2022 (1) TMI 411 - AT - Income Tax

Transfer pricing - Specified Domestic Transaction (SDT) u/s 92BA(i) r.w.s. 40A(2)(b) - whether under the present facts and circumstances of the case Section 92BA(i) would be applicable particularly when the said section was omitted from the statute by the Finance Act, 2017 w.e.f. 01.04.2017? - HELD THAT - It is a settled principle of law that when a particular provision is repealed from the statue the normal effect would be to obliterate it from the statute book as completely as if it had never been passed and the statute must be considered as a law that never existed - in a case where a particular provision in a statute is unconditionally omitted and in its place another provision dealing with the same contingency is introduced without a saving clause in favour of pending proceedings then it can be reasonably inferred that the intention of the legislature is that the pending proceeding shall not continue but fresh proceedings for the same purpose may be initiated under the new provision. If that be so, then since the Clause (i) of Section 92BA was omitted by Finance Act, 2017 w.e.f. 01.04.2017 from the statute the same cannot be made applicable in the pending proceeding. It is, therefore, to be considered non-est in the concerned statute as if it had never been passed. In that view of the matter once the said Clause being omitted w.e.f. 01.04.2017 the decision made by AO/TPO and DRP invoking such Section 91BA is without any basis, and/or jurisdiction, invalid and bad in law and, thus, the same is liable to be quashed. No justification in passing the impugned order by the TPO/AO in making upward adjustment invoking Section 92BA(i) of the Act in the present facts and circumstances of the case particularly when the said section stood omitted w.e.f. 01.04.2017 from the statute itself. Hence, we find the same is without any basis, void ab initio and without jurisdiction. In our considered opinion the impugned order is, thus, bad in law and hence the same is hereby quashed. - Decided in favour of assessee.

Summary

Issues involved:
1. Applicability of Section 92BA(i) of the Income Tax Act, 1961 post its omission by the Finance Act, 2017.

Detailed Analysis:
1. The appeal challenged an order related to the purchase of business undertakings under the slump sale arrangement as Specified Domestic Transaction (SDT) under Section 92BA of the Act. The assessee argued that post the omission of Section 92BA(i) by the Finance Act, 2017, such transactions were not covered under SDT. The assessee contended that the transfer pricing provisions did not apply as the purchase of undertakings did not involve payments to a person under Section 40A(2)(b). The assessee cited precedents and argued that the omission of Section 92BA(i) rendered it non-existent in law, thus challenging the jurisdiction of the authorities in treating the transactions as SDT.

2. The tribunal considered the legal implications of the omission of Section 92BA(i) from the statute by the Finance Act, 2017. It noted that when a provision is repealed, it is as if it never existed, and fresh proceedings may be initiated under the new provision. Relying on the judgment of the Hon'ble Karnataka High Court and various ITAT benches, the tribunal concluded that the transactions in question, falling under the omitted Section 92BA(i), could not be subject to transfer pricing adjustments. The tribunal found the orders based on Section 92BA(i) to be without jurisdiction, invalid, and bad in law. Consequently, it quashed the impugned order, as it lacked any legal basis post the omission of the relevant section.

3. The tribunal's decision was based on the principle that the omission of Section 92BA(i) rendered it non-existent in law, and any actions taken based on it were invalid. Citing precedents and legal interpretations, the tribunal found no justification for the authorities' actions in invoking Section 92BA(i) post its omission. The tribunal allowed the appeal solely on the maintainability point, considering the impugned order as void ab initio and without jurisdiction. As a result, the tribunal quashed the order, rendering further discussion on the merits of the case unnecessary.

This detailed analysis of the judgment highlights the core issue of the applicability of Section 92BA(i) post its omission by the Finance Act, 2017, and the subsequent legal implications on the related transactions and transfer pricing adjustments.