by it of 7% plus cost qualified as an
arm’s length price for transfer pricing purposes.

was asked by the TPO to update the margin of the comparable
companies selected in the TP study using financial data for the FY
2007-08. The arithmetic mean for the FY 2007-08 for the 11
comparable companies worked out to 1.04 percent. Since the
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appellant’s Net Cost Plus (‘NCP’) mark-up was 7.12 percent, it was
submitted that the NCP mark-up earned from international
transactions was at arm’s length. Thereafter, the appellant was further
asked by the TPO to conduct a fresh search based on the data available
on the PROWESS database, pursuant to which the NCP mark-up
earned by the comparables for the contact centre services was 0.99
percent. Accordingly, a computation was submitted before the TPO
using the current year’s data also which further evidenced that the
price charged by the appellant was at arm’s length.

furnished by the appellant, the TPO rejected the functions assets and
risk (‘FAR’) and economic analysis conducted by the appellant in its
TP report without pointing out any cogent deficiency or insufficiency
in the same. The TPO (para 7.15) rejected the appellant’s TP report
citing the following reasons:
 not using current year's data;
 not using different accounting year filter;
 not selecting proper criteria for rejecting and selecting
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comparable companies;
 not selecting proper criteria even tough they are functionally
similar and operating in similar economic environment.

the TPO. While doing so, the TPO failed to appreciate that as per
section 92C(3) of the Act, he had jurisdiction to do a fresh search of
comparables only if the comparables selected by the appellant were
either insufficient or had other deficiencies. Neither the AO nor the
TPO pointed out which of the above mentioned four conditions of
section 92C(3) of the Act, if any, was satisfied.

section 92CA(3) of the Act by which he determined the arm’s length
margin of the international transactions entered into by the appellant
to be 32.33% based on 17 comparables selected by him.
th
61 The respondent passed a draft assessment order dated 29
December, 2011, under section 143(3) read with section 144C of the
Act whereby the respondent upheld the margin computed by the TPO.
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62 Being aggrieved by the said order of the respondent, the
appellant filed its objections before the DRP. The DRP vide order
th
dated 30 September, 2012, allowed partial relief to the appellant by
removing some of the comparables from the list of comparables
selected by the TPO, which reduced the NCP margin to 19.21% based
on a set of 10 comparables.
63 The AO in pursuance to the aforesaid DRP directions, passed
st
the final assessment order dated 31 October, 2012, under section
143(3) read with section 144C of the Act.
64 Being aggrieved by the said order of the Respondent, the
appellant filed an appeal before the Tribunal. The said appeal was
th
disposed of by the Tribunal vide its order dated 10 December, 2014.
The Tribunal while solely relying on the order of the Tribunal for AY
2007-08 and in complete disregard of the Hon’ble Special Bench
ruling in the case of Maersk Global Services Centres (India) Private
Limited [ITA No. 7466/M/12(Special Bench)] held that the following
companies are comparable to the appellant:
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a) Infosys BPO Ltd.
b) WIPRO Ltd. (seg)
c) HCL Comnet Systems and Services Ltd. (seg)
d) E4e Healthcare Solutions Ltd.
65 It may be pertinent to mention here that while the TPO had used
segmental financial information of Wipro Ltd. and HCL Comnet
Systems and Services Ltd. called upon by issuing notice under section
133(6) of the Act, this information was not made available to the
appellant inspite of request for the same. This fact that TPO did not
provide information obtained under section 133(6) of the Act to the
appellant has been noted by DRP in second para under para 12.5(iv),
page 52.
66 The Tribunal after having duly noted the contentions of the
appellant in para 135 of the order (Page Nos 157-158) inadvertently
omitted to dispose of Ground of appeal no. 16 pertaining to (a)
working capital adjustment and (b) risk adjustment to the arm’s length
margin as required under the Rule 10B(1)(e)(iii) of the Rules. In this
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regard, the appellant has already filed a miscellaneous application on
th
30 December, 2014, which is pending adjudication by the Tribunal.
67 It is pertinent to mention here that the Tribunal in the order for

that the appellant must be granted working capital adjustment in
accordance with the OECD guidelines (Para 27.1 on page 43). Even
the Respondent in its submissions before the Tribunal conceded that
working capital adjustment may be granted to the appellant in line
with the appellate order of the Tribunal for AY 2007-08.

appellant that we will have to appreciate the contentions raised before
us by the learned senior counsel appearing for the parties.

the appellant submitted that the order passed by the Income Tax
Appellate Tribunal and impugned in this appeal is erroneous and
illegal. He submits that the said order is vitiated by total non
application of mind to several vital and crucial aspects of the case.
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The order passed by the ITAT is perverse inasmuch as the materials
which were relevant have either been overlooked or omitted from
consideration. This has led to the Tribunal rendering inconsistent and
contradictory conclusions. The Tribunal, in a very lengthy order, has
failed to note the fundamental controversy and by losing sight of a
legal submission canvassed throughout. Thus, the Tribunal
misdirected itself in law.

inviting our attention to the list of dates and events and the ownership
structure, Mr. Salve would submit that the matter must go back to the
Tribunal as the appellant had no opportunity to meet the case of the

Mr. Salve would urge that the Tribunal failed to realise that there is
only one transaction. The Revenue is seeking to impose tax on capital
gains arising on the transfer of an asset. Hutchison group (Hutchison
Telecommunication International) sold a company CGP Investments
(Cayman Island company) to VIH BV. On account of transfer of the
share, a company called 3 Global Services Private Limited became a
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subsidiary (direct of VIH BV). 3GSPL is now known as the appellant.
The appellant had entered into three Framework Agreements under
which it had call options and obligations by way of put options. Two
of the call options were with the AG and AS group companies. The
target of these call options was a downstream company called TII Pvt.
Ltd. (which company in turn held directly and indirectly shares in
Hutchison Essar Limited / Vodafone India Limited). At the time when
these transactions took place, another set of Framework Agreements
were signed (with revised consideration) for the call options and put
options. VIH BV was made a confirming party to these revised
Framework Agreements. Mr. Salve then extensively referred to the
first case in which this transaction was the subject matter. He
submitted that the Revenue contended in this first case that the revised
Framework Agreements were a part of the overall transaction and the
consideration for these revised Framework Agreements was also
inbuilt into the amount paid by Vodafone to Hutchison for acquisition
of the CGP share. Mr. Salve submits that the Revenue's stand and
which was accepted by this Court in the first case, later on does not
survive in the light of the reversing of the judgment of this Court in
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the first case titled as Vodafone case. When the first case and by way
of appeal was pending in the Hon'ble Supreme Court, the Revenue
started the second case against the appellant and which involves the
same transaction but the Revenue in the second case resorted to
transfer pricing so as to assess the appellant to tax on so called capital
gains. This matter related to financial year 2007-08. Mr. Salve
submits that in the judgment of the Hon'ble Supreme Court reversing
that of this Court, there is an observation that the call options had not
been exercised “till date”. Mr. Salve submits that when the Supreme
Court observed that this option was not exercised till date it had in
mind till the end of that financial year. Even if that expression relates
to the date of the delivery of the judgment by the Hon'ble Supreme
Court, there is nothing erroneous or incorrect about the same. Mr.
Salve submits that it is the counter parties who had exercised the put
options sometime in 2010 and pursuant to which the shares had been
acquired. Mr. Salve, therefore, submits that there was no occasion for
the Revenue then to take up a case and which cannot be reconciled
with its consistent stand of assignment of call options.
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the Tribunal with regard to what is styled as a third case by him. Mr.
Salve faults the Tribunal for having discovered from the documents
filed another agreement which was entered into between the
shareholders of the appellant CGP (Mauritius) and AG and AS in their
companies which allegedly had another set of call options in favour of
CGP. The Tribunal arrived at the conclusion that the call options
contained in this shareholders agreement rendered the call options
contained in the Framework Agreements nugatory. On this basis, the
Tribunal concluded that the shareholders agreement, therefore, results
in an assignment of the call options of the appellant. Mr. Salve
submits that the beneficiary of this assignment was not VIH BV but
CGP. Mr. Salve submits that the submissions filed by the Revenue
clearly assert that the options of the Framework Agreements became
meaningless and thus stood transferred by virtue of the shareholders
agreement to CGP Mauritius. Mr. Salve, therefore, submits that the
Tribunal seriously erred in law in taking into consideration a case
which was not set up by the Revenue. He contended that the Revenue
never urged that the shareholders agreement of 2007 to which CGP
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was a party and to which the appellant was not a party resulted in any
assignment of the appellants' call options. Had such a case been put
to the appellant, it would have pointed out that even in 2006 prior to
the Vodafore taking over there was always in place a similar
shareholders agreement. Mr. Salve contended that the Tribunal
rendered contradictory finding and while it accepted the case that a
revised Framework Agreement recognising same options did not
constitute a transfer, it was not open to it to then hold to the contrary
and by referring to the 2007 shareholders agreement. Therefore,
acceptance of the Revenue's case that this shareholders agreement
constituted an assignment of the call options has resulted in grave and
serious prejudice. Mr. Salve, therefore, heavily criticised this
approach of the Tribunal. Mr. Salve submitted that the matter should
go back to the Tribunal so as to render complete justice.

