TaxTMI 
TaxTMI 
2023 (2) TMI 1417
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....ailed to benchmark the arm's length price prevailing in the real estate sector and proceeded unilaterally to adopt the "SBI Prime Lending Rate" in respect of transactions in the form of interest on loans by the Associate enterprises which has given rise to Specified domestic transactions ('SDT') as per Section 92BA of the Act as per the TPO's order in this regard. 4. The CIT Appeals has also failed to consider the fact that the disputed interest on loan paid by the Appellant to its Associated Enterprises is included as income in the latter's total income and offered for tax at a rate not lower than the rate of taxation of the Appellant Company, thus it is revenue neutral. 5. The CIT Appeals erred in not considering the practical realties in the real estate sector and brushing aside the benchmark analysis of the arm's length price prevailing in the real estate sector. 6. The CIT Appeals failed to provide any opportunity before passing the impugned order and ought to have appreciated that any order passed in violation of principles of natural justice is not valid in law. 7. The Appellant craves leave to file additional groun....
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....hat once a particular provision of section is omitted from the statute, it shall be deemed to be omitted from its inception unless and until there is some 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 and thus, any addition made to 'specified domestic transactions' as per provisions of Sec.92BA(i) of the Act, on payment made to related parties, cannot be sustained. In this regard, he relied upon the decision of the Hon'ble Supreme Court in the case of General Finance Co. v. ACIT (supra). 7. The Ld. DR, on the other hand, supporting the SLP admitted by the Hon'ble Supreme Court in the case of M/s.Texport Overseas P Ltd vs. DCIT in IT(TP)A No.1722/Bang/2017, against the order of the Hon'ble Karnataka High Court, submitted that the matter is pending for adjudication before the Hon'ble Supreme Court and has not reached finality, therefore, when the additions made by the TPO u/s.92BA(i) of the Act, said provision was very much existed in the statute and thus, subsequent omission of said provision does not invalidate addition made and thus arguments of the asses....
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....ated 12.07.2022, which reads as under:- "2. The revenue has taken seven grounds of appeal. Similarly, the assessee has taken five grounds of appeal. But the assessee subsequently filed additional grounds of appeal, which read as under:- "A/G-1. For that since clause (i) of section 92BA has been omitted by the Finance Act, 2017 means that provisions was not in existence or never existed in Statute. Therefore, the jurisdiction exercised by the T.P.O. and Income Tax Department is void and as a result the order by assessing officer dt. 26.12.2017 u/s 143(3) of the Act is void ab initio wrong, illegal, bad in law as well as on facts. A/G-2. That because of such omission, the addition of Rs.6,19,14,682/- made by the AO in this case for the A.Y. 2014-15 as per T.P.O.'s order is invalid and bad in law, and as such the addition should be directed to be deleted." 3. The seven grounds of appeal taken by the revenue and four ground of appeals taken by the assessee revolve around these two additional grounds of appeals taken by the assessee. 4. In brief, the controversy in all these grounds, revolves around the issue whether Arm's Length Pric....
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....fore, we have specifically heard the parties on the preliminary issue only. 8. The ld. Counsel for the assessee while contending in his support submitted that this issue is covered by a series of orders passed at the end of the Tribunal. He placed on record copy of the order of the Co-ordinate Bench of ITAT Kolkata in the case of M/s. DVC Emta Coal Mines Ltd. vs. ACIT, CC-3(1) (& two other appeals), Kolkata in ITA No. 2430/Kol/2017; Assessment Year 2013-14; order dt. 01/05/2019. According to the ld. Counsel for the assessee, the Tribunal has decided the appeals of three assessee's by way of a common order. In all these three appeals, the common issue involved relates to sustainability of ALP qua transactions enumerated in 92BA(i), which has been omitted by the Finance Act, 2017. The Tribunal after following the decision of the Co-ordinate Bench of ITAT Bangalore in the case of Texport Overseas Private Limited vs. DCIT; IT(TP)A No. 1722/Bang/2017 Assessment Year 2013-14, order dt. 22/12/2017, held that omission of the provision would mean that it has to be presumed with such clause was never there in the statute and all consequential proceedings including the ones pendi....
