Tribunal excludes Transfer Pricing for Specified Domestic Transactions under Finance Act, 2017.

The Tribunal held that Transfer Pricing (TP) provisions did not apply to Specified Domestic Transactions (SDTs) due to the omission of section 92BA(i) by the Finance Act, 2017. The Tribunal directed the Assessing Officer (AO) to reexamine the issues related to TP methodology, Arm's Length Price (ALP) adjustment, treatment of unconfirmed creditors, and setting off of losses. The appeals were allowed for statistical purposes, with all issues remitted back to the AO for fresh examination and decision in accordance with the law, emphasizing the need for reasonable opportunities to the assessee and avoiding unnecessary adjournments.

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Issues Involved:
1. Applicability of Transfer Pricing (TP) provisions to Specified Domestic Transactions (SDTs).
2. Selection of Transfer Pricing Methodology (TNMM vs. CUP).
3. Adjustment of Arm's Length Price (ALP) and its computation.
4. Treatment of unconfirmed creditors.
5. Setting off of brought forward business losses and unabsorbed depreciation losses.

Summary:

1. Applicability of Transfer Pricing (TP) Provisions to Specified Domestic Transactions (SDTs):
The assessee argued that the transactions with related parties were SDTs and should not be subject to TP provisions as per the Finance Act, 2017, which excluded SDTs from the purview of TP regulations. The Tribunal noted that section 92BA(i) had been omitted by the Finance Act, 2017, and referred to various judicial precedents, including the case of Edelweiss Rural and Corporate Services Ltd. vs. DCIT and the Karnataka High Court decision in Pr. CIT vs. Texport Overseas Pvt. Ltd. It was held that the reference made to the TPO under clause (i) of section 92BA of the Act is invalid, and consequently, the TP adjustment in respect of SDTs is liable to be deleted. The issue was remitted to the AO for examination in terms of section 40A(2)(b) of the Act.

2. Selection of Transfer Pricing Methodology (TNMM vs. CUP):
The assessee contended that the CUP method should be used instead of the TNMM method for determining the ALP. The Tribunal observed that the TPO had rejected the CUP method and applied the TNMM method, resulting in an adjustment. The Tribunal remitted the issue back to the AO for re-examination, noting that the international transactions were below Rs. 1 crore, and thus, TP adjustment should not be made.

3. Adjustment of Arm's Length Price (ALP) and its Computation:
The TPO had made an adjustment of Rs. 25,72,10,127/- which was later reduced by the DRP to Rs. 20,27,10,179/-. The Tribunal remitted the issue back to the AO for fresh examination, considering the omission of section 92BA(i) and the fact that the international transactions were below the threshold limit.

4. Treatment of Unconfirmed Creditors:
The AO had made adjustments based on differences in the closing balances of creditors. The assessee argued that proper opportunity was not given for verification. The Tribunal remitted the issue back to the AO for fresh verification and decision, directing the AO to provide a reasonable opportunity to the assessee.

5. Setting Off of Brought Forward Business Losses and Unabsorbed Depreciation Losses:
The assessee claimed that the AO did not give effect to the set-off of brought forward business losses and unabsorbed depreciation losses. The Tribunal remitted the issue back to the AO for fresh consideration, directing the AO to give a reasonable opportunity to the assessee and decide the issue in accordance with the law.

Conclusion:
The appeals were allowed for statistical purposes, with the issues being remitted back to the AO for fresh examination and decision in accordance with the law. The Tribunal emphasized providing reasonable opportunities to the assessee and avoiding unnecessary adjournments.

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