stands covered and in favour of the appellant by the judgment of the
Hon'ble Supreme Court in the first case. Mr. Salve's arguments and
which were spread over several days, revolved around this judgment
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of the Hon'ble Supreme Court. Mr. Salve referred to it in great detail.
Firstly, Mr. Salve read out to us paragraphs 23 to 25 of the impugned
order of the Tribunal. Then, he referred to paragraph 30 at page 137
of the paper-book from the Tribunal's order. Mr. Salve then took us
through the judgment of the Hon'ble Supreme Court and submitted
that the main issue is noted in paragraphs 72, 73 and 76 of the
judgment. He also referred to paragraphs 235 and 236 of this
judgment and equally paragraph 231 to urge that the approach of the
Revenue and upheld by the Tribunal is nothing but revisiting or
reconsidering these observations and findings in the Supreme Court
judgment. Mr. Salve submits that the Supreme Court judgment holds
that the call option was not exercised and that the call and put option
are not the same. The first one, namely, the call option is to get hold
of the company whereas the second or other is to go out. There is no
fraud perpetrated on the Revenue and in any manner. The put option
in this case was exercised in later years and in that regard, our
attention is invited to the law report in which the first Vodafone
judgment is reported viz. 341 ITR 1. Mr. Salve has taken us through
pages 48, 49 and 50 of this law report to submit that the factual details
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noted in the foregoing paragraphs by us match completely with that of
the judgment of the Hon'ble Supreme Court. All agreements are
extensively referred and neither is there any fraud nor suppression.
Mr. Salve, therefore, submits that the Tribunal has faulted the assessee
by holding that the judgment of the Hon'ble Supreme Court was
obtained by not disclosing true and correct set of affairs. That is how
Revenue's case and which was consistent with the stand taken by it
throughout was allowed to be raised and the Tribunal has gone ahead
and accepted it. It is in this backdrop that Mr. Salve would submit that
the Revenue should be consistent in its stand or version. No shifting
or adopting conflicting stands is permissible. With the aid of the
ownership structure and the chart in that regard Mr. Salve has urged
that if the appellants are not a party to the July 2007 agreement and
the subject matter of the two Framework Agreements and the
shareholders agreement is different, then, the Tribunal should not have
relied on the same to the detriment of the assessee's interests. Had it
intended to rely on it, it should have in the course of prolonged
hearing put it to the assessee and then the assessee would have met it
squarely. In such circumstances, Mr. Salve would submit that even if
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the matter does not go back and this Court is not inclined to adopt that
course, still it should not allow the Revenue to raise the plea noted by
us hereinabove. This Court, therefore, should hold that the matter is
squarely covered in favour of the assessee by the judgment of the
Hon'ble Supreme Court.

pleas and which proceed as follows. The options are not interest in
property. The Tribunal would conclude that an important aspect of the
case has been missed by the Hon'ble Supreme Court but a binding
judgment of the Hon'ble Supreme Court cannot be ignored or brushed
aside by a subordinate Court or Tribunal on such specious ground.
The mandate of Article 141 of the Constitution of India is relied upon
by Mr. Salve in this regard. He would submit that even otherwise the
options are not an interest in property because in India, we do not have
a recognition and legally given to equitable or beneficial ownership.
If call options and put options are treated as purely contractual rights
and the principle of finality of judgment is attracted, then, nothing
more needs to be decided and to be gone into. Assuming this
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submission fails even then on merits the assignment of call option
cannot lead to a taxable capital gain. Mr. Salve relied upon section
2(14) of the IT Act which is a definition of the term 'capital assets'.
Mr. Salve would submit that the Parliament has stepped in and
inserted an explanation in this definition and given it retrospective
effect, but even this explanation is not attracted for an interest in
property must be the foundation on which this definition has to be
construed. Mr. Salve submits that the Tribunal has misread and
misinterpreted the concession of the learned senior counsel before it
that call option is valuable. It may be valuable but it is not property.
Mr. Salve, therefore, submits that so long as there is no transfer of
capital asset, the provisions in Chapter X of the IT Act which are
styled as machinery provisions by him are inapplicable.

difference between assignment of options and an option having
potential of assignment. That it is capable of being assigned or has the
potential of being assigned would not make the act an assignment of
call options. He relied upon pages 152 and 164 of the paper-book. In
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other words, Mr. Salve read out paragraphs after paragraphs from the
impugned order to urge that the Tribunal has mixed up the issues, lost
sight of the parties to the agreements and committed several factual
and legal errors. There has been no assignment and the potential of
assignment in favour of CGP Mauritius cannot be termed as
assignment.

following words :

Framework Agreements are identical, for the sake of simplicity, the
FWA relating to the Asim Ghosh (AG) group of companies is being
dealt with. The 2006 FWA with AG group of companies is at page 299
of Volume 1.

the right to require 3GSPL/appellant or its nominee to purchase all the
Plustech shares (“Tier 2 company”). The 'put' option was contained in

situations :
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acquired or became eligible to acquire “subscription shares” (present
appeal does not relate to this – it never happened);

acquisition of TII shares to Centrino issued a notice of default.

acquire the entirety of Plustech shares (Tier 2 company) held by
Goldspot (Tier 1 company).

circumstances came into existence :

sufficient shares under the subscription route, whereby it could have
more than 50% effective control of either Centrino or TII.

ceiling of 74% was enhanced, 3SGPL could not exercise these
options. This is for the reason that the Essar shareholding of 33% was
held to the extent of approximately 22% by Mauritius holding
companies and was counted as FDI. This is why the direct and
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indirect holding of Hutchison could never exceed 52% approximately
and those equity interests were acquired by Genre 1 and Genre 2
companies. The balance of 15% equity interests were those through
the contractual route i.e. options. Any beneficial interest in these 15%
would reach the FDI requirements.

appellant would become eligible to increase its stake in any way,
whether by acquiring the subscription shares and these option shares
or merely by acquiring these option shares.

and 'put' options at a different level. CGPM had a 'call' option under
this shareholders' agreement to acquire the shares of TII held by the
two Tier II companies (NDC of the AS group and Centrino of the AG
group) at the stipulated price. The shareholders' agreement was a
tripartite agreement in the sense that companies of Hutchison group,
AS and AG group were parties to it, in addition to the target company
i.e. TII.

options. Clearly, once the Framework options were exercised by
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3GSPL (a co-subsidiary of CGP) and full value paid, a second
transaction at the lower level (acquiring the shares of TII) would only
be if Hutchison wanted to move economic value from 3GSPL to CGP
– or any other company. This is for the reason that :

Tier II companies (Goldspot and Scorpios)

downstream shares of the Tier III companies (NDC or Centrino),
which in turn derived value from the shares of TII (which also derived
value from the shares of HEL / VIL).

indirect equity interest in HEL would have already been available to
HTIL (or after the sale, VIL).

value or increase the indirect equity interest in the Indian company.

AG group of companies is at page 567, Volume 2. In this FWA there
was a 'call' option and a 'put' option.

