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2023 (12) TMI 499 - AT - Income TaxTP Adjustment - valuation of Arms Length Price (ALP) of the various Specified Domestic Transactions (SDTs) between the assessee and its Associated Enterprises (AEs) - AO had made a reference to Transfer Pricing Officer u/s. 92CA of the Act to determine ALP with respect to SDT u/s. 92BA(1) - HELD THAT - We are of the view that Coordinate Benches have taken a view that since clause (i) of section 92BA stands omitted from the provision and omission of such is to be construed as if it never existed in the Statute Book and if it never existed in the Statute Book, then, no Arm's Length Price is required to be determined for a transaction with specified persons in section 40A(2)(b) of a domestic transaction. If no Arm's Length Price is required to be determined, then, no reference was required to be made. As relying on Texport Overseas Pvt. Ltd 2019 (12) TMI 1312 - KARNATAKA HIGH COURT we allow the Cross Objection of the assessee resulting into deletion of the adjustments made in respect of the SDTs by the Ld. AO.
Issues Involved:
1. Condonation of delay in filing the appeal by the Revenue and the Cross Objection by the assessee. 2. Validity of adjustments made with respect to Specified Domestic Transactions (SDTs) after the omission of clause (i) of section 92BA of the Income Tax Act, 1961. Summary: Issue 1: Condonation of Delay The appeal by the Revenue was delayed by 85 days, and the Cross Objection by the assessee was delayed by 110 days. The Tribunal considered the reasons for the delays, noting that procedural approvals and communication delays were responsible for the Revenue's delay, while the assessee's delay was due to becoming aware of the correct legal position concerning section 92BA through various decisions. The Tribunal referenced the Supreme Court's liberal interpretation of "sufficient cause" under Section 5 of the Limitation Act, emphasizing that justice should not be denied on technical grounds. Consequently, the Tribunal condoned both delays and admitted the appeal and Cross Objection. Issue 2: Validity of Adjustments for SDTs The assessee argued that the adjustments related to SDTs should be deleted as clause (i) of section 92BA was omitted by the Finance Act, 2017, with the effect that the provision never existed in the statute. The Tribunal noted that the omission of a statutory provision without a saving clause means it is as if the provision never existed. The Tribunal cited the Supreme Court's decisions in Kolhapur Canesugar Works Ltd. v. Union of India and General Finance Co. v. ACIT, which support this interpretation. The Tribunal found that since clause (i) of section 92BA was omitted, no Arm's Length Price determination was required for transactions under section 40A(2)(b), rendering the adjustments and references made by the Transfer Pricing Officer (TPO) invalid and contrary to law. The Tribunal also referenced the Karnataka High Court's decision in PCIT v. Texport Overseas Pvt. Ltd., which upheld this view. Conclusion: The Tribunal allowed the Cross Objection of the assessee, resulting in the deletion of the adjustments made in respect of the SDTs. Consequently, the appeal by the Revenue was dismissed as the adjustments did not survive the legal scrutiny. Order Pronounced: The appeal of the Revenue was dismissed, and the Cross Objection of the assessee was allowed. The order was pronounced in the open court on 29th November, 2023.
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