Square Yards Consulting Pvt. Ltd. Vs ACIT (ITAT Delhi)
Delhi ITAT: Omission of Section 92BA(i) Invalidates Specified Domestic Transaction Transfer Pricing Proceedings
The Delhi ITAT held that after the omission of section 92BA(i) by the Finance Act, 2017, transfer pricing proceedings initiated in respect of specified domestic transactions covered by the omitted clause could not survive. Following the Karnataka High Court’s decision in Pr. CIT v. Texport Overseas Pvt. Ltd., the Tribunal allowed the assessee’s appeal.
The dispute related to transfer pricing adjustments in respect of specified domestic transactions for AY 2016-17. The assessee contended that clause (i) of section 92BA, which brought payments covered by section 40A(2)(b) within the ambit of specified domestic transactions, had been omitted with effect from 01.04.2017 and, in the absence of any saving clause, must be treated as if it had never existed. It therefore challenged the reference made by the Assessing Officer to the Transfer Pricing Officer under section 92CA.
The Revenue relied on the Explanatory Notes to the Finance Act, 2017, contending that the amendment applied only from AY 2017-18 onwards.
Rejecting the Revenue’s contention, the Tribunal relied on the Bangalore ITAT decision in Texport Overseas Pvt. Ltd., as affirmed by the Karnataka High Court, which held that once clause (i) of section 92BA was omitted without any saving provision, it would be deemed never to have formed part of the statute. Consequently, the Assessing Officer’s reference to the TPO under section 92CA, as well as the consequential orders of the TPO and the DRP, were unsustainable in law.