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who was given the 'put' option and made subject to the 'call' option.
AG thus had the right to require 3GSPL/appellant or its nominated
person to buy Goldspot (renamed AG Mercantile) shares i.e. the Tier 1
company shares.

exercised :

increase of the sectoral cap;

of the FWA;

had paid for the TII shares (there was a mechanism provided for
identifying a suitable Indian person, in case the shares were sold
without the sectoral cap being relaxed or in excess of the sectoral cap).

option entitled 3GSPL/appellant to purchase or nominate someone to
purchase the Goldspot shares from AG. All limitations on exercise of
call options were removed.
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only reflected that the lower lever call and put options in the
shareholders agreement were only to be used for restructuring - after
the equity interests by way of contractual option had enlarged to a full
indirect interest by acquisition of the upstream shares of the Tier 1
company.

of companies from Goldspot / AG Mercantile down to Centrino
(Nadal) would become a VISPL subsidiary. VISPL would have
already acquired indirect control over the TII shares. The only
purpose thereafter of Nadal / Centrino exercising a put option would
be to remove the shares of TII from one VIH BV subsidiary (VISPL)
to another VIH BV subsidiary (CPGM) for purposes of corporate re-
structuring. None of this has any relevance.

parties. VIHBV was added as a confirming party. The agreement was
carefully drafted – the rights and obligations under the agreement
were cast upon the “parties” which expression was defined, excluding
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VIHBV.

(Nadal) could require CGPM or its nominated person to purchase the
shares held by it in TII (this put option was subject to the limitation in
the FWA, i.e. it was subservient to the call option – thus it could only
be a measure of restructuring after the appellant had become the
parent company).

could compel Centrino (Nadal) and/or NDC to sell their shares held in
TII to CGPM. This call option was made subject to the condition that
it would not be exercised unless the call or put options under the FWA
in relation to Scorpio shares (AS group) and/or Goldspot (AG
Mercantile) shares were exercised in full.

to CGPM to take over the TII shares. This also would happen only
after VIHBV had indirectly through the appellant acquired control of
these shares.

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FWAA were exercised.
76 Thus, Mr. Salve emphasised that the Tribunal proceeded on an
erroneous assumption that for the first time an option was exercised in
favour of CPGM by way of 2007 TII SHA. Mr. Salve submits that the
Tribunal's order fails to note as to how the option contained in the
document referred by the Tribunal could confer the right and as
concluded by the Tribunal. Mr. Salve submits that the Tribunal
confuses between 'call' options and their limitations and 'put' options.
As already stated, the FWAs of 2006 & 2007 contained a provision
that a buyer could be nominated to honor a put option. Nominating a
buyer in relation to a put option is not an assignment for the reason
that an obligation simplicitor cannot be assigned. AS and AG had put
options under the FWAs which they were entitled to, as and when the
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regulatory regime allowed the appellant to acquire more shares
indirectly. The appellant nominated CGPM to discharge the
obligation on its behalf and it was pursuant to that nomination that
CGPM acquired these shares. The call options under the FWA 2007
which could have been assigned were never actually assigned.
(A) Finally the Tribunal overlooked the 2006 shareholders'
agreement. CGPM had similar 'call' options in the 2006 agreement in
relation to the TII shares. As submitted, when multiple options at
multiple layers are created at different tiers, it is to provide flexibility.
If the idea was to confer a call option on CPGM in 2006, there was no
need to follow this long procedure. Simultaneous signing of the FWA
did not involve any taxable transaction and CGPM could have straight
away been given the option if it was CGPM and CGPM alone who
could acquire these shares.
(B) Finally, to hold that the call options rights held by the appellant
to require AS and AG to sell Goldspot/AG Mercantile and Scorpio
shares were assigned by virtue of a clause in the 2007 shareholders'
agreement to CPGM, which clause entitled CGPM to acquire TII
shares from Centrino / Nadal and NDC is a leap of faith.
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77 As far as the Call Centre business is concerned, Mr. Salve
referred to the facts as culled out and then contended that the issue is
whether the scope of section 92B(1) of the Income Tax Act, 1961 that
defines “international transaction” for the purpose of the application of
transfer pricing regulations (Chapter X) can be applied to a transaction
entered into between two resident entities on the specious ground that
the transaction was entered into with an Indian company to avoid
applicability of Chapter X. Secondly, whether the finding that the
transfer of an asset from one Indian subsidiary to another Indian
subsidiary of Hutch can be considered to be a device to evade tax,
because had the transfer been made to a foreign company, the
department could have availed of the Chapter X machinery to arrive at
an arms length price, overlooking that the transfer of an Indian call
centre, owned by an Indian company to a foreign company would
create serious regulatory hurdles and problems in relation to Indian
Exchange Control Regulations.
(A) There are restrictions under Foreign Exchange Management
Act, 1999 (“FEMA”) on a foreign company directly (without an
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intermediate Indian company) by way of a business transfer.
(B) Section 6 of the FEMA restricts all Capital Account
Transactions except those permitted by the RBI. The RBI has issued
general permissions (under the Regulations) that identifies areas in
which FDI is permitted - this would however have to be by way of
acquisition of shares of an Indian company. A direct acquisition of a
call centre would require a special permission from the RBI.
(C) Owing to difficulties in obtaining regulatory approval to run a
Call Centre business in India by an Indian branch of non-resident
company, together with the legal and practical difficulties of doing so
even if such approval could be obtained, it was decided that the Call
Centre business would be acquired by an Indian subsidiary of the
HWL group. It is common practice for most multinational companies
to do business in India through an Indian subsidiary rather than a
branch of a foreign company. Merely because such a business
arrangement does not fall in Chapter X as an international transaction
(at the material time) does not for that reason render it a sham or a
fraud.
(D) Furthermore, wholly owned subsidiaries enjoy: (a) greater
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flexibility of operations (e.g. it is easier for an Indian entity to lease
office space as compared to a foreign entity) (b) ring fencing of risk,
(c) limitation of liabilities, (d) preferential tax regime and so on, as
compared to branch of a non-Indian company. Had HWP India not
existed, HWL would have incorporated a new Indian wholly owned
subsidiary to run the Call Centre business as required under FEMA.
(E) The TPO, during the course of assessment proceedings, alleged
the transaction of sale of Call Centre business to be an international
transaction under section 92B(2) of the Act. The AO accepted the
valuation adopted by the TPO, and passed a draft assessment order
th
dated 29 December, 2011.
(F) The DRP while disposing of the objections of the appellant, in
addition to upholding the transaction as a deemed international
transaction under section 92B(2), which was applied by the TPO/AO
also alternatively suo moto suggested that section 92B(1) of the Act
could also be applied. This fact has been noted by the Tribunal at
para 115 of the impugned order. The DRP, while issuing directions
under section 144C of the Act, at para 10.2.2 erroneously lifted the
corporate veil of HWP India and applied the 'substance over form'
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doctrine and, accordingly, held that the sale of the Call Centre
business is an 'international transaction' effectively between the
appellant (a resident entity) and HWL (a non-resident entity being the
ultimate parent of HWP India) thus falling within the scope of setion
92B(1) of the Act. The DRP also held that HWP India was interposed
only to evade tax by avoiding transfer-pricing compliance. The DRP
upheld the valuation based on the PE multiple methodology adopted
by the TPO/AO but reduced arm's length price of the Call Centre
st
business. The AO passed the final assessment order dated 31
October, 2012 in pursuance of directions of DRP inter alia ,
determining a capital gain on the transfer of the Call Centre business.
th
(G) The Tribunal vide its order dated 10 December, 2014, accepted
the appellant's contention that section 92B(2) of the Act is inapplicable
to the instant case (para 128 of impugned order). However, the
Tribunal upheld the alternative conclusion of DRP that transaction of
sale of Call Centre business was an “international transaction” under
section 92B(1) of the Act (para 126 of impugned order).
(H) The Tribunal noted at para 89 of its order (page 230) the fact
that owing to the difficulties in obtaining regulatory approval to run a
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Call Centre business in India by an Indian branch of non-resident
company, together with the legal and practical difficulties of doing so
even if such approval could be obtained, it was decided that the Call
Centre business would be acquired by an Indian subsidiary of the
HWL group. It should be noted that it is common practice for most
multinational companies to do business in India through an Indian
subsidiary rather than a branch of a foreign company.
(I) The Tribunal, at para 126, concluded that HWP India was
interposed to avoid chargeability to tax, by giving a different colour to
the transaction, with the motive to circumvent the transfer pricing
provisions and consequently, applied the doctrine of substance over
form solely on the argument that the payment of Rs. 64 crores was
made by a HWL group company and was received by HWP India in
its bank account and paid out of the same bank account on the same
th
day 30 April 2007. The Tribunal has completely disregarded the fact
that HWP India raised the Rs.64 crores for acquisition of the Call
Centre business by way of issuance of preference shares to its
immediate parent company HWP Investments Holdings (India)
Limited, Mauritius. A copy of a preference share certificate issued by
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HWP India and Foreign Inward Remittance Certificate (“FIRC”) is at
pages 4741 to 4743. This FIRC was in fact filed by the income tax
department during the proceedings before the Tribunal vide letter
th
dated 18 June, 2014 at pages 4230 to 4255, relevant pages in
submissions being 4241 and 4242 under heading “ Submission on
Payment made by HWP India for Call Centre ” and FIRC being at
pages 4259 to 4261.
(J) Despite the bank statement referred to above showing the
injection of funds from the assessee's parent for subscription of
preference shares, the Tribunal in para 126 of the impugned order
(page 252 of paper-book-I) alleged that “ there is no record produced
by the assessee to show that the HWP (India) procured finance from
its Group Companies for the purpose of business.” Furthermore, the
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income tax department vide letter dated 18 June, 2014, had also filed
the financial statement of HWP Investment Holdings (India) Limited
st
('HWP Mauritius') for year ended 31 December 2007 (pages 4262 to
4280, paperbook-12) to show the source of funds for payment of
preferences shares of HWP India. HWP Mauritius was a tax resident
of Mauritius and immediate holding company of HWP India in 2007.
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(K) It is important to note that 3GSPL (transferor) was an indirect
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subsidiary of HTIL until 8 May, 2007, prior to the completion of
SPA. During that period, HWP India (transferee) was also an indirect
subsidiary of HWL and both HTIL and HWL were public listed
companies in Hong Kong (having significantly different
beneficiaries), therefore, in accordance with stock regulations, any
transaction between them being a connected transaction was required
to be on normal commercial terms and at arm's length.
(L) The appellant submits that in the present case, the corporate veil
of HWP India i.e. purchaser of the Call Centre business is lifted,
merely on the premise that it raised funds by way of preference shares
from its parent company HWP Mauritius and used the same for
acquisition of the Call Centre business. This reasoning is perverse on
its face.
(M) It is submitted that in the instant case, the transaction of sale of
the Call Centre business is between two resident entities i.e. the
appellant and HWP (India) and accordingly, the same does not qualify
to be “an international transaction” under section 92B(1) of the Act.
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the first case Mr Salve relies on the following decisions in support of
his above contentions.

