Legislative omission of an enabling provision nullifies jurisdiction for transfer pricing reference, so TPO adjustments fall away.

Omission of the statutory provision empowering reference to a transfer pricing authority (Section 92BA(1)) without a saving clause was held to render that provision non-existent for the purposes at hand, removing the jurisdictional basis for any reference to the TPO; accordingly references and consequent transfer pricing adjustments were invalid. The tribunal further held that statutory disclosure of specified domestic transactions in Form 3CEB under Section 92E does not cure the absence of jurisdiction where the enabling provision is omitted. The appellate deletion of the adjustment was therefore upheld.

---

---

Issues: (i) Whether omission of Section 92BA(1) of the Income-tax Act, 1961 w.e.f. 01-04-2017 without a saving clause rendered the provision non-existent ab initio and thereby rendered the reference to the Transfer Pricing Officer (TPO) and consequent transfer pricing adjustment invalid; (ii) Whether the reference to the TPO was valid notwithstanding the assessee's disclosure of the purchases as specified domestic transactions in Form 3CEB under Section 92E of the Income-tax Act, 1961.

Issue (i): Whether omission of Section 92BA(1) of the Income-tax Act, 1961 w.e.f. 01-04-2017 without a saving clause rendered the provision non-existent ab initio and thereby rendered the reference to the TPO and consequent transfer pricing adjustment invalid.

Analysis: The Court examined the effect of legislative omission of Section 92BA(1) with effect from 01-04-2017 and noted absence of any saving clause. The Court considered precedent holding that omission of a provision may render the provision non-existent for all purposes where the statutory scheme and timing indicate such effect, and applied that reasoning to the reference made by the Assessing Officer to the TPO for determining ALP of specified domestic transactions. The Court relied on the reasoning in the cited High Court decision confirming that where the provision is omitted and no saving is provided, the action taken under that provision is without jurisdiction.

Conclusion: The omission of Section 92BA(1) of the Income-tax Act, 1961 w.e.f. 01-04-2017 without a saving clause rendered the provision non-existent for the purposes considered and the reference to the TPO and the consequential transfer pricing adjustment were invalid.

Issue (ii): Whether the reference to the TPO was valid notwithstanding the assessee's disclosure of the purchases as specified domestic transactions in Form 3CEB under Section 92E of the Income-tax Act, 1961.

Analysis: The Court considered the interaction between statutory disclosure in Form 3CEB under Section 92E and the jurisdictional basis for reference to the TPO. The Court held that where the foundational provision empowering reference (Section 92BA(1)) is absent, the existence of disclosure under Section 92E does not cure the lack of jurisdiction to make the reference or to sustain adjustments made by the TPO.

Conclusion: The disclosure in Form 3CEB under Section 92E does not validate a reference to the TPO or sustain transfer pricing adjustments where the provision empowering such reference is non-existent; the reference was therefore invalid.

Final Conclusion: The appellate order deleting the transfer pricing adjustment was upheld on jurisdictional grounds because the omission of the statutory provision empowering the reference to the TPO removed the jurisdictional basis for the TPO's action; consequently, the revenue's appeal was dismissed.

Ratio Decidendi: Where a provision authorising reference to a transfer pricing authority is omitted without a saving clause and is therefore non-existent for the purposes at hand, any reference and consequential action taken under that provision are without jurisdiction and invalid.

---