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2024 (5) TMI 1169 - AT - Income TaxTP adjustment under Specified Domestic Transactions after Omission of Clause (i) of Section 92BA - HELD THAT - As per ratio of judgment of Texport overseas (P) Ltd. s case 2019 (12) TMI 1312 - KARNATAKA HIGH COURT it is well settled principle of law that once this section is omitted w.e.f. 1.4.2017 the resultant effect is that it had never been passed to be considered as a law and never been existed. The request/submission of learned departmental representative for reference to the President, ITAT to constitute Special Bench because ITAT Mumbai and Delhi Benches of equal strength have given conflicting judgments has been considered and not granted. Therefore the request of Learned departmental representative for reference to the President, ITAT is declined. Thus no transfer pricing adjustment can be made on account of domestic transaction which has been referred by the AO, after omission of Clause (i) of section 92BA of the Act by Finance Act 2017. Therefore, the impugned order is not legal and deserves to be set aside. Decided in favour of assessee.
Issues Involved:
1. Validity of Transfer Pricing (TP) adjustment under section 92CA(3) of the Income Tax Act, 1961. 2. Effect of the omission of clause (i) of section 92BA by the Finance Act, 2017. 3. Application of judicial precedents and conflicting judgments. Detailed Analysis: 1. Validity of Transfer Pricing (TP) Adjustment under Section 92CA(3) of the Income Tax Act, 1961: The appeal concerns the addition of Rs. 7,47,40,000/- made by the Learned Assessing Officer (AO) on account of TP adjustment. The assessee filed the return of income on 29.11.2016, and the case was selected for complete scrutiny. A reference to the Transfer Pricing Officer (TPO) was made to determine the Arm's Length Price. The TPO passed an order on 31.10.2019, and the Dispute Resolution Panel (DRP) issued directions on 24.03.2021, which were incorporated into the AO's order dated 30.04.2021. 2. Effect of the Omission of Clause (i) of Section 92BA by the Finance Act, 2017: The appellant argued that the provisions of section 92BA(i) were omitted by the Finance Act, 2017, and as a result, the adjustment made regarding domestic transactions is without jurisdiction and should be deleted. The appellant cited the Karnataka High Court's decision in Principal Commissioner of Income Tax vs. Texport Overseas (P.) Ltd., which held that the omission of a statutory provision means it is obliterated from the statute-book as if it had never been passed. The department countered that the issue of TP adjustment under Specified Domestic Transactions was dealt with in detail by the DRP. They argued that the omission of clause (i) of section 92BA does not invalidate proceedings initiated before its omission. They cited Supreme Court decisions in PCIT vs. Wipro Ltd., Commissioner vs. Dilip Kumar & Co., and CIT vs. GM Knitting Industries (P) Ltd., which emphasized a stricter interpretation of the Act. 3. Application of Judicial Precedents and Conflicting Judgments: The appellant relied on ITAT Delhi Bench decisions in Yorkn Tech Pvt. Ltd. vs. DCIT and DCIT vs. DLF Urban Pvt. Ltd., which held that no TP adjustment can be made on domestic transactions after the omission of clause (i) of section 92BA. The department pointed out conflicting judgments, including the Mumbai Tribunal's decision in Firemenich Aromatics (India) Pvt. Ltd. vs. ACIT, which held that the omission of a provision does not invalidate ongoing proceedings. The Tribunal noted that the issue has been addressed differently by various benches. The Delhi Bench in the case of Yorkn Tech Pvt. Ltd. distinguished the Mumbai Bench's order in Firemenich Aromatics (India) Pvt. Ltd. and followed the Karnataka High Court's decision in Texport Overseas Pvt. Ltd., holding that the omitted clause should be considered as never having existed. The Tribunal emphasized the principle that non-jurisdictional High Court judgments have persuasive value but are not binding. Conclusion: The Tribunal concluded that the omission of clause (i) of section 92BA by the Finance Act, 2017, means it should be considered as never having existed. Consequently, no TP adjustment can be made on domestic transactions referred by the AO after the omission. The request for referring the matter to a Special Bench was declined. The impugned order was set aside, and the appeal of the assessee was allowed. Order: The appeal of the assessee is allowed, and the impugned order is set aside. The order was pronounced in the open court on 22nd May, 2024.
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