Libertatem Magazine

Income Tax Appellate Tribunal Allowed the Appeal of the Assessee for the Transfer Pricing Adjustment

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Case: M/S Sobha City, Bangalore vs Assistant Commissioner Of Income Tax

Income Tax Appellate Tribunal


The assessee filed the appeal to challenge the order passed by the assessing officer u/s 143(3) r.w.s 144c(13) of the Income Tax Act,1961. The appeal was filed to relate to the Transfer Pricing adjustment under Specified Domestic Transactions (SDT).

Facts of the Case

The assessee entered into Specified Domestic Transactions and made Transfer pricing adjustments to the tune of Rs.14.26 crores. The Ld DRP (Dispute Resolution Panel) confirmed the same and the AO (Assessing Officer) made an addition of Rs.14.26 crores towards the Transfer pricing adjustment. The assessee challenged the legality of the arrangement and hence filed the appeal. The TPO (Transfer Pricing Officer) submitted a report and the same was objected to in ITA (Income Tax Assessment) No.2936/Bang/20180.

The assessee filed an objection before the DRP on which the DRP issued certain directions, the AO passed an order.

Arguments Presented Before the Court

The counsel for the assessee submitted that section 92BA clause 1 was omitted by the Finance Act 2017. The court has examined the legal effect of omission of clause (i) of section 92BA in Texport Overseas Pvt. Ltd. Vs. Deputy Commissioner of Income-tax in IT(TP)A. The Court in this case assumed that clause (i) was never on the Statute. 


The counsel for the Ld A.R submitted that the Court in the same case held that the payments covered by clause (i) of sec.92BA are required to be examined in terms of sec.40A(2)(b) of the Act. He further added to restore the matter to the file of AO for further examination. He added that the assessee did not file Cross Objection to object to the maintainability of the appeal filed by the revenue. 


Observation of the court

The Court took the reference of the case M/s Cauvery Aqua Private Limited (IT(TP)A and Texport Overseas Pvt Ltd. The Court observed that if the payment made for any expenditure referred to in clause (b) of sub-section 2 of section 40A exceeds the prescribed limit, it would be a specified domestic transaction. In that condition, AO is required to make a reference to TPO under section 92CA of the Act and determine ALP. 

The Court also observed that if it is to determine whether a pending proceeding will continue or lapse then the pending proceedings shall continue and be disposed of under the old rule. But if the rule has not been deleted or omitted then such a proceeding will continue. If a particular provision of the section is omitted from the statute,  it is omitted completely unless and until there is some saving clause or provision to make it clear. 

The action taken or proceeding initiated under that provision or section would continue and would not be left because of omission. The Court also discussed the issue of repeal /omission/ amendment etc and held that ‘omission’ will have the effect of ‘repeal’ and ‘repeal’ will have the effect of ‘omission’.


Court’s Decision

The Court allowed the appeal of the assessee and restored the issue to the file of the AO to examine the claim of expenditure.


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