Texport Overseas Private Limited (the Appellant) vs. Deputy Commissioner of Income-tax (the Respondent)
Income-Tax Appellate Tribunal, Bangalore [IT(TP)A No. 1722/Bang. 2017, AY 2013-14]
Whether the omission of reference of section 40A(2)(b) from section 92BA by virtue of the amendment of Finance Act, 2017 w.e.f. 01.04.2017 shall be deemed not to be on the statute since its introduction w.e.f. 01.04.2012?
- The Income-tax Act, 1961 (the Act) was amended prospectively by the Finance Act, 2012, to provide for a mechanism to determine the fair market value in cases of domestic transactions of related parties in India. A new section 92BA was inserted which defined ‘Specified Domestic Transaction (SDT)’.
- ‘Specified Domestic Transaction’ covered, amongst others, the payments made to related parties stated under section 40A(2)(b) of the Act. Section 40A(2) provides for disallowance of expenditure, in respect of which payment is made by the taxpayer to its related party, where such expenditure is, in the opinion of the Assessing Officer (AO) excessive or unreasonable having regard to the fair market value of the goods, services or facilities, etc. After the amendment made by Finance Act, 2012, the expenditure referred to under section 40A(2)(b) was to be computed based on arm’s length price.
- However, sub-clause (1) of section 92BA, which referred to the payments made to related parties covered under section 40A(2)(b), was omitted by the Finance Act, 2017 w.e.f. 01.04.2017.
Contentions of the appellant
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