TaxTMI 
TaxTMI 
2025 (10) TMI 840
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Act') were issued and served on the assessee in response to which the AR of the assessee appeared before the Assessing Officer from time to time and filed the requisite details. Since the assessee has entered into certain domestic transactions with its 'Associate Enterprises' (AEs) within the meaning of section 92A(2)(a) & (b) of the Act, the Assessing Officer referred the matter to the Transfer Pricing Officer (TPO) to determine the Arm's Length Price (ALP) of the transactions entered with AEs. From the various details furnished by the assessee the TPO noted that the assessee has entered into following specified domestic transactions during the year: Sr. No. Name of AEs Description of Specific domestic transactions Amount (In INR) Method 1 ASSAM TEA COMPANY PURCHASE OF TEA LEAF AND POWDER 5844626 Kgs. 920,076,186 Cost plus method 2 ASSAM TEA COMPANY RENT PAID 96,000 CUP 3 BHAVESH R PATEL PURCHASE OF TEA LEAF AND POWDER 1108536 Kgs. 171,111,019 Cost plus method 4 BHAVESH R PATEL MACHINERY HIRE 252000, RENT 345000 597,000 CUP TOTAL 1,091,880,205 3. He n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n taken under that clause would not survive at all in the absence of any specific provisions for continuance of any proceedings under the said provision. As a result, if any proceedings have been initiated, it would be considered or held as invalid and bad in law. 2.6 Further the appellant also relied on the decision of the Hon'ble Ahmedabad ITAT in the case of Ammann India (P.) Ltd. vs. ACIT, Mehsana Circle, Mehsana, 192 ITD 680, dated 03-01-2022, wherein the similar view has been taken and held that where a provision is unconditionally omitted and in its place another dealing with same contingency is introduced without a saving clause in favour of pending proceedings, intention of legislature was that pending proceeding shall not continue but fresh proceedings for same purpose may be initiated under new provision. 2.7 Further the reliance is placed on the decision in the case of Imperial Mark Trade (I) Pvt. Ltd. Vs. Dy. Commissioner of Income Tax of ITAT K Bench Mumbai order No.IT(TP)A no.1453/Mum./2017 dated-31.08.2023. the Hon'ble ITAT in its order has relied on the decision of Co-ordinate Bench in the case Mahindra Two Whelers limited Vs. DCIT, ITA No....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hose expenditure and therefore coordinate bench set-aside the matter back to the file of the learned assessing officer. The decision of the coordinate bench setting aside the issue back to the file of the learned assessing officer for examination of allowability in accordance with the provisions of Section 40A(2) of the act has not been challenged by either of the parties before the honourable High Court. Further, the decision of the coordinate bench in case of Sobha City (supra) also held so. In view of this we set-aside ground number 5 of the appeal of the assessee back to the file of the learned assessing officer to examine allowability of expenditure in terms of provisions of Section 40A(2) of the act. 19. We do not agree with the argument of the learned authorised representative that it amounts to giving a second chance to the revenue and therefore no remand is warranted for verification of provisions of Section 40A(2) of the act. Very heavy reliance was placed on the decision of the honourable Bombay High Court in CIT versus VS Dempo and Co (private) Ltd 336 ITR 29 (Bombay). We find that in that particular decision the honourable Bombay High Court has given a categor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent of Rs. 4,73,46,877/- made under the provisions of Section 92BA is hereby deleted. Having quashed the adjustment as held in the above decision in the case of Imperial Mark Trade (I) Pvt. Ltd. Vs. Dy. Commissioner of Income Tax, the Hon'ble ITAT further stated that, the provisions of section 40A(2) of the Act governs allowability of such expenditure and hence directed the AO for verification of allowability of such expenditure in terms of Provisions of section 40A(2) of the Act. The issue in this case is similar to that of the decision cited above. Hence the appellant was asked to file copies of documents to verify the allowability of such expenditures u/s. 40A(2) of the Act. The appellant has filed the Income Tax Return, Computation of Total Income, Balance Sheet and Profit and Loss account and Tax Audit Report for A.Y. 2013-14 in the case its AEs M/s. Assam Tea Company and M/s. Bhavesh R. Patel. Similar details were also filed before the Assessing Officer. On verification, it is seen that, the Tax Auditor has certified in the Clause 23 of the Form 3CD (Tax Audit Report), that the payments made to the Related parties for the expenditures, which debited to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ased on omission of clause (i) of section 92BA w.e.f. 01.04.2017 by the Finance Act, 2017. He submitted that as per clause (i) of section 92BA being meaning of Specific Domestic Transaction, "any expenditure in respect of which payment has been made or is to be made to a person referred to in clause (b) of sub-section (2) of section 40A." He submitted that during the course of assessment proceedings, in response to the notice issued under section 142(1) read with section 129 of the Income-tax Act, 1961, dated 01.11.2016, the assessee company vide letter dated 10.11.2016 had submitted the Tax Audit Report of the assessee company along with the Tax Audit Report, Audited Balance Sheet and Profit & Loss Account of its Associate Enterprises (AEs) namely M/s Assam Tea Company and M/s Bhavesh R Patel (Proprietor of Patel Tea Company). He submitted that the Auditors in the Tax Audit Report have certified that the payments made to the related parties for the expenditure which are debited to the Profit & Loss Account are at par or less than the fair market value of the transaction. He submitted that the assessee and both the AEs are paying taxes in the higher bracket and therefore, there is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owance could not have been made even though said provision was rightly invoked by AO, and as such setting aside the disallowance erroneous. Hence, he prays for substantial question of law as formulated in the appeal memorandum (ITA 170/2019) be formulated, adjudicated and answered in favour of assessee. 