(2012) 341 ITR 1(SC)

ITR 133 (Bom)

(2014) 368 ITR (Bom)

293.

W.L.R. 963.

ITR 75(SC)

Bombay 1955 27 ITR 1.

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appearing on behalf of the Revenue submits that the arguments of Mr.
Salve overlook the basic fact that the judgment in the first Vodafone
case led to several amendments to the Income Tax Act. He relies upon
the definition of the term 'capital asset' [section 2(14)]. He submits

term transfer appearing in section 2(47) and particularly explanation 2
to the same. He would submit that the option rights have been
transferred to Vodafone PLC. Therefore, these transactions and
evidenced by several agreements are covered by sections 92F(v) and
93(4)(a). He would submit that the transaction has all characters and
can safely be termed as an international transaction. Mr. Setalvad has
elaborated his submissions and has urged that a call and put option are
part of the same coin. They are related to the same shares and cannot
be viewed as a traditional or narrow option. It is fallacious to urge
that one is a right and the other is an obligation. Rather, exercise of
one would exhaust the other. Mr. Setalvad has then handed over
written notes and further explaining his contentions.
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nature of capital asset was considered by the Hon'ble Supreme Court
in the original Vodafone Capital Gain dispute. There the issue was
whether any capital gain tax was attracted in the hands of HTIL when
it transferred its 67% interest in VIL to VIHBV. As HTIL was non
resident, the Hon'ble Supreme Court was considering the applicability
of Section 9 in the case of an indirect transfer of capital asset. In this
connection, the Hon'ble Supreme Court held that u/s. 9, only direct
transfers are covered.

Finance Act, 2012, the provisions of section 9 along with section
2(14) and section 2(47) were amended with retrospective effective
from 01.04.1962. This combined amendment of section 9 and section
2(14) and section 2(47) was to ensure that any transfer effected by
creation of an interest in option rights will now be taxable. The
respondent submits that while the language of amended provisions are
in themselves adequate to construe that the option rights is a capital
asset, and creation of interest in option rights is a transfer, the
amendment should be interpreted to advance the purpose of the same.
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call option rights held by the appellant is a capital asset. In order to
determine whether this constitutes a capital asset reference is made to
the provisions of Section 2(14). The newly introduced Explanation to
section 2(14) is as under:

right in the options is property for the purpose of section 2(14). The
Options relate to shares of an Indian company i.e. Scorpios Beverages
(P) Ltd. and AG Mercantile Co. Pvt. Ltd. This in turn entitles the
option holder to a 12.25% equity interest in Vodafone India Ltd.,
(HEL). Thus the right of the appellant to subscribe to the shares of AS
and AG group company, is in the nature of a capital asset as defined in
section 2(14) of the IT Act 1961. Once it is established that the option
rights held by the assessee is property, any interest created therein is
also in the nature of property and falls within the ambit of section
2(14) read with Explanation thereto, which was introduced by virtue
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of amendment to the I. T. Act after the Supreme Court judgment.

Hon'ble Supreme Court is that the option rights are in the nature of
contractual rights and contractual rights do not constitute property.
However, the retrospective amendment to section 2(14) specifically
includes any rights in an Indian Company, or in relation to an Indian
company or any other rights whatsoever. Hence, it is submitted that,
once a right, whether contractual or otherwise, falls within the
amended section 2(14), it becomes a property and hence a capital
asset. Hence, assessee's arguments that option rights being a
contractual right do not constitute a property or capital asset do not
survive after the amendment.

multinational companies to create a web of companies for the purpose
of holding their stake in different countries. Their holdings structure
becomes complex as it has to take into account taxation laws of
different countries as well as the regulatory norms. As a result,
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because of the complex structure, it becomes difficult to understand
the actual transactions being undertaken and the tax treatment to be
given to it. The advanced countries hence developed the transfer
pricing (TP) provisions as a part of their respective domestic law. The
transfer pricing provisions regulate the transactions entered into by
different companies of a multinational group situated in different tax
jurisdictions in their dealings with one another. This ensures that each
country gets its due share of taxes. These laws have been in place in
other countries for many years whereas India was a late entrant.

2001 and the same was first applicable for assessment year 2002-03.
The object of these provisions is to prevent erosion of tax base from
the country. The Indian TP provisions enact that income arising from
an international transaction should be determined having regard to the
Arm's Length Price (ALP). The taxable income is computed by
substituting the ALP in the place of the actual transaction value.

