M/S. INFONOX SOFTWARE PRIVATE LIMITED vs. DEPUTY COMMISSIONER OF INCOME TAX & ORS.

PDF · subscribers
W.P.(C)/1417/2019HC DelhiDLHC01010472201922 May 2024Bench: HON'BLE MR. JUSTICE YASHWANT VARMA,HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV3 pages
AI SummaryDismissed

What did the High Court hold?

The Delhi High Court held that the challenge to the reference under Section 92CA(1) of the Income Tax Act, 1961, could not be sustained. The Court found that Section 92CA(1) confers a statutory power on the AO to make a reference to the TPO. The Court viewed the CBDT Instruction No. 03/2016 and any framed Risk Parameters as merely guides for the exercise of this power, not as conditions precedent that would invalidate the reference if not strictly followed. The Court emphasized that the petitioner was invoking the extraordinary writ jurisdiction under Article 226 of the Constitution at the stage of a mere reference. The Court noted that the petitioner has adequate and efficacious remedies available under the Act, including challenging any order passed by the TPO, draft assessment order, directions from the Dispute Resolution Panel, or the Income Tax Appellate Tribunal, in accordance with the scheme of Section 144C. Therefore, the Court found no prejudice caused by the reference itself warranting the invocation of Article 226. The writ petition was dismissed.

What were the facts?

The petitioner, M/s. Infonox Software Private Limited, filed a writ petition before the Delhi High Court challenging a reference made by the Assessing Officer (AO) under Section 92CA(1) of the Income Tax Act, 1961, and an order dated 8.12.2018 by the AO disposing of objections against this reference. The petitioner argued that the AO failed to consider CBDT Instruction No. 03/2016, particularly paragraph 4.1, and the framed Risk Parameters when making the reference. The respondents were the Deputy Commissioner of Income Tax and others. The assessment year(s) are not explicitly stated. The dispute concerns the validity of the reference to the Transfer Pricing Officer (TPO).

What were the issues?

1. Whether the reference made by the Assessing Officer under Section 92CA(1) of the Income Tax Act, 1961, is liable to be quashed for failing to consider CBDT Instruction No. 03/2016 and its paragraph 4.1, and the framed Risk Parameters. Assessee's Contention: The Assessing Officer failed to consider CBDT Instruction No. 03/2016, specifically paragraph 4.1, and the Risk Parameters when making the reference under Section 92CA(1). This failure vitiates the reference. Revenue's Contention: The judgment does not record specific arguments from the revenue regarding the interpretation of the instruction or risk parameters. However, the court's reasoning implies that the instruction and risk parameters are guides and do not fetter the statutory power of the AO to make a reference.

Which sections of the Income-tax Act were involved?

Section 92CA,Section 144C

AI-generated summary — verify with the full judgment below

$~69 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 1417/2019

M/S. INFONOX SOFTWARE PRIVATE LIMITED

..... Petitioner

Through: Mr. Deepak Chopra, Adv.

versus

DEPUTY COMMISSIONER OF INCOME TAX & ORS.

..... Respondents Through: Mr. Vipul Agrawal, SSC with Mr. Gibran Naushad, JSC and Ms. Sakashi Shairwal, JSC.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MR. JUSTICE AMIT BANSAL

22.05.2024 O R D E R

1.

This writ petition has been preferred seeking the following reliefs: “(a). Issue a writ of mandamus or any other appropriate writ quashing the reference made by the First Respondent under section 92CA(l) of the Act and quash the order dated 8.12.2018 passed by the First Respondent disposing off the objections raised by the Petitioner against reference to Third Respondent. (b). Pass such other orders which this Hon'ble Court may deem fit and proper on the facts and in the circumstances of the case.”

2.

The principal ground on which the reference under Section 92CA of the Income Tax Act, 1961 [“Act”] is challenged is that the Assessing Officer [“AO”] has failed to bear in consideration Instruction No. 03/2016 of the Central Board of Direct Taxes [“Board”] dated 10 March 2016, and more particularly Para 4.1 thereof, which reads as follows: “4.1 The role of the TPO begins after a reference is received from the AO. In terms of Section 92CA, this role is limited to the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 30/05/2024 at 12:20:53

determination of the ALP in relation to international transactions or specified domestic transactions referred to him by the AO. However, if any other international transaction comes to the notice of the TPO during the course of the proceedings before him, then he is empowered to determine the ALP of such other international transactions also by virtue of Section 92CA (2A) and (2B). The transfer price has to be determined by the TPO in terms of Section 92C. The price has to be determined by using anyone of the methods stipulated in sub-section (1) of Section 92C and by applying the most appropriate method referred to in Sub-section (2) thereof. There may be occasions where application of the most appropriate method provides results which are different but equally reliable. In all such cases, further scrutiny may be necessary to evaluate the appropriateness of the method, the correctness of the data, weight given to various factors and so on. The selection of the most appropriate method will depend upon the facts of the case and the factors mentioned in Rule 10C. The TPO, after taking into account all relevant facts and data available to him, shall determine the ALP and pass a speaking order

.” 3. According to Mr. Chopra, learned counsel appearing in support of the writ petition, a bare perusal of the reference as made would indicate that the AO has failed to bear in mind the Risk Parameters as framed. 4. We find ourselves unable to sustain the challenge which stands raised bearing in mind the undisputed fact that Section 92CA of the Act confers a statutory power on the AO to make a reference to the Transfer Pricing Officer [“TPO”]. An Instruction of the Board and the Risk Parameters, which may have been framed, are merely to act as guides for the purposes of exercise of that power. 5. We fundamentally bear in mind the fact that the petitioner seeks to invoke our extraordinary jurisdiction under Article 226 of the Constitution, and that too at the stage of a mere reference to the TPO. We consequently find no justification for continuing the writ petition on our board. This, since all contentions of the petitioner-assessee including the fact that any order that the TPO may pass with respect to This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 30/05/2024 at 12:20:53

Arm’s Length Price [“ALP”], or a Draft Assessment Order which may be framed, or even for that matter a direction by the Dispute Resolution Panel [“DRP”], and ultimately by the Income Tax Appellate Tribunal would themselves be in accordance with the scheme of Section 144C of the Act, and in respect of which the petitioner has adequate and efficacious remedies under the Act. 6. We are thus of the opinion that the reference in itself shall cause no prejudice warranting invocation of Article 226 of the Constitution. 7. The writ petition fails and shall stand dismissed.

YASHWANT VARMA, J

AMIT BANSAL, J MAY 22, 2024/kk This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 30/05/2024 at 12:20:53

More judgments on Section 92CA

All 3,978 judgments and leading authorities on Section 92CA →

Recent GST High Court judgments

Search GST case law →