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TMI Blog2019 (3) TMI 1309X X X X Extracts X X X X X X X X Extracts X X X X ..... specified domestic transaction, the TPO can under take transfer pricing study only in relation to those transactions which are referred to him under sub-section (1) of Section 92C of the Act. Revenue is correct in pointing out that in the present case, the assessee did not report such transaction at all and therefore, the Assessing Officer had no occasion to notice such transaction as specified domestic transaction. His reference, therefore, was necessarily confined to the reported transactions. The TPO noticed this anomaly, he proceeded to determine the arm's length price after full opportunity of hearing to the petitioner. There may be number of cases where the assessee may bonafide hold a belief that certain transaction is not a specified domestic transaction and therefore, would not report the same under Section 92E of the Act. Whether bonafide or not, not making a report by the assessee of a specified domestic transaction would not leave the revenue without remedy. As clarified by CBDT in the instructions dated 20.5.2013, it is always open for the TPO who notices such transaction during the course of the proceedings before him to call for a reference by the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advised not to undertake in a writ petition. - Writ Petition No. 3386 of 2018 - - - Dated:- 15-3-2019 - AKIL KURESHI SARANG V. KOTWAL, JJ. Mr. Jehangir Mistri, Sr. Counsel a/w Mr. Harsh Kapadia for the Petitioner Mr. P. C. Chhotaray a/w Mr. P.A. Narayanan for Respondent Nos. 2 to 4 ORAL JUDGMENT (Per Akil Kureshi, J.) 1. The petitioner has challenged an order dated 15.10.2018 as at Annexure M to the petition passed by the Transfer Pricing Officer ( TPO for short) under Section 92CA(3) of the Income Tax Act, 1961 ( the Act for short). 2. Brief facts are as under:- 2.1 Petitioner - Times Global Broadcasting Company Ltd is a company registered under the Companies Act, 1956 and his a wholly owned subsidiary of Benett, Coleman and Company Ltd (hereinafter referred to as BCCL ). The petitioner is engaged in the business of distribution of television channels for the Times Group entities. It also provides support services to Times Group entities in the area of finance, legal, human resources, commercial, administration and technical and broadcasting. With effect from 1.4.2014, the petitioner demerged one of its business undertakings into BCCL. The sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prescribed form '3CEB'. According to the petitioner, the support services resulted into an income in the hands of the petitioner and therefore, the same could not be considered a specified domestic transaction and was accordingly, not reported. 2.4 In order to determine the arm's length of the specified domestic transaction, the petitioner had adopted TNMM as the 'Most Appropriate Method'. The petitioner presented data to contend that the payment of subscription fee to the related party was at arm's length. 2.5 Return of income filed by the petitioner was selected for scrutiny. The Assessing Officer made a reference to the TPO for determining the arm's length price of the specified domestic transactions reported in from 3CEB . The petitioner appeared before the TPO in response to the notice issued and besides others, took a contention that in view of the express omission of clause (i) to Section 92BA of the Act without any saving clause, reference itself was not competent. Further correspondence ensued between TPO and the petitioner company during which the TPO also desired to take within the sweep of transfer pricing study, the petitioner' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Any Expenditure as provided under Section 92BA of the Act and arms length price of the transactions is required to be computed in accordance with provisions of the Act. The amount of outstanding creditors pertaining to the demerged unit of assessee is Nil and its books as on 31.5.2015 and hence, this amounts to a payment as envisaged under the provisions of Section 92BA of the Act. 7.7 As per the provisions of Section 92C of the Act, the arm's length price in relation to a specified domestic transaction shall be determined by any of the methods, being the most appropriate method, having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe. The assessee has however not done the transfer pricing study of the above stated transactions nor applied any method to determine Arm's Length Price of the transactions. 7.8 As per provisions of section 92E of the Act, every person who has entered into an international transaction or specified domestic transaction during a previous year shall obtain a report from an accountant and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO as the case may be. 7.12 AO is also requested to initiate penalty proceedings u/s. 271(1) (c) of the Act in respect of other adjustments made to total income on account of furnishing inaccurate particulars of taxable income. 8. TPO's conclusions: In view of the above following adjustment is made in ALP. Adjustment to taxable income: SR.NO. Adjustments on account of Amount in Rs. 1 ALP adjustment made on SDT's reported in the form 3CEB towards payment of subscription fees. 26,55,06,880 2 ALP adjustment made on SDT's not reported in the form 3CEB towards payment of creditors in the Demerger Process 57,54,00,000 Total Adjustments made 84,09,06,880 2.7 The petitioner has challenged both these adjustments on various grounds. With respect to adjustment of ₹ 57.54 crores towards payment of creditors in demerger process, the case of the petitioner is that in absence of any specific reference by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice of reopening of assessment issued by the Assessing Officer had held and observed that, though the writ of prohibition or certiorary will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well settled, will issue appropriate orders or directions to prevent such consequences. The existence of such alternative remedy is not however always a sufficient reason for refusing a party quick relief by a writ or order prohibiting an authority acting without jurisdiction from continuing such action. It was further observed that, when the Constitution confers on the High Courts the power to give relief it becomes the duty of the courts to give such relief in fit cases and the courts would be failing to perform their duty if relief is refused without adequate reasons. It is not necessary to refer to large number of authorities on the point in this