2016 (5) TMI 395 - HC - Income Tax

Courts territorial jurisdiction to adjudicate the matter - Held that - The initial order dated 21.12.2006, Annexure A.1 under Section 92CA(3) of the Act which was rectified under Section 154 of the Act on 28.12.2006 was passed by the Additional Commissioner of Income Tax (Transfer Pricing), Hyderabad. The final assessment order dated 29.12.2006, Annexure A.2 was passed by the Deputy Commissioner of Income Tax, Circle 2(1), Hyderabad. Even the appeal was filed by the assessee before the CIT(A) at Hyderabad. Further appeal by the assessee and cross appeal by the revenue were filed before the Tribunal at Hyderabad. Since the initial process of assessment was started at Hyderabad and the final assessment was framed by the Assessing Officer at Hyderabad, this court lacks territorial jurisdiction to adjudicate the matter. In view of the above, this court has no territorial jurisdiction to adjudicate upon the lis over an order passed by the Assessing Officer, i.e. Deputy Commissioner of Income Tax, Circle 2(1), Hyderabad, the complete paper book of appeal

Summary

Issues:
1. Interpretation of provisions under sections 80HHC, 80IB, 80IA of the Income Tax Act, 1961.
2. Application of transfer pricing rules under Section 92CA.
3. Jurisdiction of the court to adjudicate on the matter based on the location of the Assessing Officer.

Analysis:
1. The appeal involved questions regarding the interpretation of provisions under sections 80HHC and 80IB of the Income Tax Act, 1961. The appellant-revenue challenged the Tribunal's decision allowing separate deductions under these sections on the same profits, contrary to section 80IB(13) read with section 80IA(9) of the Act. The Assessing Officer had reduced the deduction under section 80IB from the business profits to calculate the deduction under section 80HHC. The CIT(A) partly allowed the appeal, confirming the deduction under section 80HHC after reducing the amount under section 80IB. The Tribunal partly allowed the appeal filed by the assessee and dismissed the revenue's appeal. The High Court noted the issues but dismissed the appeal due to lack of territorial jurisdiction.

2. The case also involved transfer pricing rules under Section 92CA of the Act. The Assessing Officer referred the international transactions to the Transfer Pricing Officer to determine the Arm's Length Price (ALP). The TPO's order led to additions to the total income of the assessee on account of transfer pricing adjustments. The CIT(A) sustained some additions, which were further contested in the appeal before the Tribunal. However, the High Court did not delve into the merits of these transfer pricing adjustments due to jurisdictional constraints.

3. The High Court emphasized the importance of territorial jurisdiction in adjudicating tax matters. Citing precedents, the court held that it lacked jurisdiction to decide on an order passed by the Assessing Officer in Hyderabad. Referring to the principles of territorial jurisdiction and the transfer provisions under the Act, the court dismissed the appeal and directed the revenue to file before the competent court with proper jurisdiction. This decision was in line with previous judgments on similar jurisdictional issues.

In conclusion, the High Court dismissed the appeal due to lack of territorial jurisdiction, despite the substantive tax issues raised regarding deductions under sections 80HHC and 80IB, and transfer pricing adjustments under Section 92CA. The judgment highlights the significance of territorial jurisdiction in tax matters and upholds the principles governing the allocation of cases based on the location of the Assessing Officer.