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TMI Blog2023 (8) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant. 3. The addition of Rs. 60,92,02,263/- being adjustment under section 92CA, 234B and general disallowance of the Act made by the Assessing Officer is bad in law. 4. The TPO, DRP and the Assessing Officer erred in - * Rejecting the TP study of the appellant. * Selecting TNM Method for determining the Arm's Length Price (ALP) as against the CUP Method followed by the Company resulting in an illogical comparison of financial data. * Without prejudice to CUP method selected by the Company, we would like to bring to your kind attention that the provisions of Sec, 92C(1) required taxpayer to select the method that under the facts and circumstances provides the most reliable measure of Arm's Length Price. * Based on the facts and circumstances, the most reliable measure of the Arm's Length Price is CUP method. However, the other immediate most appropriate method which would be applicable for Company is Resale Price Method (RPM). 5. The authorities have erred in not giving effect to the reduction in scope of Transfer Pricing for Specified Domestic Transaction vide Finance Act, 2017. Company is having only specified domestic transactions under section 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt satisfies the computation mechanism for determination of the ALP, the determination of ALP by using arithmetic mean of difference comparables is not warranted under the facts and circumstances of the case. 14. The appellant denies itself liable to be levied to interest under sections 234B of the Act and further, the computation of interest under sections 234B was not provided to the appellant as regard to the rate, period and method of calculations of interest under the facts and circumstances of the case. 15. The appellant craves leave to add, alter, delete, and modify any of the grounds which are urged above. 16. For the above and such other grounds as may be urged at the time of hearing the appellant prays your Honour to consider the facts and circumstances of the case and justice be rendered. Grounds of appeal in ITA No. 1599/Bang/2019 for Assessment Year 2015-16 1. The Learned Transfer Pricing Officer (TPO) and the Learned Assessing Officer (AO) has failed to consider the fact that the Company is having only specified domestic transactions under section 92BA read with 40A(2)(b) on which TP Adjustment made by the learned TPO/AO. However, as per para 166 of Bud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er examining the details, rejected the CUP method and applied TNMM method and he determined the adjustment of Rs. 25,72,10,127/-. The AO after receipt of the order under section 92CA passed by the TPO, proceeded to complete the assessment. The AO further observed that the assessee had creditors to which the AO issued notice under section 133(6) of the Act to 13 creditors to ascertain the turnover and also to confirm the balance as on 31.03.2014. The AO partly received replies from the creditors and after examining the information received from the creditors, he observed differences in the closing balance shown by the creditors in their books and the assessee's books and he summarized in the chart as under : Name Ledger Extract Replied Difference Nava Karnataka Steels Pvt Ltd 1,45,42,41,671 1,45,42,41,671 NIL Triveni Movers Pvt Ltd 1,91,88,192 18735117 4,53,075 Nizam Coal Pvt Ltd 5,54,475 5,54,475 M S Metals & Steels 5,46,618 5,43,319 3299 Mandovi Casting Pvt Ltd 1,00,94,268 1,00,94,268 Lakshmi Metallurgy Ltd 73,71,051 73,71,051 HRG Alloys & Steels Hindupur Steel and Alloy 27,18,107 NIL 27,18,107 HCL Coal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has undertaken SDT with its AEs of Rs. 35,76,44,188/-. The TPO suggested for adjustment of Rs. 25,72,10,127- & the assessee has also undertaken other international transactions of Rs. 21,15,692/- as is evident from the TPO order at para No. 3. This issue was raised before the ld. DRP but they did not accept the objection of the assessee. Before deciding this issue, first we refer to the Memorandum of the Finance Bill 2012 in this regard which is as under:- TRANSFER PRICING REGULATIONS TO APPLY TO CERTAIN DOMESTIC TRANSACTIONS Section 40A of the Act empowers the Assessing Officer to disallow unreasonable expenditure incurred between related parties. Further, under Chapter VI-A and section 10AA, the Assessing Officer is empowered to re-compute the income (based on fair market value) of the undertaking to which profit linked deduction is provided if there are transactions with the related parties or other undertakings of the same entity. However, no specific method to determine reasonableness of expenditure or fair market value to re-compute the income in such related transactions is provided under these sections. The Supreme Court in the case of CIT v. Glaxo Smith Kline Asi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt assessment years. [Clauses 12, 23, 29, 33, 35, 37, 38, 92, 94, 97] 7.1. For the sake of convenience we are reproducing the relevant clause of the Finance Bill 2017 as under:- Scope of section 92BA of the Income-tax Act relating to Specified Domestic Transactions The existing provisions of section 92BA of the Act, inter-alia provide that any expenditure in respect of which payment has been made by the assessee to certain "specified persons" under section 40A(2)(b) are covered within the ambit of specified domestic transactions. As a matter of compliance and reporting, taxpayers need to obtain the chartered accountant's certificate in Form 3CEB providing the details such as list of related parties, nature and value of specified domestic transactions (SDTs), method used to determine the arm's length price for SDTs, positions taken with regard to certain transactions not considered as SDTs, etc. This has considerably increased the compliance burden of the taxpayers. In order to reduce the compliance burden of taxpayers, it is proposed to provide that expenditure in respect of which payment has been made by the assessee