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2018 (9) TMI 1977 - AT - Income TaxTP Adjustment - AO made a reference to TPO u/s 92CA to determine arms length price as the assessee had entered into specified domestic transaction and on the ground it was covered u/s 92BA - specific domestic transaction in the nature of remuneration paid to the directors by the Appellant - HELD THAT:- As decided in assessee's own case [2017 (12) TMI 1719 - ITAT BANGALORE] undisputedly, by the Finance Act, 2017, clause (i) of section 92BA has been omitted w.e.f. 01.04.2017. Once this clause is omitted by subsequent amendment, it would be deemed that clause (i) was never been on the statute. While omitting the clause (i) of section 92BA, nothing was specified whether the proceeding initiated or action taken on this continue. Therefore, the proceeding initiated or action taken under that clause would not survive at all. In this legal position, the cognizance taken by the AO under 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. Where this clause (i) is omitted from the statute since its inception, the AO ought 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 readjudicate 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. Disallowance u/s 14A - HELD THAT:- The authorities have made disallowance having noted that the assessee did not have any exempted income. On this issue, it has been repeatedly held by the Tribunal, Hon’ble Apex Court and the High Court that wherever there is no exempted income, provisions of section 14A cannot be invoked. In the light of these facts, the finding of the lower authorities appears to be wrong as they have made the disallowance even after having noted that there is no exempted income. But in fact, the assessee has exempted income. Therefore, the disallowance can be made in accordance with the provisions of section 14A of the Act. Since this aspect was never examined by the AO, we set aside the order of the CIT(A) and restore the matter to the AO with a direction to readjudicate the issue afresh after affording opportunity of being heard to the assessee, keeping in view that earlier issue was also restored to the AO for readjudication. Appeal of the assessee stands allowed for statistical purposes.
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