TaxTMI 
TaxTMI 
TaxTMI 
2024 (8) TMI 37
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....ection 40A(2)(b) is not a specified domestic transaction under section 92BA of the IT Act. 2. Without prejudice to the Ground No.1, the reference to the TPO under section 92CA (1) by the Learned Assessing Officer is in defiance to Instruction Nos. 15 of 2015, 3 of 2016 and against the principles of natural justice is bad in law and that the reference under section 92CA (1) of the IT Act being bad is void-ab-initio, the draft Assessment Order passed by the Learned Assessing Officer is invalid rendering all the subsequent proceedings as bad. That as the reference under section 92CA (1) being bad void-ab-initio, the impugned Assessment Order passed by the Learned Assessing Officer is barred by limitation in terms of section 153 (1) of the IT Act. 3. The learned Assessing Officer acting under directions of leaned Dispute Resolution Panel erred both on facts and in law in confirming the addition of Rs. 4,00,00,000 by holding that the appellant's specified domestic transactions relating to procurement of drawing and design services, erection and commissioning charges and purchase of raw material by the assessee from its related parties does not satisfy the arm's length principle as....
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....ent Order, the assessee has filed appeal before this tribunal. Submission of ld. Authorised Representative(ld.AR) : 3. The Ld.Authorised Representative of the Assessee (ld.AR) made elaborate arguments and also submitted written submission. The relevant part of the written submission is reproduced here under : Quote' The aforementioned ground pertains to the determination of the arm's length price of the Specified Domestic Transaction under clause (i) of section 92BA of the Act. The Appellant has contended in the grounds of appeal that since clause (i) of section 92BA of the Act was 'omitted' from the Income Tax Act, 1961 ('the Act') w.e.f. 1 April 2017, without any savings clause it shall be deemed to be omitted since inception. Hence, the transactions of the appellant with persons covered under section 40A(2)(b) cannot be treated as 'Specified Domestic Transaction'. In this regard, the appellant has relied upon the decision of the Hon'ble ITAT Bangalore in case of Texport Overseas Ltd. v. DCIT ITA No. 1722/Bang/2017 dated 22.12.2017 wherein it has been held that once a particular provision of a section is omitted from the statute, it shall be deemed to be omitted from its in....
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....the table in para-1.4 above (except at sr. no 5 therein) was that omission of the said clause (i) without a saving clause meant that it never existed on the statute from the very beginning and therefore any action initiated even during the currency of the said provision was ab initio void. Reliance in this regard has been placed mainly on the decision of M/s Texport Overseas Pvt Ltd [ITA 1772/Bang/2017] that came to be affirmed by the Karnataka High Court. The various decisions of the various tribunals have taken this decision as the base and have dealt with the issue of "repeal" & "omission" as discussed/held by the various apex court decisions which have been mentioned in the table in para-1.4 above. The decisions referred to are not mentioned here again for the sake of brevity. 2.4 As can be seen from para-2.3 above, the apparent and explicit reason and therefore the legislative intention for taking clause (i) of section 92BA off the statute was basically to ease the compliance & reporting burden of the assessees in terms of obtaining the chartered accountant's certificate in Form 3CEB, providing the details such as list of related parties, nature and value of specified domest....
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....a Central Act or Regulation and not of a Rule." (emphasis supplied) The Supreme Court in the above judgment did not discuss the two terms 'repeal' and 'omission' before coming to the said conclusion. There is no discussion on how the two terms are separate and whether they can be used interchangeably. 3.3 Rayala Corporation case came for consideration before the five-Judge Bench of Supreme Court in Kolhapur Canesugar Works Ltd. v. Union of India [(200) 2 SCC 536]. In this case the Court dealt with the definitions of 'Central Act', 'enactment', 'regulation', 'rule' as defined in Sections 3(7), 3(19), 3(50) and 3(51) respectively in the General Clauses Act and held that Section 6 only applies to Central Act and regulations. The Court further stated that - "When the Legislature by clear and unambiguous language has extended the provision of Section 6 to cases of repeal of a 'Central Act' or 'regulation', it is not possible to apply the provision to a case of repeal of a 'rule'....Secf/o/7 6 is applicable where any Central Act or Regulation made after commencement of the General Clauses Act repeals any enactment It is not applicable in the case of omission of a "rule (emphasis ....
