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Taxsutra – Indian High Court Finds Transfer Pricing Provisions Inapplicable to Outbound Share Investment; Leaves Angel Tax Impact Open for Post-amendment PeriodMar-08-2019

The Indian High Court recently deleted the transfer pricing adjustment on investment in the share capital of a 100% subsidiary of the taxpayer. The Court relied on an earlier High Court ruling in the case of Vodafone India Services Limited. In tax year 2009/10, the taxpayer, PMP Auto Components Pvt. Ltd, acquired shares of its 100% subsidiary PMP Bakony (AE). The transfer pricing officer (TPO) sought to bring the difference between the actual investment and the fair market value of shares to tax, applying transfer pricing provisions. The TPO also imputed notional interest treating the excess amount paid as a deemed loan granted to the outbound subsidiary.