context. Therefore, if we find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be made to a person, referred to in clause (b) of subsection (2) of Section 40A. 7. Section 92CA of the Act pertains to reference to Transfer Pricing Officer. Relevant portion of this Section reads as under:- (1) Where any person, being the assessee, has entered into an international transaction [or specified domestic transaction] in any previous year, and the Assessing Officer considers it necessary or expedient so to do, he may, with the previous approval of the [Principal Commissioner or] Commissioner, refer the computation of the arm's length price in relation to the said international transaction or specified domestic transaction under section 92C to the Transfer Pricing Officer. (2) Where a reference is made under sub-section (1), the Transfer Pricing Officer shall serve a notice on the assessee requiring him to produce or cause to be produced on a date to be specified therein, any evidence on which the assessee may rely in support of the computation made by him of the arm's length price in relation to the international transaction [or specified domestic transaction] referred to in sub-section (1). [(2A) Where any other international transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be, expires:] [Provided that in the circumstances referred to in clause (ii) or clause (x) of Explanation 1 to section 153, if the period of limitation available to the Transfer Pricing Officer for making an order is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to have been extended accordingly.] [(4) On receipt of the order under sub-section (3), the Assessing Officer shall proceed to compute the total income of the assessee under sub-section (4) of section 92C in conformity with the arm's length price as so determined by the Transfer Pricing Officer.] 8. Section 92E requires every person who has entered into an international transaction or a specified domestic tranasaction during a previous year to obtain a report from an accountant and furnish the report on or before the specified date in the prescribed form and verified in specified manner containing particulars as may be prescribed. 9. Analysis of above noted statutory provisions would show that under sub-section (1) of Section 92CA, where any person has entered into an international transaction or specified domestic tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as if such international transaction is a transaction referred to him under sub-section (1). The common feature of both these sub-sections is that they take within the sweep only an international transaction. Conspicuous by absence is the reference to any specified domestic transaction. 12. One thing therefore, that can be safely concluded is that the legislature while making amendments in various provisions contained in Chapter X of the Act, covering the cases of specified domestic transactions in transfer pricing mechanism, did not make any such corresponding change in sub-sections (2A) or (2B) of Section 92CA. We may recall, sub-section (2A) was inserted by Finance Act of 2011. Therefore, when under Finance Act of 2012, the specified domestic transactions were being made subject to transfer pricing mechanism, there was no reason for the legislature, if so thought necessary, to include a reference to specified domestic transaction under sub-section (2A). More significant indication of the conscious legislative process is the fact that sub-section (2B) was inserted under the same Finance Act of 2012 by which the specified domestic transactions became subject matter of transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equires the Assessing Officer to obtain an approval from senior Revenue Authority before a reference is made. Such requirement cannot be jettisoned by the TPO exercising sue motu jurisdiction over the transaction not reported to him. 15. This Court in case of Vodafone India Services Pvt Ltd Vs. Union of India Ors. [2013] 359 ITR 133 (Bom) considered a question whether the TPO could have considered a transaction coming to his notice during the course of the proceedings before him, though not referred to him by the Assessing Officer in a case which arose prior to 1.6.2011 when sub-section (2A) was inserted in Section 92CA of the Act. In this context, the Court held and observed as under:- 28. Sub-section (2A) undoubtedly confers fresh jurisdiction upon and extends the jurisdiction of the TPO. Prior thereto, the TPO was not entitled to deal with or consider international transactions which came to his notice without the same being referred to him by the AO. Prior to sub-section (2A) being introduced with effect from 1st June, 2011, the TPO was entitled to determine the arm's length price in relation to an international transaction only upon the same being referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct in pointing out that in the present case, the assessee did not report such transaction at all and therefore, the Assessing Officer had no occasion to notice such transaction as specified domestic transaction. His reference, therefore, was necessarily confined to the reported transactions. The TPO noticed this anomaly, he proceeded to determine the arm's length price after full opportunity of hearing to the petitioner. 19. Even in such a situation, the statute does not permit the TPO to assume the jurisdiction to determine the arm's length price of a specified domestic transaction not reported to him. There may be number of cases where the assessee may bonafide hold a belief that certain transaction is not a specified domestic transaction and therefore, would not report the same under Section 92E of the Act. Whether bonafide or not, not making a report by the assessee of a specified domestic transaction would not leave the revenue without remedy. As clarified by CBDT in the instructions dated 20.5.2013, it is always open for the TPO who notices such transaction during the course of the proceedings before him to call for a reference by the Assessing Officer. If the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal's case, Titagarh Paper Mills' case and other similar judgments that the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation. All the contentions on merits raised by the learned counsel for the petitioner in relation to this adjustment require minute examination of documents and materials on record and accounts. Even the contention of breach of natural justice is not possible of summary consideration. The TPO had issued ..... X X X X Extracts X X X X X X X X Extracts X X X X
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