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2023 (4) TMI 1296 - AT - Income TaxTP adjustment - resultant effect of omitted clause (i) of section 92BA with effect form 01/04/2017 - DR relied on the decision of Maari Multi Trading Pvt Ltd 2023 (2) TMI 1256 - ITAT MUMBAI wherein Tribunal has, though deleted the TP adjustment made, has remitted the issue back to AO with a direction to re-adjudicate the issue claim of expenditure incurred in respect of the transactions with AE and the clause (b) of sub section (2) to section 40A - HELD THAT - We notice that the Delhi Bench of the Tribunal in the case of Yorkn Tech Pvt Ltd 2021 (8) TMI 1374 - ITAT DELHI as held Clause (i) of Section 92BA did not come into operation whenever any action has been taken especially after such omission. Accordingly, we hold that no Transfer Pricing Adjustment can be made on a domestic transaction which has been referred to by the Assessing Officer after the omission of the said clause by the Finance Act, 2017 even though transaction has undertaken in the Assessment Year 2016-17. We also notice that the co-ordinate bench in the case of Maari Multi Trading Pvt Ltd vs ACIT 2023 (2) TMI 1256 - ITAT MUMBAI has also deleted the TP adjustment by relying on the decision of Texport Overseas (P.) Ltd 2019 (12) TMI 1312 - KARNATAKA HIGH COURT With respect to the contention that the issue should be remitted back to the AO to examine the impugned addition from the perspective of section 40A(2)(b), we notice that the AO, considering the volume of SDT has made the reference to the TPO and has not recorded any adverse finding with regard to the impugned transactions. We, therefore, see no reason to remit the issue for reexamining the impugned transactions from the perspective of section 40A(2)(b) and accordingly we see no merit in the claim of Revenue. Appeal of the assessee is allowed.
Issues Involved:
1. Validity of Transfer Pricing Adjustment after the omission of clause (i) of Section 92BA by the Finance Act, 2017. 2. Whether the issue should be remitted back to the Assessing Officer to examine the impugned addition from the perspective of section 40A(2)(b). Summary: 1. Validity of Transfer Pricing Adjustment: The Tribunal addressed the validity of the Transfer Pricing Adjustment made by the Assessing Officer (AO) after the omission of clause (i) of Section 92BA by the Finance Act, 2017. The Tribunal noted that the AO had referred the specified domestic transactions (SDT) to the Transfer Pricing Officer (TPO) for determining the arm's length price (ALP), which led to a proposed adjustment. The Dispute Resolution Panel (DRP) reduced this adjustment. The Tribunal considered the legal implications of the omission of clause (i) of Section 92BA, referencing the Karnataka High Court's decision in PCIT vs. Texport Overseas (P) Ltd., which held that the omission of the clause should be considered as if it never existed. Consequently, any action taken under the omitted provision is invalid and bad in law. The Tribunal concluded that no Transfer Pricing Adjustment can be made on a domestic transaction referred by the AO after the omission of the said clause, even if the transaction occurred in the Assessment Year 2016-17. 2. Remitting the Issue to the Assessing Officer: The Tribunal also addressed the Department's contention that the issue should be remitted back to the AO to examine the impugned addition from the perspective of section 40A(2)(b). The Tribunal observed that the AO had made the reference to the TPO considering the volume of SDT and had not recorded any adverse findings regarding the impugned transactions. Therefore, the Tribunal saw no reason to remit the issue for re-examination under section 40A(2)(b) and found no merit in the Revenue's claim. Conclusion: The Tribunal allowed the appeal in favor of the assessee based on the legal ground concerning the omission of clause (i) of Section 92BA. Consequently, the grounds raised regarding the merits of the case became academic and did not warrant separate consideration. The appeal of the assessee was allowed, and the order was pronounced in the open court on 24/04/2023.
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