Principle than to refer to the definition contained in Organization for
Economic Co-operation and Development (OECD) Model
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convention. Article 9 of the OECD Model Convention has been
adopted by almost all the countries of the world as the basis for
recognising the intra-group transactions of multi-national
corporations. The Arm's Length principle has been explained in the
Article 9 of OECD Model Convention as under -
Where

essence of the same is that transactions between related parties of an
MNC group should be undertaken at the same price at which a similar
transaction is undertaken by unrelated parties under similar
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conditions.

put options in this case are actually not in the nature of an option
contract, but are in the nature of a Forward contract. In this
connection, an extract from two standard commentaries “Practical
Share Valuation” by Nigel Eastway and Others published by BDO as
well as “Financial Valuation – Applications and Models” by James R.
Hitchner.
The following Write-up is based on these commentaries.
(a) A Call Option provides the holder with a Right to purchase the
underlying stock but not the obligation to purchase the stock at a
specified price (strike price) and date. A person buys a call option if
he anticipates the market to go up. For example, if the prevailing price
of ABC Corporation (ABC Corp) is Rs. 700. If A has bought a call
option to buy the shares of ABC Corp at 710 say for a premium of Rs.
5 from B, then A would be known as option holder and B would be
option writer. Now, if the price of ABC Corp goes to 720, it would be
profitable for Mr. A to exercise the option as he would earn profit of
Rs. 5 (720 market price – 710 strike price + 5 option premium paid).
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Therefore, a call option is exercised only when the market price of the
underlying share goes up, in this example beyond 715 or else the
option holder will allow the option right to expire without actual
purchase of share.
(b) Similarly, a Put Option provides the holder with a Right to sell
but not the obligation to sell, at a known price (strike price) and date.
A person buys a put option if he anticipates the market to go down For
example, if the prevailing price of ABC Corporation (ABC Corp) is
Rs. 700. If A has bought a put option to sell the shares of ABC Corp at
690 say for a premium of Rs.5 to B, then A would be known as option
holder and B would be option writer. Now, if the price of ABC Corp
goes to 680, it would be profitable for Mr. A to exercise the option as
he would earn profit of Rs.5 (option price 690-cost of option Rs5-
prevailing market price). Therefore, a put option is exercised only
when the market price of the underlying share goes down, in this
example beyond 685 or else the option holder will allow the option
right to expire without actual sale of share.
84. It has been the contention of the appellant that call options were
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never transferred by it and they remain vested in the appellant.
Further, what has been exercised is only the Put Options by AS and
AG. It has further been argued by the appellant that Put options
exercised by AS/AG are different from Call options referred by the
Supreme Court.
85. The arguments of the appellant are not tenable in view of the
facts of the case and terms of the FWA's of 2007 detailed herein:
(a) The term 'Option' has been defined to mean Put Option or Call
Option. Thus, even as per the appellant's FWA, both options are
included in the term 'Options' which clearly demonstrates that they are
the two sides of the same coin.
(b) As per clause 3.1 of the FWA 2007, AS/AG have to ensure that
the entire issued and paid up capital of the Group companies are held
by them respectively. Thus, it is ensured that AS and AG cannot bring
new shareholders into their company. As per clause 4.1 of this
agreement, there is a complete embargo on AG and AS from issuing
any further shares in their companies which would alter the issued
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share capital of those companies. The combined effect of these two
clauses is that both AS and AG have been completely restrained from
making any changes in the shareholding of their companies through
which they hold 12.25% stake in VIL. When the restrictions
contained in para 3.1 and 4.1 of the FWA's of 2007 as discussed above
are read with the Call and Put Option terms, it is clear that to the
extent Put option is exercised, automatically, call option to same
extent stands extinguished.
(c) The terms Put Shares and Call Shares are separately defined in
th
the FWA's of 2007. For instance, in the FWA agreement of 5 July
2007, entered into with AS and its group, both the Put Shares and
Call Shares are defined as 'SBP Shares' (These are the shares of a
100% owned company of AS). From the same, it is evident that both
Put option and Call Option are to be exercised in respect of the same
shares.
(d) The price at which Put Option and Call option are to be
exercised is the transfer price as defined in para 4.6 of the FWA. Thus
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the price of both the Options is the same.
(e) Clause 4.6(b) of the FWA's of 2007 further supports the view
that the Call and Put Options are one and the same. As per Clause
4.6(b) of the FWA, in case of transfer of Put Shares by AS/AG, either
under Call or Put Options, the annual payment made to AS/AG gets
proportionally reduced. This shows that the transfer under Call and
Put Options have the same effect under the FWA.
(f) From the terms of the Option, it is also clear that both Call
Option and the Put Option can be effectively exercised only when the
sectoral CAPS are relaxed.
86. Thus from a reading of the FWA, whether Put option is
exercised by AS/AG or Call Option is exercised by the appellant, it is
one and the same and can be said to be two sides of the same coin.
87. In this case, VISPL had a Call option to ask AS/AG to sell
shares of SBP/AG Mercantile shares while AS and AG had so called
put option to ask VISPL to buy same shares of SBP/AG Mercantile.
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The so-called call/put option in the Framework Agreement is
examined in view of the above mentioned commentaries.
i. In case of call options granted by AS and AG to VISPL, the
option holder is VISPL while the option writer is AS/AG. In case of
call option, VISPL pays a premium to AS/AG who are writers of the
Options in the form of annual payment of USD 10/6.3 Million to
AS/AG, which is as per the principle laid down above.
ii. In case of Put option granted by VISPL to AS/AG, the optiion
holders are AS/AG, while the option writer is VISPL. There is no
premium paid by the AS/AG to VISPL. This clearly shows that the
option given to the AS/AG are not classic put options but only an exit
route provided to AS/AG.
iii. It is seen that there is no expiration date of Call Options in the
FWA. Therefore, one of the essential conditions of Call Option is
missing. Similarly, for Put Option, on expiry of 5 years, another party
can step into the shoes of AS/AG [Clause 4.3 b(iii) and the Put Option
gets revived for further 5 years, therefore, there is no expiration date
for Put Option as well. Thus, under both Call and Put Option under
FWA, there is no expiry date which is an essential condition for
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Options.
iv. In classic Call/Put Options, the Call/Put Option expires on the
expiration date if the triggering event does not take place, and there is
no obligation to buy/sell shares under Call/Put Option. But, in this
present case, under both Call and Put options, the delivery of shares is
mandatory to VISPL. Thus, both so called Call and Put Options are
not option contracts as per the definition of Forward or Future contract
discussed above, the call and put option in the Framework Agreement
are more akin to forward contract as delivery of shares to VISPL is
mandatory in both the cases of Put/Call option.
88. Thus it may be seen that AS and AG were under an obligation
to sell their stake and hence had no put option. Hence, what has been
transferred is the rights, by whatever name called, under Clause 4.4 of
the 2007 FWA with AS and AG. As this right vested in the appellant
earlier which has now been transferred to its AE-VIHBV, there is
transfer of a valuable right attracting capital gains.
(a) As per para 4.6 of the FWA's of 2007, the transfer price has
been fixed at which the put options are to be tendered. As per
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Schedule 1 of FWA's of 2007, the AS group of companies would get
minimum amount of Indian rupees equivalent to US$ 164.51 million.
Over and above this, the AS group of companies would get 10.2
million per annum accruing on a daily basis up to 7 May 2017 or until
AS ceases to hold shares indirectly (Clause 4.4 (d) of FAW of 2007).
Similarly, the AG group of companies would get 6.3 million per
annum accruing on a daily basis up to 7 May 2017 or until AS ceases
to hold shares indirectly (Clause 4.4 (d) of FWA of 2007).
(b) Therefore, there is no reason for AS and AG to exercise put
options early as the consideration to be received by them is fixed by
the FWA's of 2007. In fact, if the put options are exercised early, it
would result in discontinuance of annual payment to AS and AG by
th
the appellant/VIH BV which is valid till 7 May, 2017. Therefore,
once the put options are exercised, the AS and AG would be in a great
loss by forgiving annual payments i.e. 10.3 million US$ for AS and
6.3 million US $ for AG group of companies. Hence, in the given
situation, the AS and AG would not like to exercise their put option as
they would be in a great loss by exercising the same. Hence, it may be
seen that the argument of the appellant on this account are not based
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on the facts and are misleading.
(c) In this regard, the appellant at para 24 of the note regarding
assignment of options has contended that nominating a buyer in
relation to a put option is not an assignment for the reason that an
obligation simplicitor cannot be assigned and that the call options
under FWA's of 2007 which could have been assigned were never
actually assigned.

the case, the call and put options are the two sides of the same coin.
Hence, by exercise of put option, the call option (if they are
considered separate) automatically stands assigned/extinguished.

Transfer Pricing Officer so also the Tribunal, Mr. Setalvad submits

are :

in section 92F(v) and Rule 10A(d).

