Omitted transfer pricing provision cannot sustain proceedings, and adjustments remain confined to international transactions only.

An omitted transfer pricing provision, absent a saving clause, is treated as having ceased to operate, so proceedings and references founded solely on that clause cannot survive merely because the assessment year preceded the omission. The commentary also states that transfer pricing adjustment under Chapter X is confined to international transactions and arm's length pricing, and cannot be extended to independent dealings with non-associated enterprises. The subject matter is thus the survival of omitted statutory provisions and the permissible scope of transfer pricing adjustments.

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Issues: (i) Whether the omission of clause (i) of Section 92BA of the Income-tax Act, 1961 invalidated the reference to the Transfer Pricing Officer and the resulting transfer pricing adjustment. (ii) Whether transfer pricing adjustment could be restricted only to international transactions with associated enterprises and not extended to transactions with non-associated enterprises.

Issue (i): Whether the omission of clause (i) of Section 92BA of the Income-tax Act, 1961 invalidated the reference to the Transfer Pricing Officer and the resulting transfer pricing adjustment.

Analysis: The omission of a statutory provision, in the absence of a saving clause, ordinarily obliterates the provision from the statute book. Applying the settled principle on repeal and omission, the effect of the omission of Section 92BA(i) was that proceedings founded solely on that clause could not survive merely because the relevant assessment year preceded the omission. The reference to the Transfer Pricing Officer and the consequential order based on the omitted provision were therefore treated as unsustainable.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Issue (ii): Whether transfer pricing adjustment could be restricted only to international transactions with associated enterprises and not extended to transactions with non-associated enterprises.

Analysis: Under Chapter X of the Income-tax Act, 1961, the transfer pricing mechanism operates only with respect to international transactions and the determination of arm's length price. The adjustment mandated by law is confined to the transactions giving rise to the international transfer pricing dispute and cannot be expanded to independent transactions with unrelated third parties, as such an extension would go beyond the scope of the transfer pricing provisions.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Final Conclusion: The appeal failed on all substantial questions, and the transfer pricing findings were not interfered with.

Ratio Decidendi: An omitted provision, when not protected by a saving clause, cannot continue to operate for pending or consequential proceedings, and transfer pricing adjustment under Chapter X is confined to international transactions alone.

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