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Income Tax Appellate Tribunal, “C” BENCH KOLKATA
Before: SHRI SANJAY GARG & SHRI GIRISH AGRAWAL
Present for: Revenue by : Shri Kapil Mondal, Addl. CIT, DR Assessee by :Shri Soumen Adak, FCA & Shri Ashish Poddar, FCA Date of Hearing : 22.11.2023 Date of Pronouncement : 29.11.2023 O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
The appeal filed by the revenue and the Cross Objection filed by the assessee are against the order of Ld. CIT(A)-22, Kolkata dated 31.01.2019 passed against the assessment order of Ld. DCIT, Circle-5(1), Kolkata u/s. 143(3) r.w.s. 92CA(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) dated 23.02.2018 for AY 2014-15.
CO No. 10/Kol/2023 L&T Finance Ltd. AY 2014-15 2. The appeal filed by the Department is delayed by 85 days for which petition for condonation of delay is placed on record. The reasons explained for delay relate to various procedural approvals and communication which took time for filing the present appeal. We also note that there is a delay of 110 days in filing the Cross Objection of the assessee for which also petition for condonation of delay along with affidavit is placed on record. To explain the delay for filing the Cross Objection, assessee submitted that it became aware of the correct legal position in respect of clause (i) of section 92BA through various decisions which squarely covers the assessee favourably for the upward adjustment made on account of various Specified Domestic Transactions (SDT). Assessee has raised a pure question of law in its Cross Objection which does not require any further investigation of facts and at the same time it has a bearing on its tax liability. Thus, assessee prayed that its Cross Objection be admitted by condoning the delay of 110 days for which it placed reliance on the decision of Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT [1998] 97 Taxman 358 (SC).
2.1. We have duly considered rival contentions and gone through the record carefully. Sub-section 5 of Section 253 contemplates that the Tribunal may admit an appeal or permit filing of memorandum of cross-objections after expiry of relevant period, if it is satisfied that there was a sufficient cause for not presenting it within that period. Similarly, it has been used in section 5 of Indian Limitation Act, 1963. Whenever interpretation and construction of this expression has fallen for consideration before Hon'ble High Court as well as before the Hon'ble Supreme Court, then, Hon'ble Court were unanimous in their conclusion that this expression is to be used liberally. We may make reference to the following observations of the Hon'ble Supreme court
CO No. 10/Kol/2023 L&T Finance Ltd. AY 2014-15 from the decision in the case of Collector Land Acquisition Vs. Mst. Katiji & Others, 1987 AIR 1353:
"1. Ordinarily a litigant does not stand to benefit by lodging an appeal late.
Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties. 3. "Every day's delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense pragmatic manner.
When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.
5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk.
6. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so."
2.2. Similarly, we would like to make reference to authoritative pronouncement of Hon'ble Supreme Court in the case of N.Balakrishnan Vs. M. Krishnamurthy (supra). It reads as under:
"Rule of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation fixes a life-span for such legal remedy for the redress of the legal injury so suffered. Time is precious and the wasted time would never revisit. During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a life span must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim Interest reipublicae up sit finis litium (it is for the general welfare that a period be putt to litigation). Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time. A court knows that refusal to condone delay would result foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate. This Court has held that the words
CO No. 10/Kol/2023 L&T Finance Ltd. AY 2014-15 "sufficient cause" under Section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice vide Shakuntala Devi lain Vs. Kuntal Kumari [AIR 1969 SC 575] and State of West Bengal Vs. The Administrator, Howrah Municipality [AIR 1972 SC 749]. It must be remembered that in every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy the court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then the court should lean against acceptance of the explanation. While condoning delay the Could should not forget the opposite party altogether. It must be borne in mind that he is a looser and he too would have incurred quiet a large litigation expenses. It would be a salutary guideline that when courts condone the delay due to laches on the part of the applicant the court shall compensate the opposite party for his loss."
2.3. We do not deem it necessary to re-cite or recapitulate the proposition laid down in other decisions. It is suffice to say that the Hon'ble Courts are unanimous in their approach to propound that whenever the reasons assigned by an applicant for explaining the delay, then such reasons are to be construed with a justice oriented approach.
2.4. In light of the above, if we examine the facts then it would reveal that there is a brief delay of 85 days in filing of the appeal by the Department. In its application it has been contended by the revenue that delay occurred on account of time taken in getting the approvals by the concerned officer from the competent authority for filing the appeal. Considering the brief delay and the explanation of the revenue, we condone the same and admit the appeal.
2.5. As far as the delay in filing of the cross-objection is concerned, it is pertinent to note that sub-Section (4) of Section 253 of the Act, authorizes the respondent to file cross-objection against any part of the impugned order by which it is aggrieved. In the present case, the assessee has filed the cross-objection well in advance of the actual listing of the appeal on the board. Further, the impugned order on CO No. 10/Kol/2023 L&T Finance Ltd. AY 2014-15 which the cross-objection has been filed by the respondent/assessee is open for debate in the appeal of the appellant/revenue. The respondent/assessee has explained the reason for such delay in the affidavit placed on the record. We have gone through the same. The affidavit in itself contains an exhaustive explanation. Therefore, for the just decision of the controversy, it is incumbent upon us to condone the delay.
