RBI Guidelines Not Binding For I-T Act

Recently, in the case of Zeppelin Mobile Systems GmbH, Germany (the assessee) , the Delhi Tribunal rejected the enhancement of capital gains income on share transfer from non-resident to resident, by relying on valuation carried out under FEMA regulations. The Tribunal held that the Reserve Bank of India's (RBI) guidelines on pricing of shares  issued under  FEMA regulations are relevant for remittance purposes only and are not binding for the Income Tax Act, 1961 (the Act). Since the RBI’s guidelines have been issued for specifically for FEMA purposes, it is the FEMA authorities who are competent to take appropriate action against the assessee on breach of the guidelines. This ruling is relevant where price negotiated between the parties is different from normative pricing determined under rules/regulations governing the transaction.

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