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2022 (7) TMI 790 - AT - Income TaxTP Adjustment - ALP determination qua domestic transactions entered into by the assessee with its partner u/s 92BA(i) of the Act - TP Adjustment of transactions falling u/s 40A(2)(b) - HELD THAT - We find that though all these arguments have been duly considered by the ITAT in the orders for the earlier years, particularly in the case of M/s. Raipur Steel Casting India (P) Ltd. 2020 (6) TMI 629 - ITAT KOLKATA but after taking note the issue was decided in favour of the assessee. In the case of M/s. DVC Emta Coal Mines Ltd. ( 2019 (5) TMI 1709 - ITAT KOLKATA ITAT Kolkata as reproduced the finding of the ITAT Bangalore and thereafter held that effect of Finance Act, 2017 for omission of sub-clause to Section 92BA is that it would be deemed that such clause was never been on the statute book and, therefore, no Transfer Pricing adjustment can be examined with regard to the transactions falling u/s 40A(2)(b). We are of the view that the transactions of the assessee referred to the TPO for determination of ALP could not be made subject to TP adjustment after the Finance Act, 2017, as discussed above. Consequently, no addition on account of TP Adjustment is sustainable because it has been categorically held that omission of a provision would mean that it was never on the statue book - It has to be deemed that it was not in existence in A.Y. 2014-15 and if there was no such provision for recommending the transactions u/s 40A(2)(b) for determination of ALP, there cannot be any adjustment in the income of the assessee on the ground of TP adjustment. Accordingly these grounds of the assessee are allowed. The additions made in the income of the assessee on account of TP adjustment in the domestic transaction are deleted. TDS credit denied - as contended by the assessee that the Assessing Officer has erred in treating the TDS credit of Rs.30,48,824/- only in the assessment order instead of additional claim of TDS credit of Rs.1,22,317/- on mobilization advance claimed by the assessee during the course of assessment proceedings - HELD THAT - CIT(A) has relegated this issue to the file of the Assessing Officer with a direction to grant TDS credit. Since the ld. CIT(A) has already issued direction to the Assessing Officer, we need not issued directions separately. Rather we concur with the ld. CIT(A) on this issue. With the above observation, this ground is disposed off.
Issues Involved:
1. Validity of jurisdiction exercised by the TPO and Income Tax Department after the omission of clause (i) of section 92BA by the Finance Act, 2017. 2. Validity of addition made by the AO based on the TPO's order under the omitted section 92BA(i). 3. Grant of TDS credit to the assessee. Detailed Analysis: 1. Validity of Jurisdiction Exercised by the TPO and Income Tax Department: The core issue revolves around whether the Arm's Length Price (ALP) determination for domestic transactions under section 92BA(i) of the Income Tax Act, which was omitted by the Finance Act, 2017, remains valid. The Tribunal highlighted that the omission of clause (i) of section 92BA means it was never in existence. This interpretation follows precedents set by various ITAT benches, including ITAT Kolkata in M/s. DVC Emta Coal Mines Ltd. vs. ACIT and ITAT Bangalore in Texport Overseas Private Limited vs. DCIT. The Tribunal concluded that any jurisdiction exercised by the TPO and Income Tax Department under the omitted clause is void ab initio. 2. Validity of Addition Made by the AO Based on the TPO's Order: The Tribunal examined the implications of the omission of section 92BA(i) on the addition of Rs.6,19,14,682/- made by the AO based on the TPO's order. It was argued that the omission implies that the provision never existed, thus nullifying any actions taken under it. The Tribunal referred to the Supreme Court's rulings in Kolhapur Canesugar Works Ltd. vs. Union of India and General Finance Co. vs. ACIT, which support the principle that omission of a provision results in its obliteration from the beginning. Consequently, the Tribunal held that the ALP determination and the subsequent addition made by the AO are invalid and must be deleted. 3. Grant of TDS Credit to the Assessee: The assessee contended that the AO failed to grant proper TDS credit, specifically an additional claim of Rs.1,22,317/- on mobilization advance. The Tribunal noted that the ITAT Kolkata Bench had previously directed the AO to allow TDS credit on mobilization advances in earlier years where corresponding income was booked. The ld. CIT(A) had already directed the AO to grant TDS credit, and the Tribunal concurred with this direction, thus resolving the issue in favor of the assessee. Conclusion: The Tribunal allowed the assessee's appeal, holding that the omission of section 92BA(i) renders any TPO and AO actions under it void. Consequently, the addition based on the TPO's order was deleted. The Tribunal also upheld the direction to grant TDS credit to the assessee, thereby allowing the assessee's appeal and dismissing the revenue's appeal.
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