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Associated Enterprise of one another. The relationship of associated
enterprise is defined in Section 92A.

nature of an international transaction. To qualify as international
transaction, the transaction should be between one or more associated
enterprises of which at least one is a non-resident (Section 92B).

asset of the company.

then any income arising from such transaction should be determined
in accordance with the Arm's Length Price. Arm's Length price is the
price paid by persons other than associated enterprise under
uncontrolled conditions.

Length Price in respect of an international transaction.

obligation is of the appellant to determine the income arising from the
international transaction having regard to the arm's length price.
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Where assessee fails to discharge the basic onus, the onus on Revenue
is secondary in nature. The Revenue has to then determine the ALP
based on material available with it.
TRANSACTION:

undertaken by the appellant. The term 'transaction' has been defined
in Clause (v) of sec. 92F and Rule 10A(d).

in concert,-

formal or in writing; or

intended to be enforceable by legal proceeding.”

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'transaction'. It is a word of widest import. Thus the term transaction
not only includes a sale, purchase, lease, mortgage, pledge, rent or hire
but also any other dealing or course of dealings undertaken in the
normal course. In the specific context of T.P. Provisions, it includes
any arrangement or undertaking, or action in concert. Further, there is
no necessity that such arrangement or understanding should be in
writing or legally enforceable. Thus, even an oral understanding or
arrangement which may or may not be enforceable at law will
constitute a transaction.
INTERNATIONAL TRANSACTION

international transaction. The term 'international transaction' has been
defined in sec.92B. Under sub section (1), international transaction
has been defined as a transaction between two or more associated
enterprises out of which at least one is non-resident. This section
further provides that the transaction should be in the nature of :

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losses or assets of such enterprise.
The term 'associated enterprises' has been defined in section 92A.

this case.

two or more associate enterprises out of which, at least one is non-
resident. In this case, the arrangement and undertaking described in
the above paragraphs is the transaction between the assessee, TII, VIH
BV and CGP Mauritius out of which, VIH BV and CGP Mauritius are
both non-residents.

losses or assets of the enterprise is an international transaction. Hence
the arrangement, understanding or action in concert resulting in the
creation of interest in favour of CGP Mauritius in the option rights
held by the assessee under the 2007 FWA by virtue of 2007 TII SHA,
falls in the category of any other transaction having a bearing on the
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income, profits, losses or assets of the enterprise. The creation of
interest in the option rights has an impact on the income as well as
assets of the assessee.

reason given by the ITAT to reject the revenue's contention u/s. 92B(2)
is two fold.

transfer took effect. While this conclusion of the ITAT is factually
correct, the ITAT has thereafter relied upon the provisions of section
92A(2) to conclude that once the assessee and HWP India are
associate enterprises for the part of the year, they remain associated
enterprises for the entire year. Having reached this conclusion, the
ITAT held that even if it is assumed that the transfer of call centre took
place after 08.05.2007, due to the fiction created by section 92A(2),
the AE relationship would continue for the entire year and there is no
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question of applying section 92B(2).

took place before the execution of SPA. Once it is held that the call
centre was transferred before the share transfer, once again the
applicability of section 92B(2) is ruled out.

arrived at on the basis of language of section 92B(2), the second
finding has been arrived at by examining the terms of the SPA. The
revenue's argument in respect of the above findings are as follows :

122 of its judgment. It has held that the assessee was a associated
enterprise of both HTIL and VIH BV during the previous year in
terms of section 92A(2). Thus, once two enterprises are associated
enterprise at any time during the previous year they shall be deemed to
be the associated enterprise for the purpose of section 92A(1).
Similarly at Para 128, it has been held that HWP (India) is an
associated enterprise of the assessee for the year under consideration,
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therefore, the provisions of section 92B(2) are not applicable. Further
at Para 123, it has been held that the BTA has preceded the SPA.

92A(2) along with section 92B, should be given a purposive
interpretation. The words 'at any time during the year' should be
considered qua the relevant 'international transaction'. It may be seen
that section 92(1) starts with 'any income from an International
Transaction....'. Thus, in the TP proceedings, one has to see firstly
whether there is a 'transaction', if yes, whether it is entered into
between 'associated enterprise'. The words 'at any time during the
year' were introduced in the Act to overcome a situation where the
assessee would contend that although it was an AE at the time when
the transaction was entered into, but was not an AE either at the
beginning of the year or at the end of the year, and hence the TP
provision would not apply. The relationship of associated enterprise
should be considered at the time when the relevant international
transaction was entered into. If the interpretation adopted by the ITAT
that once two enterprises are associated enterprise at any time during
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the previous year they shall be deemed to be the associated enterprise
for the entire year is upheld, it would lead to anomalous and

explained diagrammatically as Annexure A-1. In the example
depicted therein A Ltd., is an Indian company which has purchased
goods from B Ltd. Hongkong. Both A & B are held by the same
holding company X Ltd. Mauritius. Therefore, the transaction of
purchase of goods by A from B Ltd. is subject to Transfer Pricing
provisions at the time the transaction is entered into. Subsequently X
Ltd. Mauritius ceases to be the holding company of B Ltd. Hongkong
in the same previous year. B. Ltd., is now held by some other party
not related to X Ltd., Mauritius and A Ltd., India. Therefore, at some
point during the year A Ltd., India and B Ltd., Hongkong ceased to be
AEs as they failed to fulfil any of the conditions u/s.92A(1) and (2).
That is the position at the end of the previous year.

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Ltd., India and B Ltd., Hongkong (during the period they complied
with the conditions in section 92A) is covered by the TP provisions,
the legislature used the word 'at any time during the year'. The object
of using these words is only to ensure that a transaction which in fact
was undertaken between parties who fulfilled the conditions contained
in Section 92A at the time when the transaction was undertaken, does
not escape the applicability of the TP Provisions. However, the
purpose of the words at any time during the year cannot be extended
to such an extent that transactions that were undertaken at a time when
the parties did not fulfil any of the conditions contained in section
92A(1) the transaction would still be subjected to Transfer Pricing
Provisions.

transferred before the share is based on the interpretation of the
provisions of SPA. The ITAT has relied on clause 8.8(j) of the SPA
wherein it is stated that HTIL was under an obligation to procure and
deliver the call centre business transfer agreement duly executed into
between the assessee and an affiliate of HTIL at the time of
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completion of SPA on 08.05.2007. Relying upon this clause, the ITAT
has concluded that the call centre business has therefore been
transferred by the assessee before the execution of the SPA on
08.05.2007. Once it was held that the call centre business was
transferred prior to the execution of the SPA, the ITAT held that the
assessee and HWP India being associate enterprises, section 92B(2)
will have no application. Clause 8.8. of the SPA can be referred to at
page no.469/Vol.II of appellant paper book. Further the term
completion is defined as part of the definition clause in the SPA.

completion of share sale whereas the ITAT has incorrectly assumed
that these conditions are required to be fulfilled prior to the
completion. The Revenue's argument in this regard is further
supported by the following clauses in the SPA as well as the BTA
which clearly evidence the fact that the call centre transfer took place
on 04.12.2007 long after the execution of SPA on 08.05.2007.

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(Vol.II / Pgs. 447 to 566 of the appellant):-

which shows that the transaction contemplated is disposal and the

Completion means sale and purchase of share and the loans.

date of the SPA to the date of completion of termination.

when Completion takes place.

HWL relating to the Call Centre Disposal substantially in the form
attached to the Disclosure Letter.

transferred to a VIH BV. The completion date would be 8.5.2007.

be executed only after completion, i.e. “On Completion”. Since
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completion has been defined as completion of share of CGP, it is
obvious that BTA is to be signed only after the share of CGP is
transferred.

Submissions below.

Submissions below.

Submission below.

intention of the parties was always to transfer the call centre only upon

December 2007.

