2019 (3) TMI 1309 - HC - Income Tax

Court quashes TPO's creditor payment order in demerger, citing lack of jurisdiction. Subscription fee adjustment remains.

Times Global Broadcasting Company Ltd. Versus Union of India & Ors.

Times Global Broadcasting Company Ltd. Versus Union of India & Ors. - [2019] 413 ITR 42 (Bom) Issues Involved:1. Jurisdiction of the Transfer Pricing Officer (TPO) to examine specified domestic transactions not referred by the Assessing Officer.2. Legality of the TPO's adjustment towards payment of subscription fees.3. Maintainability of the writ petition in the presence of alternative statutory remedies.Issue-wise Detailed Analysis:1. Jurisdiction of the TPO to Examine Specified Domestic Transactions Not Referred by the Assessing Officer:The petitioner challenged the TPO's jurisdiction to make adjustments on transactions not specifically referred by the Assessing Officer. The court analyzed the statutory provisions under Chapter X of the Income Tax Act, 1961, particularly Sections 92, 92CA, and 92E. It was noted that sub-sections (2A) and (2B) of Section 92CA empower the TPO to examine international transactions not referred by the Assessing Officer, but these provisions do not extend to specified domestic transactions. The court concluded that the TPO could undertake a transfer pricing study only for transactions referred to him under sub-section (1) of Section 92CA. The court emphasized that the legislature consciously excluded specified domestic transactions from the ambit of sub-sections (2A) and (2B). Consequently, the TPO lacked jurisdiction to make adjustments for the payment of creditors in the demerger process, as this transaction was not referred by the Assessing Officer.2. Legality of the TPO's Adjustment Towards Payment of Subscription Fees:The petitioner argued that the adjustment towards payment of subscription fees was made without proper notice and was ex facie bad. The court acknowledged that while the petitioner might have arguable points, it would not bypass the statutory scheme of assessment, appeal, and revision. The court noted that the petitioner would have the opportunity to challenge the TPO's report through the statutory appeal process. The court refrained from examining the merits of the adjustment, emphasizing that detailed provisions for assessment, appeals, and revisions are provided in the statute, and these should be followed.3. Maintainability of the Writ Petition in the Presence of Alternative Statutory Remedies:The Revenue raised a preliminary objection regarding the maintainability of the writ petition, arguing that the petitioner should be relegated to the departmental proceedings and appeals. The court reiterated that the writ jurisdiction under Article 226 of the Constitution is extremely wide and can be exercised to strike down actions taken without jurisdiction. The court cited the Supreme Court's judgment in Calcutta Discount Co Ltd Vs. ITO & Anr., which held that High Courts have the power to issue orders prohibiting executive authorities from acting without jurisdiction. The court concluded that if a jurisdictional error is pointed out, it would not hesitate to strike down such actions, even if alternative remedies are available.Conclusion:The court quashed the impugned order of the TPO insofar as it provided an adjustment of Rs. 57.54 crores towards payment of creditors in the demerger process, holding that the TPO lacked jurisdiction. The rest of the impugned order, including the adjustment towards payment of subscription fees, remained as it is. The petition was disposed of accordingly.