2020 (7) TMI 823 - AT - Income Tax

Tribunal deems Section 92BA clause omission invalid, nullifies Transfer Pricing Officer's jurisdiction

The Tribunal allowed the appeal of the assessee, ruling that the omission of clause (i) of Section 92BA rendered it non-existent in the statute book. ... Revision u/s 263 - effect of omission of clause (i) of section 92BA w.e.f 01.04.2017 - meaning of “omission” - Specified domestic transactions referred to in clause (i) of section 92BA - reference to Transfer Pricing Officer (TPO) - HELD THAT:- As in respect of specified domestic transactions which is referred to clause (i) of section 92BA of the Act, which was omitted with effect from 01.04.2017 and the effect of such “omission” of clause (i) of section 92BA means that this provision never existed in the statute book, hence reference to TPO was bad in law. As the issue is squarely covered in favour of the assessee by the decision of Coordinate Bench in the case of M/s Raipur Steel Casting India (P) Ltd. [2020 (6) TMI 629 - ITAT KOLKATA] and there is no change in facts and law and the Revenue is unable to produce any material to controvert the above said findings of the Co-ordinate Bench. Therefore, respectfully following the decision of Co-ordinate Bench on the technical issue narrated above we allow appeal of the assessee. Issues Involved:1. Validity of the reference to the Transfer Pricing Officer (TPO) under the omitted clause (i) of Section 92BA.2. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act post-omission of clause (i) of Section 92BA.3. Applicability of Section 6 of the General Clauses Act to the omitted clause (i) of Section 92BA.4. Relevance of judicial precedents regarding the interpretation of 'omission' versus 'repeal.'Issue-wise Detailed Analysis:1. Validity of the reference to the Transfer Pricing Officer (TPO) under the omitted clause (i) of Section 92BA:The Tribunal examined the effect of the omission of clause (i) of Section 92BA by the Finance Act, 2017, effective from 01.04.2017. The Tribunal referred to its previous decision in the case of M/s Raipur Steel Casting India (P) Ltd. and Srinath Ji Furnishing Pvt. Ltd., where it was held that the omission of clause (i) of Section 92BA meant that it was never in existence. Consequently, any reference to the TPO under this clause was deemed invalid. The Tribunal reiterated that the omission of clause (i) without a saving clause implied that the provision was obliterated from the statute book as if it never existed, rendering any reference to the TPO under this clause as bad in law.2. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act post-omission of clause (i) of Section 92BA:The Tribunal scrutinized the jurisdiction exercised by the PCIT under Section 263 of the Act. It was noted that the PCIT issued a show-cause notice under Section 263 concerning specified domestic transactions referred to in clause (i) of Section 92BA, which was omitted effective from 01.04.2017. The Tribunal emphasized that the omission of clause (i) without any saving clause meant that the provision never existed in the statute book. Therefore, the PCIT could not exercise jurisdiction under Section 263 concerning the omitted clause. The Tribunal concluded that the action of the Assessing Officer could not be held erroneous or prejudicial to the interest of the revenue, thus nullifying the PCIT's jurisdiction to invoke Section 263.3. Applicability of Section 6 of the General Clauses Act to the omitted clause (i) of Section 92BA:The Tribunal discussed the applicability of Section 6 of the General Clauses Act, which pertains to the repeal of statutes. It was clarified that Section 6 applies to repealed laws but not to omitted provisions unless there is a specific saving clause. The Tribunal cited the Supreme Court's judgment in Rayala Corporation (P) Ltd., which distinguished between 'omission' and 'repeal,' stating that Section 6 does not apply to omissions. Consequently, the omission of clause (i) of Section 92BA without a saving clause meant that it was obliterated from inception, and any pending proceedings under this clause could not continue post-omission.4. Relevance of judicial precedents regarding the interpretation of 'omission' versus 'repeal':The Tribunal referred to several judicial precedents, including the Supreme Court's judgments in Rayala Corporation (P) Ltd., Kolhapur Canesugar Works Ltd., and General Finance Co., which clarified the distinction between 'omission' and 'repeal.' The Tribunal noted that the judgments consistently held that an omission without a saving clause implies that the provision never existed in the statute book. The Tribunal also addressed the Revenue's reliance on subsequent Supreme Court judgments in M/s. Shree Bhagwati Steel Rolling Mills and M/s. Fibre Boards, clarifying that these judgments did not overrule the earlier precedents but rather interpreted different contexts. The Tribunal concluded that the omission of clause (i) of Section 92BA without a saving clause rendered any proceedings under this clause invalid.Conclusion:The Tribunal allowed the appeal of the assessee, holding that the omission of clause (i) of Section 92BA meant that it never existed in the statute book. Consequently, the reference to the TPO under this clause was invalid, and the PCIT's jurisdiction under Section 263 concerning the omitted clause was nullified. The Tribunal's decision was based on the consistent judicial interpretation that an omission without a saving clause obliterates the provision from inception.