K PARAMASIVAM,ERODE vs. ACIT CIRCLE 1, ERODE

ITTPA 18/CHNY/2018Status: DisposedITAT Chennai15 February 2023AY 2014-157 pages
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What were the facts?

The appeals by various assessees for Assessment Years 2013-14 and 2014-15 arose from final assessment orders passed by the Assessing Officer (AO). The assessees, being group entities, had specified domestic transactions (SDTs) among themselves. The revenue determined the Arm's Length Price (ALP) for these transactions. In one instance, for AY 2013-14, the AO passed an order under section 143(3) r.w.s. 144C(13) on 26.09.2017, following directions from the Dispute Resolution Panel (DRP). The Transfer Pricing Officer (TPO) had proposed an adjustment of Rs. 673.54 Lacs on purchases of edible oil from an associated entity, classifying it as an SDT. The assessee used the Comparable Uncontrolled Price (CUP) method, which was rejected by the TPO, who then applied the Transactional Net Margin Method (TNMM). The assessee's Profit Level Indicator (PLI) was -4.54% against a mean PLI of 2.02% from comparable entities.

What did the Tribunal hold?

The Tribunal held that the reference to the TPO in respect of specified domestic transactions under clause (i) of Section 92BA was invalid because the provision was omitted. Following the Hon'ble Karnataka High Court's decision in PCIT vs. Texport Overseas (P.) Ltd. and the Mumbai Tribunal's decision in Mahindra Two Wheelers Ltd. vs. DCIT, the Tribunal reasoned that the omission of a statutory provision, without a saving clause, means the provision is to be considered as if it never existed. Therefore, the TPO's order and the consequential TP adjustments made by the AO were unsustainable in law. However, regarding the second issue, the Tribunal noted that the deletion of disallowance made by the AO had been remitted back to the AO for factual determination. The Tribunal affirmed the action of the Tribunal in restoring the matter back to the file of the AO to examine the claim of expenditure in accordance with the provisions of Section 40A(2)(b) of the Act. All appeals were restored to the file of the AO for examination of allowability of expenditure under Section 40A(2) of the Act.

What were the issues?

1. Whether the reference to the Transfer Pricing Officer (TPO) for determining the Arm's Length Price (ALP) of specified domestic transactions (SDTs) under Section 92BA(i) of the Income Tax Act, 1961, was valid, given that clause (i) of Section 92BA was omitted with effect from 01.07.2017 by the Finance Act, 2017? - Assessee's contention: The reference to the TPO is invalid and bad in law, and therefore, the consequential TP adjustments made by the AO should be deleted. Relied on PCIT vs. Texport Overseas (P.) Ltd. (Karnataka High Court) and Mahindra Two Wheelers Ltd. vs. DCIT (Mumbai Tribunal). - Revenue's contention: These transactions were brought under the Transfer Pricing (TP) mechanism pursuant to the directions of the Hon'ble Supreme Court in CIT vs. Glaxo Smithkline Asia (P.) Ltd. 2. Whether the deletion of disallowance made by the Assessing Officer, which was remitted back to the AO for factual determination, warrants interference by the Tribunal?

Which sections of the Income-tax Act were involved?

Section 92BA,Section 143(3),Section 144C(13),Section 92CA(2),Section 40A(2)(b)

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Heard together (3 matters)

ITA No.2608/Chny/2017
ITA No.2609/Chny/2017
ITA No.2610/Chny/2017

Read from the judgment's own cause title. This page is filed under one of them.

आयकर अपीलीय अिधकरण ‘डी’ "ायपीठ चे"ई म"। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI

माननीय ,ी वी. दुगा2 राव, "ाियक सद4 एवं माननीय ,ी मनोज कुमार अ9वाल ,लेखा सद4 के सम;। BEFORE HON’BLE SHRI V. DURGA RAO, JUDICIAL MEMBER AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

1.

आयकर अपील सं./ ITA No.2608/Chny/2017 (िनधा2रण वष2 / Assessment Year: 2013-14) &

2.

IT(TP)A No.21/Chny/2018 (िनधा2रण वष2 / Assessment Year: 2014-15) Sri Maharaja Refineries ACIT बनाम 126, Bhavani Road, Circle-1, / Vs. Erode – 638 004. Erode. "थायी लेखा सं./जीआइ आर सं./PAN/GIR No. AAFFS-8491-N (अपीलाथ"/Appellant) : (""थ" / Respondent) & 3.आयकर अपील सं./ ITA No.2609/Chny/2017 (िनधा2रण वष2 / Assessment Year: 2013-14) &

4.

IT(TP)A No.20/Chny/2018 (िनधा2रण वष2 / Assessment Year: 2014-15) Maharaja Sivam Industries (P) Ltd. ACIT बनाम 119, Bhavani Road, Circle-1, / Vs. Erode – 638 004. Erode. "थायी लेखा सं./जीआइ आर सं./PAN/GIR No. AABCM-3049-D (अपीलाथ"/Appellant) : (""थ" / Respondent) & 5. आयकर अपील सं./ITA No.2610/Chny/2017 (िनधा2रण वष2 / Assessment Year: 2013-14) S. Saradha, ACIT बनाम 117, Bhavani Road, Circle-1, / Vs. Erode – 638 004. Erode. "थायी लेखा सं./जीआइ आर सं./PAN/GIR No. AJCPS-0707-K (अपीलाथ"/Appellant) :

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