Tax Tribunal Invalidates Assessing Officer's Action, Grants TDS Credit to Assessee

The Tribunal held that the omission of section 92BA(i) by the Finance Act, 2017 rendered any actions taken by the Transfer Pricing Officer (TPO) and the Assessing Officer (AO) under it void ab initio. Consequently, the addition made by the AO based on the TPO's order was deemed invalid and deleted. Additionally, the Tribunal directed the AO to grant TDS credit to the assessee, in line with previous decisions, resulting in a favorable outcome for the assessee and dismissing the revenue's appeal.

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Issues Involved:
1. Validity of jurisdiction exercised by the TPO and Income Tax Department after the omission of clause (i) of section 92BA by the Finance Act, 2017.
2. Validity of addition made by the AO based on the TPO's order under the omitted section 92BA(i).
3. Grant of TDS credit to the assessee.

Detailed Analysis:

1. Validity of Jurisdiction Exercised by the TPO and Income Tax Department:
The core issue revolves around whether the Arm's Length Price (ALP) determination for domestic transactions under section 92BA(i) of the Income Tax Act, which was omitted by the Finance Act, 2017, remains valid. The Tribunal highlighted that the omission of clause (i) of section 92BA means it was never in existence. This interpretation follows precedents set by various ITAT benches, including ITAT Kolkata in M/s. DVC Emta Coal Mines Ltd. vs. ACIT and ITAT Bangalore in Texport Overseas Private Limited vs. DCIT. The Tribunal concluded that any jurisdiction exercised by the TPO and Income Tax Department under the omitted clause is void ab initio.

2. Validity of Addition Made by the AO Based on the TPO's Order:
The Tribunal examined the implications of the omission of section 92BA(i) on the addition of Rs.6,19,14,682/- made by the AO based on the TPO's order. It was argued that the omission implies that the provision never existed, thus nullifying any actions taken under it. The Tribunal referred to the Supreme Court's rulings in Kolhapur Canesugar Works Ltd. vs. Union of India and General Finance Co. vs. ACIT, which support the principle that omission of a provision results in its obliteration from the beginning. Consequently, the Tribunal held that the ALP determination and the subsequent addition made by the AO are invalid and must be deleted.

3. Grant of TDS Credit to the Assessee:
The assessee contended that the AO failed to grant proper TDS credit, specifically an additional claim of Rs.1,22,317/- on mobilization advance. The Tribunal noted that the ITAT Kolkata Bench had previously directed the AO to allow TDS credit on mobilization advances in earlier years where corresponding income was booked. The ld. CIT(A) had already directed the AO to grant TDS credit, and the Tribunal concurred with this direction, thus resolving the issue in favor of the assessee.

Conclusion:
The Tribunal allowed the assessee's appeal, holding that the omission of section 92BA(i) renders any TPO and AO actions under it void. Consequently, the addition based on the TPO's order was deleted. The Tribunal also upheld the direction to grant TDS credit to the assessee, thereby allowing the assessee's appeal and dismissing the revenue's appeal.

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