2.6. In view of the above, we condone the delay in filing of the appeal as well as the cross-objection and proceed to adjudicate them on merits.
Since the assessee has raised pure question of law in its Cross Objection, we are inclined to take up the Cross Objection filed by the assessee before adjudicating on the appeal by the revenue. Ground of Cross Objection raised by the assessee is reproduced as under:
“That on the fact and in the circumstances of the case, adjustments W.r.t to Specified Domestic Transactions entered into by the assessee during the relevant assessment year be deleted as the provisions of Section 92BA(i) of the Income Tax Act, 1961 covering transactions falling under Sec. 40A(2)(b) has been omitted vide Finance Act, 2017 with the effect that the said provisions never existed in the Statute and accordingly, the order passed by the TPO/AO TPO is void ab initio wrong, illegal and bad in law.”
4. Revenue has raised 11 grounds in its appeal which are all in respect of adjustments made by the Ld. Transfer Pricing Officer and accepted by the Ld. AO while completing the assessment in respect of CO No. 10/Kol/2023 L&T Finance Ltd. AY 2014-15 SDTs which have been deleted by the Ld. CIT(A). Grounds taken by the revenue are not reproduced for the sake of brevity.
Through the Cross Objection, ld. Counsel has asserted that pursuant to the omission of clause (i) of section 92BA, the proceedings initiated and action taken in the said clause do not survive at all, rendering the adjustment made by the Ld. TPO and adopted by the Ld. AO as invalid and contrary to law.
According to him, the primary issue involved in the present assessment is in respect of valuation of Arms Length Price (ALP) of the various Specified Domestic Transactions (SDTs) between the assessee and its Associated Enterprises (AEs). Ld. AO had made a reference to Transfer Pricing Officer u/s. 92CA of the Act to determine ALP with respect to SDT u/s. 92BA(1) of the Act.
6.1. The adjustments made by the Ld. AO (TPO) while completing the assessment for the SDTs is tabulated as under:
CO No. 10/Kol/2023 L&T Finance Ltd. AY 2014-15
7. To corroborate the nature of transactions and AEs of the assessee, ld. Counsel referred to Form 3CEB furnished by the assessee to the department. He referred to clause 21 and clause 22 of Form 3CEB to demonstrate that the transactions in respect of which adjustments have been made are all SDTs, carried out with its.
7.1. Ld. Counsel thus, submitted that once clause (i) of section 92BA has been ommitted by the Finance Act, 2017 from the statute, the resultant effect is that the said
CO No. 10/Kol/2023 L&T Finance Ltd. AY 2014-15 provision had never existed and as such in the present case the reference and adjustment proposed u/s. 92CA and addition made in the assessment order are erroneous and contrary to the law.
7.2. Ld. Counsel submitted that the position of law with regard to omission of a provision from a statute is settled, which is the normal effect of repealing a statute or deleting a provision is to obliterate it from the statute-book as completely as if it had never existed. If a provision of a statute is unconditionally omitted without a saving clause in favour of pending proceedings, all actions must stop where the omission finds them, and if final relief has not been granted before the omission goes into effect, it cannot be granted afterwards.
7.3. He further submitted that the said view has been settled by the Hon’ble Supreme Court in the cases of Kolhapur Canesugar Works Ltd. v. Union of lndia, [2000 (119) E.L.T. 257] and General Finance Co. v. ACIT, [2002] 257 ITR 338]. The said view has been reaffirmed by the Hon'ble Karnataka High Court in PCIT v. Texport Overseas (P.) Ltd., [[2020] 271 Taxman 170] and also by the Cooirdinate Bench of ITAT, Kolkata in various cases including ACIT v. Rahee Jharjharia in dated July 2, 2022.
Ld. DR placed reliance on the orders of the authorities below.
We have duly considered this fold of contention raised by the ld. Counsel for the assessee. We are of the view that Coordinate Benches have taken a view that since clause (i) of section 92BA stands omitted from the provision and omission of such is to be construed as if it never existed in the Statute Book and if it never existed in the Statute
CO No. 10/Kol/2023 L&T Finance Ltd. AY 2014-15 Book, then, no Arm's Length Price is required to be determined for a transaction with specified persons in section 40A(2)(b) of a domestic transaction. If no Arm's Length Price is required to be determined, then, no reference was required to be made.
9.1. To buttress our views, we find force from the decision of Hon’ble High court of Karnataka in the case of PCIT Vs. T export Overseas Pvt. Ltd. (2020) 114 taxmann.com 568 (Kar). The finding arrived at by the Hon’ble Court in this respect in para 6 and 7 is reproduced as under: “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. Hence, decision taken 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.
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 Court in the matter of M/s. 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 res integra.”
9.2. Therefore, respectfully considering the above, impugned order is not sustainable. Considering the above facts and circumstances in their setting as a whole, we allow the Cross
CO No. 10/Kol/2023 L&T Finance Ltd. AY 2014-15 Objection of the assessee resulting into deletion of the adjustments made in respect of the SDTs by the Ld. AO.
9.3. As already noted above, appeal by the revenue is in respect of deletion of adjustments made for various SDTs which do not survive in view of the decision given by us while disposing the Cross Objection of the assessee as stated above. Accordingly, appeal of the revenue is dismissed.
In the result, appeal of the revenue is dismissed and Cross Objection of the assessee is allowed.