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....ow, in brief, to the extent applicable for our discussion: "In the present case, the Principal Commissioner of Income Tax5, Kolkata passed an order u/s.263 holding that specified domestic transactions shown by the assessee were not taken into cognizance by the A.O. and not referred to the TPO before completing the assessment, which he was required to do statutorily, for the correct Benchmarking of the domestic transactions undertaken by the assessee with specified domestic parties. The notice for 263 proceedings was issued dated 20.11.2018. The assessee is contesting the jurisdiction of the Pr. C.I.T.-5, Kolkata in initiating proceedings u/s.263 on the ground that the reference to the TPO on the specified domestic transactions was not applicable to him since Section 92BA(i) was omitted by Finance Act, 2017 w.e.f. 01.04.2017. The assessee is relying on Section-6 of the General Clause Act, 1897(GCA 1897) to contend that an omission is not entailed in repeal, and upon omission, the provision results in obliteration from the very beginning. The appellant has relied on the decision of ITAT, Bangalore in the case of M/s. Texport Overseas (P) Ltd. vs. DCIT, A.Y.....
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....e Revenue's stand that omission of a provision shall have to be interpreted as per sec.6 and sec.6A of GCA 1897 and read in togetherness. For proceedings which stem from the omitted provision, or part thereof, including consequential proceedings, it shall not mean an obliteration from the very beginning; it will have the effect as if the omitted part is in full force before such omission of the provision, or part thereof. The Hon'ble Bangalore Bench in the case of M/s. Texport Overseas Pvt. Ltd. (supra) has given the finding on the basis of Apex Court decision in the case of General Finance Company 257 ITR 338. This is an old decision pronounced on 04/09/2002. However, it may kindly be pointed out that the Hon'ble Bench of Bangalore Tribunal did not take into consideration the subsequent decision of the Apex Court constitutional bench on the same issue in the case of M/s. Shree Bhagwati Steel Rolling Mills (supra) and M/s. Fibre Boards (supra). The constitutional bench in the above cases, orders passed in 2015, have held that repeal, delete and omit can be used interchangeably and, therefore, section 6 of the General Clauses Act would also save provisions which....
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....ransactions are outside the definition of specified domestic transaction, therefore the order passed by Hon'ble assessing officer be annulled. 2.1. That the facts and circumstances of the case and the law the Assessing Officer/ TPO as well as DRP erred in not appreciating the fact that the transactions were since restricted and subjected to supervision by state government nominated directors, therefore there was no scope of tax arbitrage being enjoyed by AE and hence outside the preview of section 92BA of the Act. 3. That on the facts of the case and in law the Ld. A.O. erred in passing assessment order dated 27.09.2017 under section 143(3) read with section 92CA(3) and 144C(5) of Income Tax Act, 1961, as such the order so passed subsequent to limitation under section 144C(4) is without jurisdiction, illegal, bad in law and therefore be annulled. 4. That on the facts and circumstances of the case and in law, Ld. TPO/the Ld. AO/ and the Hon'ble DRP have erred on facts and in law in enhancing the income of the appellant by Rs. 13,52,49,494/-. " 4.1 The Ld. Counsel first of all brought to our notice that the aforesaid legal issue that has be....
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.... General Clauses Act or there is a parimaterial provision in the statute under which the rule has been framed in that case also the pending proceeding will not be affected by omission of the rule. We note that this issue has been adjudicated by the Tribunal vide order dated 22.12.2017 wherein the Tribunal has held as under: "2. During the course of hearing, the learned counsel for the assessee has moved an application for the admission of the additional grounds with a request that since the additional grounds goes to the root of the case it should be admitted and be disposed off at the threshold. The admission of the additional grounds were strongly objected by the learned DR on the premise that these grounds were never raised before the DRP nor were they raised in the original grounds of appeal. Therefore, it cannot be admitted. 3. The learned counsel for the assessee has further contended that AO has made a reference under section 92CA, having observed that the assessee has entered into specified domestic transaction as this case is covered under section 928A of the IT Act but later on there was amendment in section 92BA by the Finance Act, 2017 w.e.f. ....
