ITO , WARD - 1 , VIRUDHUNAGAR vs. M/S ANDAVAR OIL COMPANY, VIRUDHUNAGAR

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ITTPA 74/CHNY/2022Status: DisposedITAT Chennai25 March 2025AY 2015-20169 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the reference made by the AO to the TPO on August 3, 2017, for computing the Arm's Length Price (ALP) regarding Specified Domestic Transactions under Section 92BA(1) of the Act was ab initio void. This was because Section 92BA(1) had been omitted by the Finance Act, 2017, effective April 1, 2017. Consequently, the AO lacked the jurisdiction to refer the Specified Domestic Transaction to the TPO. The Tribunal found that the TPO's order dated April 10, 2018, and the subsequent adjustment ordered by the AO on August 23, 2018, to the tune of Rs. 2,27,75,890/-, were without jurisdiction and therefore bad in law. The Tribunal confirmed the impugned action on this legal issue, rendering the Revenue's grounds on merits academic. The deletion order passed by the Ld.CIT(A) was confirmed on the basis of this legal finding. The appeal filed by the Revenue was dismissed.

What were the facts?

The Revenue is in appeal against the order of the CIT(A) for Assessment Year 2015-16, which deleted an addition of Rs. 2,27,75,890/- made by the Transfer Pricing Officer (TPO) under Section 92CA(3) of the Income Tax Act, 1961, concerning a specified domestic transaction. The TPO's order followed a reference made by the Assessing Officer (AO) on August 3, 2017, to the TPO regarding specified domestic transactions under Section 92BA(1) of the Act, valued at Rs. 54.63 Crores. The AO passed the assessment order on August 23, 2018, after the TPO's downward adjustment. The assessee, supporting the CIT(A)'s deletion, raised a legal issue regarding the AO's jurisdiction to refer the matter to the TPO, as Section 92BA(1) was omitted by the Finance Act, 2017, effective April 1, 2017.

What were the issues?

1. Whether the Assessing Officer had the jurisdiction to make a reference to the TPO for specified domestic transactions under Section 92BA(1) of the Income Tax Act, 1961, when this sub-section was omitted by the Finance Act, 2017, effective April 1, 2017? (Question of law, turning on Section 92BA(1) and Section 92CA(3)). Assessee's contention: The AO's reference on August 3, 2017, was ab initio void as Section 92BA(1) was omitted prior to the reference date. Therefore, the TPO's order and the subsequent adjustment were void. Relied on Rule 27 of IT(A) Rules, 1963, and decisions in NTPC v. CIT (SC), Karnataka High Court in ITA No. 665 of 2023, and Bhuwalka Steel Industries Ltd. v. ITO (Bangalore ITAT). Revenue's contention: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 92CA(3),Section 92BA(1),Section 143(3),Section 92CA(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI AMITABH SHUKLA

Hearing: 06.02.2025Pronounced: 25.03.2025

i) Both the appeals i.e., ITA No.392/2018 and ITA No.170/2019 are dismissed.

ii) Order dated 22.12.2017 passed by the Income Tax Appellate Tribunal, Bangalore in IT(TP)A No.1722/Bang/2017 is affirmed."

IT (TP) A No.74 /Chny/2022 (AY 2015-16) M/s. Andavar Oil Company :: 7 ::

6.

Insofar as issue No.4 is concerned, the substantial question of law framed by the Bombay High Court is identical to the question No.4 in this appeal. The question is reproduced as under:

(a) Whether on the facts and the circumstances of the case and law, the Tribunal was justified in law in restricting the Transfer Pricing (TP) adjustment only to the transaction between the Associated Enterprises (AEs)?

7.

The findings of the Bombay High Court on the aforesaid question can be seen in paragraph Nos. 3(d) and (e) of the judgment as under:

xxx xxx xxx xxx xxx xxx

(d) The grievance of the Revenue before us is that the adjustment is not to be restricted only in respect of transactions entered into with the AE. All the transactions of the respondent-Assessee would have necessarily be varied/adjusted by the margin arrived at by the TPO to arrive at the ALP.

