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2023 (9) TMI 1669 - AT - Income TaxValuation of Arms Length Price (ALP) of the Specified Domestic Transactions (SDT) between the assessee and its Associated Enterprises (AEs) for purchase of trading goods - Effect of clause (i) of section 92BA omission - 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. See Texport Overseas Pvt. Ltd. 2019 (12) TMI 1312 - KARNATAKA HIGH COURT wherein held when clause (i) of section 92BA having been omitted by the Finance Act 2017 with effect from 01.07.2017 from the Statute the resultant effect is that it had never been passed and to be considered as a law never been existed. Hence decision taken the Assessing Officer under the effect of section 92BI and reference made to the order of Transfer Pricing Officer TPO under section 92CA could be invalid and bad in law. Appeal of the assessee is allowed.
ISSUES PRESENTED and CONSIDERED
The primary issue considered by the Tribunal was whether the omission of clause (i) of section 92BA by the Finance Act, 2017, rendered the adjustments made to the transactions between the appellant and its associated enterprises invalid and contrary to law. Specifically, the Tribunal examined whether the omission of this clause affected the legality of the reference made to the Transfer Pricing Officer (TPO) under section 92CA of the Income-tax Act, 1961, and the subsequent adjustments made to the purchase price in the assessment order. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The legal framework involved the interpretation of section 92BA of the Income-tax Act, 1961, which was concerned with the determination of Arm's Length Price (ALP) for Specified Domestic Transactions (SDTs). Clause (i) of this section was omitted by the Finance Act, 2017. The appellant argued that this omission should be treated as if the clause had never existed, based on established legal principles regarding the repeal or omission of statutory provisions. The appellant cited precedents from the Supreme Court and various High Courts, including the cases of Kolhapur Canesugar Works Ltd. v. Union of India and General Finance Co. v. ACIT, to support this position. Court's interpretation and reasoning: The Tribunal agreed with the appellant's interpretation that the omission of clause (i) of section 92BA should be treated as if the provision had never existed. The Tribunal relied on the principle that when a statutory provision is unconditionally omitted without a saving clause for pending proceedings, it is obliterated from the statute book as if it never existed. This interpretation was supported by the decision of the Karnataka High Court in PCIT v. Texport Overseas (P.) Ltd. and the ITAT Kolkata's own decisions in similar cases. Key evidence and findings: The key evidence presented included the appellant's Form 3CEB, which detailed the SDTs with associated enterprises. The appellant argued that these transactions were erroneously adjusted by the TPO and the Assessing Officer (AO) based on the now-omitted clause (i) of section 92BA. The Tribunal found that since the clause was omitted, the adjustments made under its authority were invalid. Application of law to facts: Applying the legal principle that an omitted statutory provision is treated as if it never existed, the Tribunal concluded that the reference to the TPO and the adjustments made to the purchase price in the assessment order were invalid. The Tribunal determined that no Arm's Length Price was required to be determined for the SDTs in question, as the legal basis for such determination had been removed by the omission of clause (i) of section 92BA. Treatment of competing arguments: The Tribunal considered the arguments presented by the Departmental Representative (DR), who relied on the orders of the authorities below. However, the Tribunal found the appellant's arguments, supported by legal precedents, to be more persuasive. The Tribunal noted that the omission of clause (i) of section 92BA had been interpreted consistently by various judicial bodies as rendering any actions taken under its authority void. Conclusions: The Tribunal concluded that the adjustments made to the appellant's transactions with its associated enterprises were invalid due to the omission of clause (i) of section 92BA. The Tribunal allowed the appellant's appeal and quashed the impugned order. SIGNIFICANT HOLDINGS The Tribunal held that the omission of clause (i) of section 92BA by the Finance Act, 2017, had the effect of rendering the provision as if it had never existed. This meant that any reference to the TPO or adjustments made under this provision were invalid. The Tribunal's decision was based on established legal principles regarding the effect of repealing or omitting statutory provisions, as articulated in precedents such as Kolhapur Canesugar Works Ltd. v. Union of India and General Finance Co. v. ACIT. The Tribunal's core principle established that when a statutory provision is omitted without a saving clause, it is treated as if it never existed, and any actions taken under its authority are void. The Tribunal's final determination was to allow the appellant's appeal and quash the impugned order, effectively invalidating the adjustments made to the appellant's transactions with its associated enterprises.
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