(Recital (C) on page 45090/Vol.XIII). The 'closing date' is defined as
the date on which closing takes place in accordance with BTA as
mentioned in Clause 6.1 (Page No.4513/Vol.XIII). As per Clause 6.1,
the sale and purchase of the business shall be completed on the third
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business day after the closing conditions are fulfilled as per Clause 5
of the BTA. The closing date as declared in financial of the appellant

the purchaser shall purchase the business at the closing date
(Pg.4509/Vol.XIII).

asset shall pass to purchaser on closing (Pg.4509/Vol.XIII).

on closing as per Clause 3 of the BTA (Pg, 4510/Vol.XIII).

conditions precedent being satisfied as per clause 5.1 of the BTA

business can only take place after the condition specified in clause 5.1

December, 2007.

to the purchaser on the closing date certifying that the Board of
Directors have passed resolution authorising the sale of the business,
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the execution of BTA and consummation of BTA (refer to Clause 6.2.1
on Pg.4513/Vol.XIII). Similarly, the purchaser also will provide
similar certificate under Clause 6.3.1 (Pg.4514/Vol.XIII). The
requirement of the Board resolutions and other formalities as of the
closing date, shows that the parties to BTA must have obtained these

was a Vodafone group company. This conclusively proves that the
transaction was completed between two unrelated parties.

and the closing memorandum will be issued on completion of actions
mentioned in Clause 6,

the call centre were the employees of VISPL (appellant) till the
closing date. This also proves that the transfer took place on the
closing date.

group as the vendor and provides that all the communications required
to be delivered to vendor, should be addressed to “Vodafone Group
Services Ltd., United Kingdom”. Since in the transaction of sale of
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call centre the vendor is the appellant and the vendor as per clause 14
of the BTA is stated as the Vodafone Group, it is clear that the BTA
has taken place after appellant became part of Vodafone Group.

supported by the List of Dates & Events submitted by VIH BV in the
Vodafone case before the Supreme Court.(page 3456-3486 /Vol.IX/A).
At Sr.no. 71 to 75 of the List of Dates, VIH BV has submitted that the
consideration was paid to HTIL and the share was transferred in the
name of VIH BV in the register of members of CGP, CI. A tax deed of
covenant was also signed in favour of the VIH BV to indemnify VIH
BV in respect of taxation or transfer pricing liabilities. Thereafter, the
nominee share in 3 GSPL was transferred. This clearly shows that 3

May before BTA was entered. The signing of the BTA has been
shown at sr.no.78. Thus, as per VIH BV's own list of dates the BTA
was signed after the CGP share was transferred, as was contemplated
by the SPA. This is an admission before Hon'ble Supreme Court,
which binds the appellant.

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(Pg.No.4520/Vol.XIII), the BTA can be terminated by mutual consent.
Therefore, VISPL has a right to terminate the BTA. In case of
termination of BTA, the call centre will remain with VISPL which on
8/5/2007 became a Vodafone group company. Therefore, if the
intention was to transfer the call centre from one Hutch group
company (GSPL) to another Hutch group company (HWP India),
there would have been no need for such a termination clause. This
proves that the call centre was to be transferred by Vodafone group to
Hutch group with adequate safeguards built in. For example, the SPA
provides that the call centre business could only be transferred to an
affiliate of HWL. Even the Draft BTA has been made a part of SPA.
Similarly, the clause 13(c) (Pg.No.505) ensures that the directors are
not changed till the transfer is completed. Similarly, the interest in
Vodafone is protected by clause 10.2 (Pg.No.498). This shows that it
was not possible to sign the BTA before the share transfer. Hence, the
contention of the appellant that the parties to the BTA are associated
enterprises is incorrect.

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the aforementioned BTA and completion of statutory formalities, the
transfer was effective December 4, 2007”. Another strong and
irrefutably positive evidence of call centre being part of Vodafone
Group for the period from 11.2.2007 to 4.12.2007 is the fact that in its
financials for the year ended 31.3.2008, the appellant has not only
shown its business being running of call centre (ITES) and holding of
investment in call options but has also included the income from call
centre business in its hands till the date of transfer. This proves that
the transfer took place on 4 December, 2007.

that the transfer call centre was always intended to take place only
upon completion of conditions precedent and the same happened only

the same conclusion. Hence, the date of the international transaction

conclusions are supported by the decisions in the case of Harish
Chandra & Ors. vs. CIT (1985) 154 ITR 478(Del.) - para No.8, Smt.
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Raj Rani Devi Ramna vs. CIT (1993) 201 ITR 1032 (Pat.) - para No.4
and para No.6.

purpose of deciding the transfer of call centre is the date when the
transfer of call centre took effect. The date of the BTA is not relevant
for the purpose of deciding the date when the transfer of call centre
took place. The BTA merely evidences the terms and conditions under
which the transfer of the call centre will take place. The clauses
extracted above show that the transfer could not have taken effect until
fulfilment of various conditions which took place only on 04.12.2007.
This reading is also in accordance with clause 8.8(j) of the SPA.
Accordingly, it is submitted that the transfer of call centre business
took place only on 04.12.2007 and not at any time before that.

04.12.2007, the share transfer had already taken effect and the
assessee was part of the Vodafone Group and HWP India was not an
associate enterprise of the assessee. The revenue submits that it was
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not only the intention of the parties to transfer the call centre business
only after fulfilment of various conditions specified in the BTA, but
the transfer in fact took place on 04.12.2007. In this connection, it
may not be out of place to mention that in the context of the transfer of
shares, the relevant date considered for the purposes of determining
AE relationship is 08.05.2007 when the SPA was executed and not
11.02.2007 when the SPA was entered into. For these reasons, it is
submitted by Mr. Setalvad that there is no merit in this appeal and it
be dismissed.

position is admitted to an extent by the parties. Firstly, it is admitted
that there was a writ petition filed in this Court by the company viz.
VIH BV and which was contested by the respondents. That is
involving an issue whether a transaction of acquisition of share and
undertaken and completed overseas can be subjected to Indian tax
laws and particularly levying a tax on income. In that writ petition,
the original petitioner lost before a Division Bench of this Court and
which in a detailed judgment held that the transaction has a nexus or
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connection with the Indian tax law and, therefore, can be subjected to
Income Tax Act, 1961. Being dissatisfied with this judgment and
order, the original petitioner carried the matter to the Hon'ble Supreme

Court was reversed. In other words, this Court's judgment was set
aside. The Parliament then amended the Act and the definition of the
term 'capital asset' in section 2(14) and 'transfer' in section 2(47) came
to be amended. Certain words and expressions and explanations came
to be added with retrospective effect. We must further clarify that the
parties have proceeded on the basis that these retrospective
amendments are constitutionally legal and valid. Their legality and
validity is not questioned in these proceedings. Based on the words
and expressions earlier used and now employed the parties have
addressed us.

petition in this Court, during its pendency and when the matter was at
large before the Hon'ble Supreme Court may be noted.
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assessee's appeal. We are not required to go into the correctness of the
Tribunal's findings and conclusions on all grounds, save and except
those which have been highlighted before us. We must note that it is
with regard to ground Nos.2 to 6 in the Memo of Appeal before the
Tribunal that the essential arguments were canvassed. These grounds
are taken by the Tribunal together for consideration. From para 21
onwards, the Tribunal has noted the facts and found that the Hutchison
Group, Hong Kong (HK) first invested into the telecom business in
India in 1992. It invested as a group in an Indian joint venture vehicle
by the name Hutchison Max Telecom Limited (HMTL) later renamed

incorporated in Cayman Islands with limited liability as an exempted
company its sole shareholder being Hutchison Telecommunications
Limited, Hong Kong (HTL for short). This company HTL stood
transferred to HTI (BVI) Holdings Limited [HTIHL (BVI) for short].

regard. Hutchison Telecommunications Limited, Hong Kong, and
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thereafter HTIHL (BVI) was thus the buyer of the CGP share. HTIHL

Tribunal, of Hutchison Telecommunications International Limited
(HTIL for short). In February, 2005, consolidation of of HMTL / HEL
was effected. Consequently, all operating companies below HEL were
held by one holding company HMTL / HEL. There were Indian Tier I
companies above HMTL / HEL. The consolidation was first noted as

5.61% shareholding in Bharti Televentures Ltd. On the same day,
Vodafone Mauritius Limited subsidiary of VIH agreed to acquire
4.39% shareholding in Bharti Enterprises Limited which indirectly
held shares in Bharti Televentures Limited, now Bharti Airtel Limited.