5. Having heard learned Advocates appearing for parties and on perusal of records in general and order passed by tribunal in particular it is clearly noticeable that Clause (i) of section 92BA of the Act came to be omitted w.e.f. 01.04.2017 by Finance Act, 2017. As to whether omission would save the acts is an issue which is no more res intigra in the light of authoritative pronouncement of Hon'ble Apex Court in the matter of Kolhapur Canesugar Works Ltd. v. Union of India AIR 2000 SC 811 whereunder Apex Court has examined the effect of repeal of statute vis-a-vis deletion/addition of a provision in an enactment and its effect thereof. The import of section 6 of General Clauses Act has also been examined and it came to be held. 37. The position is well known that at common law, the normal effect of repealing a statute or deleting a provision is to obliterate it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nch of this Court in the matter of Ms. GE Thermometrias India Private Ltd., stated supra. As such we are of the considered view that first substantial question of law raised in the appeal by the revenue in respective appeal memorandum could not arise for consideration particularly when the said issue being no more rex integra". 11. We find the Mumbai Bench of the Tribunal in the case of Imperial Mark Trade (I) Pvt. Ltd. vs. DCIT vide IT(TP)A No.1453/Mum/2017, order dated 31.08.2023 following the decision of the Mumbai Bench of the Tribunal in the case of Mahindra Two Wheelers Ltd. vs. DCIT vide ITA No.519/Mum./2018 order dated 28.04.2022 for the assessment year 2013-14 has observed as under: "17. We have carefully considered the rival contention and perused the orders of the lower authorities. In the present case there is an adjustment made to the income of the assessee by determining arm's length price of specified domestic provisions by invoking the provisions of Section 92BA (1) of the act. The impugned assessment year before us is assessment year 2013-14. The above provision i.e. 92BA (i) of the act was inserted by The Finance Act, 2012 with effect from 1/4/2013....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... matter once the said Clause being omitted w.e.f. 01.04.2017 the decision made by AO/TPO and DRP invoking such Section 91BA is without any basis, and/or jurisdiction, invalid and bad in law and, thus, the same is liable to be quashed. On this aspect, we have further carefully considered the judgment passed by the Hon'ble Karnataka High Court. While dealing with the issue the Hon'ble Court was pleased to observe as follows: "6. In fact, Coordinate Bench under similar circumstances had examined the effect of omission of sub-section (9) to Section 10B of the Act w.e.f. 01.04.2004 by Finance Act, 2003 and held that there was no saving clause or provision introduced by way of amendment by omitting sub-section (9) of Section 10B. In the matter of GENERAL FINANCE CO. vs. ACIT, which judgment has also been taken note of by the tribunal while repelling the contention raised by revenue with regard to retrospectivity of Section 92BA(i) of the Act. Thus, when clause (i) of Section 92BA having been omitted by the Finance Act, 2017, with effect from 01.07.2017 from the Statute the resultant effect is that it had never been passed and to be considered as a law never been existed.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ld PCIT issued the above show cause notice u/s 263 in respect of specified domestic transactions referred to in clause (i) of section 92BA of the Act which was omitted with effect from 01.04.2017, and effect of such "omission" of clause (i) of section 92BA means that this provision never existed in the statute book, since clause (i) of section 92BA never existed in the statute book therefore, ld PCIT cannot exercise his jurisdiction under section 263 of the Act in respect of specified domestic transactions referred to in clause (i) of section 92BA of the Act. Therefore, the action of the Assessing Officer cannot be held to be erroneous as well as prejudicial to the interest of the revenue, in the facts and circumstances as narrated above. Thus, the usurpation of jurisdiction of exercising revisional jurisdiction by the Principal CIT is "null" in the eyes of law and, therefore, we are inclined to quash the very assumption of jurisdiction to invoke revisional jurisdiction u/s 263 of the Act by the Principal CIT. Therefore, we quash the order of the Principal CIT dated 08.03.2019 being ab initio void." (iv) ITAT Indore Bench in the matter of Swastik Coal Corporation Pvt. Ltd....
X X X X Extracts X X X X
X X X X Extracts X X X X
....are dismissed. ITA No.2285/PUN/2024 14. Grounds raised by the Revenue are as under: 1. Whether, on the facts and in the circumstances of the case, the Ld. CIT(A) is correct in deleting the penalty levied u/s.271AA of the Act, without appreciating the fact that the assessee has failed to maintain the information comparable as per Cost Plus Method { Rule 10D (g)}, their analysis to evaluate comparability (Rule 10D(h)) and actual working {Rule 10D(j)} as mentioned in the 3CEB report, which were required to be maintained by the assessee as per section 92D(1) and 92D(2) read with rule 10D sub clauses (g), (h) & (j). 2. Whether, on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in deleting the penalty merely on deletion of quantum addition wherein it has been held that the omission of Section 92BA(i) is applicable retrospectively from its inception, without considering that the Finance Act 2017 specifically provides for the omission to apply prospectively from AY 2017-18 onwards. 3. Whether, on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in deleting the penalty merely on deletion of quantum addi....