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.... well. The Court further observed that all these expressions only go to form and not to substance. It also reiterated its stand in Fibre Boards case and held that "This again does not take us further as this statement of the law in Rayala Corporation [(1969) 2 SCC 412] is no longer the law declared by the Supreme Court after the decision in the Fibre Boards case." [Fibre Boards (P) Ltd. vs CIT, (2015) 10 SCC 333 at p. 658]." "In this regard, the appellant has relied upon the decision of the Hon'ble ITAT Bangalore in case of Texport Overseas Ltd. v. DCIT ITA No. 1722/Bang/2017 dated 22.12.2017 wherein it has been held that once a particular provision of a section is omitted from the statute, it shall be deemed to be omitted from its inception unless and until there is some saving clause or provision to make it clear that action taken or proceeding initiated under that provision or section would continue and would not be left on account of omission. It was held that by the Finance Act, 2017, clause (i) of section 92BA has been omitted w.e.f. 01.04.2017 and that once this clause is omitted by subsequent amendment, it would be deemed that the said clause (i) was never been on the sta....
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....f [five] crore rupees. 5.2 The said Section 92BA was amended by Finance Bill 2017 with effect from 1/04/2017and the amended Section is as under : Meaning of specified domestic transaction. 92BA. For the purposes of this section and sections 92, 92C, 92D and 92E, "specified domestic transaction" in case of an assessee means any of the following transactions, not being an international transaction, namely:- (i) 38[***] (ii) any transaction referred to in section 80A; (iii) any transfer of goods or services referred to in sub-section (8) of section 80-IA; (iv) any business transacted between the assessee and other person as referred to in sub-section (10) of section 80-IA; (v) any transaction, referred to in any other section under Chapter VI-A or section 10AA, to which provisions of sub-section (8) or sub-section (10) of section 80-IA are applicable; or (vi) any other transaction as may be prescribed, and where the aggregate of such transactions entered into by the assessee in the previous year exceeds a sum of twenty crore rupees. (38. Omitt. by Act No. 7 of 2017 (w.e.f. 1-4-2017). Prior to its omission, clause (i) read as under : "(i) any expenditure in respect....
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....arnataka High Court held that for this reason the Order passed by TPO for earlier year is unsustainable in law. 5.7 The ITAT Nagpur Bench in the case of DCIT Vs. Vivek Vinayak Vaidya ITA No.33/NAG/2020 has followed the decision of Hon'ble Karnataka High Court (supra) and decided the appeal in favour of the assessee. The Hon'ble Accountant Member is the author of the said order of the ITAT Nagpur Bench. 5.8 The Hon'ble Bombay High Court has explained the Rule of precedence in the case of Smt. Godavaridevi Saraf Vs. CIT, 113 ITR 589(Bom), as under : Quote, "Until contrary decision is given by any other competent High Court, which is binding on a Tribunal in the State of Bombay, it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of the land. When the Tribunal set aside the order of penalty it did not go into the question of intra vires or ultra vires. It did not go into the question of constitutionality of section 140A(3). That section was already declared ultra vires by a competent High Court in the country and an authority like an Income-tax Tribunal acting anywhere in the country has to respect the law laid down b....
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....3) dated 15/10/2019, the Assessing Officer has not mentioned anything about the without prejudice disallowance u/s.40A(2)(b) of the Act. Once the AO has not invoked the relevant provisions of the Act in the assessment order the Ld.CIT(DR) cannot improve the Assessment Order at this stage. The Special Bench of ITAT Mumbai in the case of Mahindra & Mahindra vs DCIT[2010] 122 ITD 216 held as under : "In our considered opinion the learned Departmental Representative has no jurisdiction to go beyond the order passed by the Assessing Officer. He cannot raise any point different from that considered by the Assessing Officer or CIT(A). His scope of arguments is confined to supporting or defending the impugned order. He cannot set up an altogether different case. If the learned D.R. is allowed to take up a new contention de hors the view taken by the Assessing Officer that would mean the learned A.R. stepping into the shoes of the CIT exercising jurisdiction under section 263. We, therefore, do not permit the learned D.R. to transgress the boundaries of his arguments." 5.11 Thus, respectfully following the ITAT Mumbai Special Bench's decision(supra), once AO has not invoked section 40A(2....