of India enhancing the Foreign Direct Investment (FDI) ceiling from
49% to 74% in telecom sector. Under this Press Note proportionate
foreign component held in any Indian company was also to be counted
towards the ceiling of 74%. According to the Tribunal, since there
was a sectoral cap / ceiling on the FDI in the telecom sector, the
assessee (GSPL) entered into framework agreements in march, 2006
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under which the share holding of HEL was restructured through TII,
an Indian company in which Analjit Singh and Asim Ghosh acquired
shares through their group companies with the credit support provided
by HTIL. In consideration of credit support, the parties entered into
framework agreements under which call options were given to GSPL
to buy from AG and AS companies, the entire share holding in TII and
consequently indirect holding in HEL. The shareholding of HEL
underwent a change in August, 2006 through execution of 2006 IDFC
framework agreement on similar terms of providing financial
assistance by HTIL and assessee and in consideration whereof the
assessee would have call option to buy entire equity shares of SMMS
thereby its entire holding in HEL. The GSPL was understood as the
assessee in the Tribunal's order. The Tribunal in para 23 holds that
due to the transfer of the entire share capital (single share) of CGP
from HTIL group to VIH BV, the Vodafone group acquired the
controlling interest in HEL via its subsidiary VIH BV through the
subsidiary companies of HITL group with control of 67% in HEL
including indirect 15% holding through framework agreements. New
framework agreements were executed in the month of July 2007,
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between the assessee and Indian Partners holding 15% indirect interest
in HEL. These new framework agreements were entered into because
of change of holding group companies from HTIL to Vodafone.
Certain changes in terms and conditions of 2007 framework
agreements were made which has led to the controversy in question.
The Assessing Officer has treated these changes being transfer /
assignment of option rights held by the assessee in 2006 agreement in
favour of its holding company VIH (BV) by virtue of 2007 framework
agreements. In paragraph 24 of the Tribunal's order at running page
128, how the Tribunal understood the transaction further is quoted
hereinbelow:

recasting of framework agreement in 2007 tantamounts to assignment
of option rights held by the assessee under the framework agreement
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of 2006. The Tribunal had before it an argument and very seriously
canvassed also before us, that the issues of fact and law now raised are
fully covered by the decision of the Hon'ble Supreme Court in the case

Reliance was placed on paragraph 88 of this judgment and several
paragraphs which we will note hereinafter. However, the Tribunal's
understanding of the matter and the issue is based on the judgment and
order of a Division Bench of this Court in a Writ Petition which was
filed by one of the parties post the Supreme Court judgment (supra).
The Division Bench which delivered the judgment and reported in

Court judgment (supra) but the amendments brought in the Act post
that decision and with retrospective effect. That changes the nature
and colour of the controversy according to the Tribunal. Hence in
paragraph 26 the Tribunal holds that the issue of assignment of option
rights has to be adjudicated by considering and examining the
framework agreements along with any documents or developments

judgment of the Hon'ble Supreme Court, the observations of this
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Court as well as the amendments in section 2(47) together with
transfer pricing provisions of the Act. The Tribunal was also of the
view that the new facts and record brought before it are relevant. The
argument of the assessee was that there was no transfer or assignment
of call option in the present case as no call options were transferred in
the framework agreements of 2007. The assessee continued to hold
these rights. Reliance was placed, according to the Tribunal, on clause
4.4 of the framework agreements and it was urged that it is identical to
or substantially similar to the counterpart clause of the 2006
framework agreement though the language is different. These
documents were drafted by different set of foreign lawyers. The
assessee's arguments were noted, particularly that there was no
material difference between the clauses and, in any case, the new

assessee to VIH BV or to any other entity. The argument principally,
therefore, was that the issue stands concluded by the judgment of the
Hon'ble Supreme Court (supra). We would proceed on the footing that
paragraphs 26 to 29 of the Tribunal's order merely note the rival
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contentions.

different inasmuch as in the said paragraphs, the Tribunal specifically
negates the argument of the assessee's senior counsel that the issue
stands concluded by the judgment of the Hon'ble Supreme Court
(supra). The reason for the same is to be found in paragraph 31 where
the Tribunal concludes that the Hon'ble Supreme Court examined the
question in the context of transfer of asset of the assesseee by its
holding company HTIL to VIH BV, by virtue of share transfer
agreements along with framework agreement and found that despite
the transfer of share holding by HTIL to VIH BV, the same would not
result in transfer of asset of the assessee to VIH BV. The Tribunal
took the view that the question was dealt with only in the context of
transaction between HTIL and VIH BV by virtue of share transfer
agreement and not in the context of transfer of option rights by the
assessee to its affiliate. The understanding of the Tribunal of this
judgment and which has been heavily criticised needs to be noted and
in the words of the Tribunal itself :
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section 2(47) are not found to be applicable to the facts of the case in
hand, then, the Supreme Court's observations and conclusions with
regard to the nature of the agreements, interpretation of their clauses
would bind all authorities and others, including the Tribunal.

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framework agreements, including the additional evidence produced in
the light of the amended provisions of section 2(47) of the Income Tax
Act as well as sections 92B / 92F of the said Act.

to dispose of the first contention of Mr. Salve, the learned senior
counsel appearing on behalf of the assessee. He had argued and very
vehemently that the matter must go back to the Tribunal as the
appellant had no opportunity to meet the case of the Revenue on the

same time he argued that it will not make any difference because the
entire issue stands covered by the judgment of the Hon'ble Supreme
Court (supra). Mr. Salve submits that all the arguments of the
Revenue have been considered by the Hon'ble Supreme Court and no
revisiting or reconsideration of the said judgment is permissible. Mr.
Salve has also urged that a call option was not exercised and never
exercised. A put option is not the same as call option. That there is no
fraud and perpetrated on the Revenue by the assessee inasmuch as the
essential difference between these two options has been lost sight of.
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One is to get hold and the other is to go out. At best, the put option is
exercised in later years. There is an extensive reference made by Mr.
Salve to the ownership chart. In such circumstances and when this is
the sweep of the arguments, it would be futile to send the matter back
to the Tribunal and at this belated stage. The parties having addressed
us on all material and relevant aspects with regard to ground Nos.2 to
6 as forming part of the Tribunal's Memo of Appeal and record, then,
all the more this request of Mr. Salve need not detain us.

issue as to whether the judgment of the Hon'ble Supreme Court in the
first Vodafone case covers the present controversy. Once we have
heard both sides on this aspect extensively and are considering their
arguments, all the more the first contention of Mr. Salve on the matter
going back must be rejected. It is, accordingly, rejected.

taken us not only through the judgment of the Hon'ble Supreme Court
extensively, but the Tribunal's order impugned in this case and urged
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that some of the findings in the impugned order of the Tribunal are in
favour of the appellant. He urged that the Revenue never argued that
there was an assignment in favour of CGP Mauritius and in that regard
our attention has been invited to the chart at page 6, the framework
agreements, the written submissions of the Revenue as are found in
Vol. 13 Page 4490, the appellant's written submissions page 4485 at
para 1 and an order of the Transfer Pricing Officer Vol. 14 Pg. 1102,
1175, 1270 and 1315(d). Once he has taken us through all these
materials, but complained that the Tribunal never put the case noted
by it in paragraphs 40, 41 and 42 of its order to the assessee, then, the
request that the matter must go back could have been considered
favourably. However, Mr. Salve has also addressed us in the
alternative on the nature of the options, their implications and
consequences in law. Once having addressed us and in this manner,
we do not deem it fit and proper to accede to his request of sending the
matter back. That will not serve any fruitful purpose. Once the
Tribunal has taken pains and an enormous effort and delivered a
lengthy order, then, sending the matter back would result in delay in
adjudication of the issue by the Tribunal and thereafter by a higher
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Court. There have been several rounds of litigation between the
parties, hence further delay in taking a decision on Revenue matters
and involving an important question of law will not serve larger public
interest and public purpose either. Hence this request is rejected.

relied upon before reproducing it one aspect needs to be noticed and
that is the term 'transfer' is defined in relation to a “capital asset”.
That term itself is defined in section 2(14) and to read as follows :

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(iii) agricultural land in India, not being land
situate -

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