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....en such a proceeding will continue. If the case is covered by Section 6 of the General Clauses Act or there is a pari-materia provision in the statute under which the rule has been framed in that case also the pending proceeding will not be affected by omission of the rule. A further reliance was also placed upon the judgment of the Apex Court in the case of General Finance Co. Vs. Assistant Commissioner of Income- tax 257 ITR 338 (SC) in which the Apex Court has held that the principle underlying section 6 as saving the right to initiate proceedings for liabilities incurred during the currency of the Act will not apply to omission of a provision in an Act but only to repeal, omission being different from repeal as held in the aforesaid decisions. Reliance was also placed upon the order of the Tribunal in IT (TP)A No. l 722/Bang/2017 Page 4 of 7 the case of CIT Vs. GE Thermometrics India Pvt. Ltd., in ITA No. 876/2008 in which while dealing the omission sub- section (9) of Section 1 OB the Hon'ble High Court has held that once the section is omitted from the statute book, the result is it had never been passed and be considered as a law that never exists and therefore, when the....
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....d. Having carefully examined the issue in the light of provisions of section 6 of the General Clauses Act, their Lordship has observed "that in such a case, the court is to look to the provisions in the rule which has been introduced after omission of the previous rule to determine whether a pending proceeding will continue or lapse. If there is a provision therein that pending proceedings shall continue and be disposed of under the old rule as if the rule has not been deleted or omitted, then such a proceeding will continue. If the case is covered by Section 6 of the General Clauses Act or there is a pari-materia provision in the statute under which the rule has been framed in that case also the pending proceeding will not be affected by omission of the rule. In the absence of any such provisions in the statute or in the rule, the pending proceeding will lapse under rule under which the notice was issued or proceeding being omitted or deleted". 8. In the case of General Finance Co., Vs. ACIT, their Lordship of the Apex Court has again examined the issue and held that the principle underlying section 6 as saving the right to initiate proceedings for liabilities incurred du....
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....er section 92B(i) and reference made to TPO under section 92CA is invalid and bad in law. Therefore, the consequential order passed by the TPO and DRP is also not sustainable in the eyes of law. 11. Under these circumstances, where this clause (i) is omitted from the statute since its inception, the AO ought to have required to frame the assessment in normal course after making necessary enquiries of particular claim of expenditure in accordance with law. But this exercise could not have been done on account of provisions of section 92BA Clause (i) of the Act. Now when this clause (i) has been omitted from the statute by virtue of the aforesaid amendments, the AO is required to adjudicate the issue of claim of expenditures in accordance with law after affording opportunity of being heard to the assessee. We therefore set aside the orders of the AO and the DRP and restore the matter to the AO with the direction to re-adjudicate the issue of claim of expenditure incurred in respect of which payment has been made or is to be made to person referred to in clause (b) of sub section 2 of section 40A of the Act. Accordingly, since we have restored the matter to the AO, we find no....
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....f the various Co-ordinate of the Tribunal (supra), we are of the view that the transactions of the assessee referred to the TPO for determination of ALP could not be made subject to TP adjustment after the Finance Act, 2017, as discussed above. Consequently, no addition on account of TP Adjustment is sustainable because it has been categorically held that omission of a provision would mean that it was never on the statue book. In other words, it has to be deemed that it was not in existence in A.Y. 2014-15 and if there was no such provision for recommending the transactions u/s 40A(2)(b) for determination of ALP, there cannot be any adjustment in the income of the assessee on the ground of TP adjustment. Accordingly, these grounds of the assessee are allowed. The additions made in the income of the assessee on account of TP adjustment in the domestic transaction are deleted". 9. In view of the above discussion, the appeal of the assessee is partly allowed and the additions made on account of domestic transfer pricing adjustment are deleted. Grounds No. 1 to 5 and 6(a) to 6(f) are allowed. 9. We further noted that the Hon'ble Supreme Court in the case of General Finance ....