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Issues: (i) Whether omission of clause (i) of Section 92BA of the Income-tax Act, 1961 by the Finance Act, 2017 w.e.f. 01/04/2017 (without a saving clause) operates retrospectively so as to invalidate actions/references to the Transfer Pricing Officer under that clause; (ii) Whether additions in the assessment year 2016-17 based on benchmarking and adjustments made in A.Y. 2015-16 (by reference to the earlier TPO/AO findings) are sustainable once the A.Y. 2015-16 addition is held invalid.
Issue (i): Whether omission of clause (i) of Section 92BA of the Income-tax Act, 1961 by the Finance Act, 2017 w.e.f. 01/04/2017 (without a saving clause) operates retrospectively so as to invalidate actions/references to the Transfer Pricing Officer under that clause.
Analysis: The tribunal examined the omission of clause (i) of Section 92BA and relied on authoritative principles concerning repeal/omission and savings (including Kolhapur Canesugar Works Ltd. and relevant High Court decisions). In the absence of any saving clause preserving pending proceedings, the ordinary rule is that an omitted provision is to be treated as never having existed, and pending actions based solely on that provision cannot be sustained. The tribunal compared the statutory omission and its effects with precedents and applied the General Clauses Act principles as interpreted by higher courts.
Conclusion: The omission of clause (i) of Section 92BA of the Income-tax Act, 1961 w.e.f. 01/04/2017 (by the Finance Act, 2017) is retrospective in effect in the absence of a saving clause, and references/actions premised solely on that clause (including reference to the Transfer Pricing Officer under that clause) are invalid. The conclusion is in favour of the assessee.
Issue (ii): Whether additions in A.Y. 2016-17 based on benchmarking/adjustment adopted in A.Y. 2015-16 (by reliance on the earlier TPO/AO findings) are sustainable once the A.Y. 2015-16 addition is set aside.
Analysis: The tribunal considered that the A.Y. 2016-17 additions were calculated on the same benchmarking and adjustments as those sustained for A.Y. 2015-16 by reference to the TPO/AO findings. Having held the A.Y. 2015-16 adjustment invalid due to retrospective omission of clause (i) of Section 92BA, the tribunal examined whether the subsequent year's addition can stand independently where no fresh reference to the TPO was made and no independent TPO determination for A.Y. 2016-17 existed. The tribunal concluded that reliance on the invalidated previous-year determination cannot sustain the addition for the subsequent year.
Conclusion: The addition made for A.Y. 2016-17 based on the earlier year's TPO/AO benchmarking is not sustainable and is directed to be deleted. The conclusion is in favour of the assessee.
Final Conclusion: The tribunal allowed both appeals, holding that omission of clause (i) of Section 92BA of the Income-tax Act, 1961 without a saving clause operates retrospectively and invalidates the TPO-based adjustments for the years under consideration; consequently the additions in both A.Y. 2015-16 and A.Y. 2016-17 are deleted in favour of the assessee.
Ratio Decidendi: Where a statutory provision is unconditionally omitted without a saving clause, the omission operates retrospectively so that actions or proceedings founded solely on the omitted provision cannot be sustained; in such cases associated transfer pricing adjustments made under the omitted provision must be set aside.
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