(e) We find that in terms of Chapter X of the Act, re-determination of the consideration is to be done only with regard to income arising from international Transactions on determination of ALP. The adjustment which is mandated is only in respect of International Transaction and not transactions entered into by assessee with independent unrelated third parties. This is particularly so as there is no issue of avoidance of tax requiring adjustment in the valuation in respect of transactions entered into with independent third parties. The adjustment as proposed by the Revenue if allowed would result in increasing the profit in respect of transactions entered into with non-AE. This adjustment is beyond the scope and ambit of Chapter X of the Act.

8.

At this stage, we may state here that the judgment of the Co-ordinate Bench in PR. Commissioner of Income Tax-7 and another Vs. M/s, Texport Overseas Private Limited was taken in appeal to the Hon'ble Supreme Court, but the tax effect being less than prescribed limit, the appeal was withdrawn. Since the issue with regard question Nos. 1 to 3 is covered by the judgment of Co-ordinate Bench of this Court, for parity of reasons, we hold, the questions are not sustainable. Insofar as, question No.4 is concerned, though the learned Senior Counsel for the respondent has also relied upon another judgment of Bombay High Court in the case of Commissioner of Income Tax-8, Mumbai Vs Phoenix Mecvano (India)(P.) Ltd. [2019] 108 taxmann.com 124 (Bombay) wherein according to him, the appeal was filed against the order of the Tribunal, wherein Tribunal has relied upon the judgment of the Bombay High Court in the case of Commissioner of Income-tax Vs Thyssen Krupp Industries India (P.) Ltd., (supra) which judgment (in the case of Commissioner of Income Tax-8, Mumbai Vs Phoenix Mecvano (India)(P.) Ltd (supra)) was taken in appeal before the Hon'ble Supreme Court the same was dismissed in SLP No.2234/2018 dated 05.02.2018.

9.

In view of the fact that the issue relatable to question No.4 is covered by the judgment of the High Court of Bombay in Commissioner of Income-tax Vs Thyssen Krupp Industries India (P.) Ltd., and also Commissioner of Income Tax-8, Mumbai Vs Phoenix Mecvano (India)(P.) Ltd., which have attained finality till the Hon'ble Supreme Court, we find no merit insofar as question No.4 is concerned. Accordingly, the appeal being without merit is dismissed. The questions of law are answered in favour of Assessee and against the Revenue.

IT (TP) A No.74 /Chny/2022 (AY 2015-16) M/s. Andavar Oil Company :: 8 ::

5.

Respectfully following the decision of the Hon’ble Karnataka High

Court in the aforesaid case [M/s.TT Steel Services India Pvt. Ltd.] supra,

we find force in the submissions of the Ld.AR that the reference made by

the AO to the TPO dated 03.08.2017 for computing the ALP regarding the

Specified Domestic Transaction u/s.92BA(1) of the Act is ab initio void,

since Sec.92BA is found to have been omitted by the Parliament by

Finance Act, 2017 w.e.f. 01.04.2017. Therefore, according to us, the AO

didn’t had the jurisdiction to refer the Specified Domestic Transaction to

the TPO. Therefore, consequent order passed by the TPO dated

10.04.2018 is null in the eyes of law and therefore, adjustment ordered

by the AO dated 23.08.2018 to the tune of Rs.2,27,75,890/- was without

jurisdiction and therefore, bad in law. Therefore, without going into the

merits of the deletion order passed by the Ld.CIT(A), we confirm the

impugned action on the legal issue discussed supra and therefore, the

grounds raised by the Revenue on merits are academic, but left open.

6.

In the result, appeal filed by the Revenue is dismissed.

Order pronounced on the 25th day of March, 2025, in Chennai.

Sd/- Sd/- (अिमताभ शु�ा) (एबी टी. वक�) (ABY T. VARKEY) (AMITABH SHUKLA) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER

IT (TP) A No.74 /Chny/2022 (AY 2015-16) M/s. Andavar Oil Company :: 9 :: चे�ई/Chennai, �दनांक/Dated: 25th March, 2025. TLN आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF

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