TMI Blog2023 (8) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... ss form the brought forward business loss and unobserved depreciation loss - This issue has been addressed by the AO at para No. 9 in the final Assessment Order at the request of the learned AR. This issue is also remitted back to the AO for deciding the issue afresh in accordance with law and the assessee is directed to produce necessary documents for substantiating its case and not to seek unnecessary adjournments. Appeal by the assessee is allowed for statistical purposes. - SHRI GEORGE GEORGE K AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER For the Appellant : Shri. T. Srinivasa, CA For the Respondent : Shri. Sunil Kumar Singh, CIT(DR)(ITAT), Bengaluru. ORDER Per Laxmi Prasad Sahu, Accountant Member : These are two appeals filed by the assessee against separate Assessment Orders passed by the AO under section 143(3) r.w.s. 144C of the Income Tax Act, 1961 (hereinafter called the Act ), vide order dated 30.10.2018 and 09.05.2019 respectively. Grounds of appeal in ITA No. 3433/Bang/2018 for Assessment Year 2014-15 1. The orders of the TPO /DRP /Assessing Officer in so far as they are against the appellant, are opposed to law, weight ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led with and consequently the order of the Learned Assessing Officer is bad in law want of requisite jurisdiction. The Learned Assessing Officer erred in not providing the copy of the approval granted by the Commissioner which is in violation of the settled principles of natural justice and thus the draft order of assessment needs to be set aside. 10. The Learned TPO and DRP has erred that the purchases made from party has gone in manufacturing activity as well as trading activity, whereas the assessee has procured material form related party solely for trading purpose. Hence, the ALP adjustment shall be restricted only to the value of SDT with related party. 11. The Submissions made by the appellant company before the TPO have not be considered and have not be discussed anywhere in the order passed by TPO. Hence, the order passed by TPO is not a speaking order, which is against the principals of natural justice and beyond the parameters of the income tax law. 12. The authorities have erred in selecting Method for determining the ARM s length Price (ALP), as against the CUP Method following by the appellant resulting in an illogical comparison of financial data. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of Sec. 92C(1) requires taxpayer to select the method that under the facts and circumstances provides the most reliable measure of Arm's Length Price. 2. From the above grounds of appeal, it is clear that the TP issue involved in both the Assessment Years are common and other 2 issues raised in ground No. 07 08 are only for the Assessment Year 2014-15. Therefore, for the sake of convenience and brevity, we are taking first the Assessment Year 2014-15 in ITA No.3433/Bang/2018 and the decision of this case in regard to the issue involved in Assessment Year 2015-16 shall apply mutatis mutandis. ITA No.3433/Bang/2018 3. The brief facts of the case are that the assessee filed its return of income on 26.09.2014 declaring current year loss of Rs. 28,82,10,558/-. The case was selected for scrutiny under CASS and statutory notices were issued to the assessee. The assessee filed reply and it was observed that the assessee had international transaction of Rs. 21,15,692/- and Specified Domestic Transactions (SDT) of Rs. 35,64,44,188/-. Therefore with the prior approval of the CIT, Bengaluru 1, Bengaluru, a reference was made to the TPO to determine ALP as per provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NIL NKSP Ltd Bharath Infra Exports Imports 6,74,25,068 6,74,25,068 Total 40,64,92,084 4. As per the above noted differences, the AO made adjustment to the tune of Rs. 40,64,92,084/- and completed the assessment without setting off of losses as claimed by the assessee and assessed income of Rs. 37,54,91,653/- and passed order on 27.12.2017. Aggrieved from the above order, the assessee filed objection before the DRP and the DRP granted marginal relief to the assessee and by order dated 18.09.2018. 4.1 After receipt of the directions of the DRP, the AO proceeded to pass the final Assessment Order and the TP adjustment was reduced to Rs. 20,27,10,179/- and the AO determined the net taxable income at Rs. 32,09,91,705/- and passed order on 30.10.2018. Aggrieved from the above order, the assessee filed appeal before the Tribunal. 5. The learned AR reiterated the submissions made before the lower authorities and submitted that the international t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of CIT v. Glaxo Smith Kline Asia (P.) Ltd., in its order has, after examining the complications which arise in cases where fair market value is to be assigned to transactions between domestic related parties, suggested that Ministry of Finance should consider appropriate provisions in law to make transfer pricing regulations applicable to such related party domestic transactions. The application and extension of scope of transfer pricing regulations to domestic transactions would provide objectivity in determination of income from domestic related party transactions and determination of reasonableness of expenditure between related domestic parties. It will create legally enforceable obligation on assessees to maintain proper documentation. However, extending the transfer pricing requirements to all domestic transactions will lead to increase in compliance burden on all assessees which may not be desirable. Therefore, the transfer pricing regulations need to be extended to the transactions entered into by domestic related parties or by an undertaking with other undertakings of the same entity for the purposes of section 40A, Chapter VI-A and section 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment has been made by the assessee to a person referred to in under section 40A(2)(b) are to be excluded from the scope of section 92BA of the Act. Accordingly, it is also proposed to make a consequential amendment in section 40(A)(2)(b) of the Act. These amendments will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent years. 7.2. It is clear from the above that the SDTs have to be examined in the light of section 40(A)(2)(b) of the Act. We note from the section 92BA that section 92BA(i) has been omitted by the Finance Act. 2017 w.e.f. 01.04.2017. Since, this effect of omission of clause (i) of sec. 92BA of the Act by the Finance Act. 2017 relating to the specified domestic transactions has been examined by the coordinate bench in the case of Edelweiss Rural and Corporate Services Ltd., Vs. DCIT in ITA No.7475/Mum/2017 dated 24/06/2022 by following the decision rendered by the Hon ble High Court in the case of Pr. CIT Vs. Texport Overseas Pvt. Ltd., (2020) 114.taxmann.com 568/271 Taxman 170, in which, it has been held that the reference made to ld. TPO under clause (i) of sec. 92BA of the Act is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 parimateria 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. v. Assistant Commissioner of Income-tax 257 ITR 38 ($.). 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 the case of CT v. GE Thermometrics India Pvt. Ltd. in ITA No. 876/2008 in which while dealing the omission sub-section (9) of section 1OB the Hon'ble High Court has held that once the section is omitted from the statute book, the result is it had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the impact of omission of old rule 10 and I OA was examined. 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 parimatenia 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., v. ACIT, their Lordship of the Apex Court has again examined the issue and held that the principle underlying section 6 as saving t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position, the cognizance taken by the AO under section 9213(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 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (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. v. 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. Hence, decision taken by the Assessing Officer under the effect of section 92BI and reference made to the order of Transfer Pricing Officer-TPO under section 92CA could be invalid and bad in law. 7. It is for this precise reason, tribunal has rightly held that order passed by the TPO and DRP is unsustainable in the eyes of law. The said finding is based on the authoritative principles enunciated by the Hon'ble Supreme Court in Kolhapur Canesugar Works Ltd. referred to herein supra which has been followed by Co-ordinate Bench of this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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