Omission of specified domestic transaction clause invalidates TPO reference, leaving expenditure to be examined under section 40A(2)(b).

The omission of section 92BA(i) was treated as removing the statutory basis for a reference to the Transfer Pricing Officer in respect of specified domestic transactions, so the reference could not survive and the transfer pricing adjustment made on that footing was unsustainable. The expenditure question was not finally decided on transfer pricing principles and was instead required to be examined independently under section 40A(2)(b) of the Income-tax Act, 1961. The matter was therefore restored for fresh consideration on that limited issue, while the TPO reference and resulting adjustment were invalidated.

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Issues: Whether the reference made to the Transfer Pricing Officer in respect of specified domestic transactions under section 92BA(i) of the Income-tax Act, 1961 was valid after omission of the provision, and whether the resulting transfer pricing adjustment could be sustained, with the matter to be examined under section 40A(2)(b).

Analysis: The omitted clause was treated as having ceased to exist for the relevant purpose, so the reference to the Transfer Pricing Officer could not survive. Once the jurisdictional reference failed, the transfer pricing adjustment made on that basis also could not stand. At the same time, the expenditure issue was not finally closed and was directed to be examined independently under section 40A(2)(b) of the Income-tax Act, 1961.

Conclusion: The reference to the Transfer Pricing Officer was held to be invalid and the transfer pricing adjustment was unsustainable, but the matter was restored to the Assessing Officer for examination under section 40A(2)(b) of the Income-tax Act, 1961.

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