to a person referred to in under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The learned counsel for the assessee further contended that sub clause (I) of section 92BA under which has undertaken the transactions which has exceeded the prescribed limit, was omitted by the Finance Act, 2017 w.e.f. 1- 4-2017. Since clause (i) has been omitted from the statute by virtue of the amendment, this particular sub clause shall be deemed not to be on the statute since the beginning. In support of his contention, the learned counsel for the assessee has placed a heavy reliance upon the judgment of the Apex Court in the case of Kolliapur Canesugar Works Ltd. v. Union of India in Appeal (Civil) 2132 of 1994 vide judgment dated 1-2-2000 in which the constitution bench has held that section 6 only applies to repeals and not to omissions, and applies when the repeal is of a Central Act or Regulation and not as a Rule. It was further clarified by the Apex Court that in such a case the court is to look to the provisions in the rule which has been introduced after omission, of the previous rule to determine whether a pending proceeding will continue or lapse. If there is a provision therein that pending proceedings shall continue and be disposed of under the old rule as if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 40A exceeds the prescribed limit, it would be a specified domestic transaction for which AU is required to make a reference to TPO under section 92CA of the Act for determination of the ALP. In the instant case, since the transaction exceeds the prescribed limit it becomes the specified domestic transaction for which reference was made by the AO to the TPO under section 92CA for determination of the ALP. Consequently, the TPO submitted a report which was objected to by the learned counsel for the assessee and filed a objection before the DRP. Having adjudicated the objections, the DRP has issued certain directions and consequently the AO passed an order. Subsequently, by Finance Act, 2017 w.e.f. 1-4-2017, clause (i) of section 92BA was omitted from the statute. Now the question arises as to whether on account of omission of clause (1) from the statute, the proceedings already initiated or action taken under clause (1) becomes redundant or otiose. In this regard, our attention was invited to judgment of the Apex Court in the case of Kolhapur Canesugar Works Ltd., (supra) in which the impact of omission of old rule 10 and I OA was examined. Having carefully examined the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business. We do not see any merit in these appeals. The substantial question of law is answered in favour of the assessee and against the revenue. Accordingly, the appeals are dismissed." 9. From the aforesaid judgments, it has become abundantly clear that once a particular provision of section is omitted from the statute, it shall be deemed to be omitted from its inception unless and until there is some saving clause or provision to make it clear that action taken or proceeding initiated under that provision or section would continue and would not be left on account of omission. 10. In the instant case, undisputedly, by the Finance Act, 2017, clause (1) of section 92BA has been omitted w.e.f. 14-20 17. Once this clause is omitted by subsequent amendment, it would be deemed that clause (i) was never been on the statute. While omitting the clause (i) of section 92BA, nothing was specified whether the proceeding initiated or action taken on this continue. Therefore, the proceeding initiated or action taken under that clause would not survive at all. In this legal position, the cognizance taken by the AO under section 9213(i) and reference made to TPO under section 92CA is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his rule, an exception is engrafted by the provisions of section 6(1). If a provision of a statute is unconditionally omitted without a saving clause in favour of pending proceedings, all actions must stop where the omission finds them, and if final relief has not been granted before the omission goes into effect, it cannot be granted afterwards. Savings of the nature contained in section 6 or in special Acts may modify the position. Thus the operation of repeal or deletion as to the future and the past largely depends on the savings applicable. In a case where a particular provision in a statute is 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 proceedings shall not continue but fresh proceedings for the same purpose may be initiated under the new provision." 6. In fact, Co-ordinate Bench under similar circumstances had examined the effect of omission of sub-section (9) to Section 10B of the Act w.e.f. 01.04.2004 by Finance Act, 2003 and held that there was no saving clause or provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition made towards differences noted by the AO are baseless and no proper opportunity was granted to the assessee. This issue was also raised before the ld. DRP but the DRP decided the issue against the assessee. The ld. AR of the assessee undertook that if a chance is given to the assessee for verification of the creditors, the assessee would be able to prove that the creditors are genuine. Considering the prayer of the assessee, this issue is remitted back to the AO to decide the issue as per law after giving reasonable opportunity to the assessee and the assessee is directed not to seek unnecessary adjournments. Accordingly ground No. 7 is allowed for statistical purposes. 9. The next ground No. 8 is with regard to not giving setting off of loss form the brought forward business loss and unobserved depreciation loss as observed in ground No.8. This issue has been addressed by the AO at para No. 9 in the final Assessment Order at the request of the learned AR. This issue is also remitted back to the AO for deciding the issue afresh in accordance with law and the assessee is directed to produce necessary documents for substantiating its case and not to seek unnecessary adjour ..... 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