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Income Tax Appellate Tribunal, ‘C’ BENCH, KOLKATA
Before: Shri Rajpal Yadav, Vice-(KZ) & Shri Girish Agrawal
Per Rajpal Yadav, Vice-President (KZ):- The assessee is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals)- 22, Kolkata dated 26.03.2021 passed for A.Y. 2015-16.
Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) 2. The assessee has taken eleven grounds of appeal, out of that Grounds No. 6 to 9 are not pressed by the ld. Counsel for the assessee. Therefore, no specific finding is required to be recorded.
In Ground No. 10, the assessee has submitted that the authorities below have erred in law and on facts in charging interest under section 234B of Rs.81,27,990/-. However, ld. Counsel for the assessee did not press this ground of appeal and submitted that it is consequential in nature. Accordingly, this ground is also rejected.
4. Ground No. 11 is a general ground of appeal, which does not call for recording of any finding.
5. In Grounds No. 1 to 5 and 6(a) to 6(f), the assessee has agitated only one issue, i.e. whether any adjustment required to be made under section 92BA on account of domestic transaction between the Associated Enterprises (AEs) of the assessee under section 40A(2)(b) of the Income Tax Act or not. In other words, there was a transaction between the assessee and its AE with respect to 40A(2)(b, whether any transfer pricing adjustment in the value of such transaction can be made with the help of 92BA of the Income Tax Act or not?
Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) 6. The ld. Counsel for the assessee, at the very outset, submitted that similar transaction was available in A.Y. 2014-15 and the dispute travelled upto the Tribunal. The Tribunal has held that clause (i) of section 92BA regarding the domestic transaction between the AEs under section 40A(2)(b) of the Act has been omitted by the Finance Act, 2017 w.e.f. 1st April, 2017 and in view of the effect of such omission when the provision was not in existence or never existed in the statute, then whatever exercise has been done by the Transfer Pricing Officer (TPO) or by the ld. Assessing Officer would become redundant. The Tribunal accepted this plea of the assessee after a detailed discussion and thereafter deleted the adjustment made in the value of transaction under section 40A(2)(b) of the Income Tax Act. He placed on record the copy of the Tribunal’s order on pages no. 1 to 14 of the paper book.
7. On the other hand, ld. D.R. was unable to controvert the submission of the ld. Counsel for the assessee.
8. We have duly considered the rival contentions and gone through the record carefully. In view of the Tribunal’s order in A.Y. 2014-15, this adjustment in the Arm’s Length Price (ALP) of domestic transaction made under section 40A(2)(b) is required to be deleted. However, within an angle of completeness of the issue, we deem it appropriate to reproduce the discussion made by Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) the Tribunal in that order dated 12.07.2022 , which reads as under:-
“2. The revenue has taken seven grounds of appeal
. Similarly, the assessee has taken five grounds of appeal. But the assessee subsequently filed additional grounds of appeal, which read as under:- "A/G-1. For that since clause (i) of section 92BA has been omitted by the Finance Act, 2017 means that provisions was not in existence or never existed in Statute. Therefore, the jurisdiction exercised by the T.P.O. and Income Tax Department is void and as a result the order by assessing officer dt. 26.12.2017 u/s 143(3) of the Act is void ab initio wrong, illegal, bad in law as well as on facts. A/G-2. That because of such omission, the addition of Rs.6,19,14,682/- made by the AO in this case for the A.Y. 2014-15 as per T.P.O.'s order is invalid and bad in law, and as such the addition should be directed to be deleted."
3. The seven grounds of appeal taken by the revenue and four ground of appeals taken by the assessee revolve around these two additional grounds of appeals taken by the assessee.
4. In brief, the controversy in all these grounds, revolves around the issue whether Arm's Length Price (ALP) is required to be determined qua domestic transactions entered into by the assessee with its partner u/s 92BA(i) of the Act.
5. Brief facts of the case are that the assessee has filed its return of income on 26/11/2014 disclosing total income of Rs.1,13,79,250/-. The case was selected for scrutiny and notice u/s 143(2) of the Act was issued and served upon the assessee. The Assessing Officer found that there was large specified domestic transaction reflecting from Form 3CEB with regard to mismatch the amount paid to related persons u/s 40A(2)(b) of the Act reported in the audit report. The Assessing Officer made reference to the Transfer Pricing Officer (TPO) for determination of ALP of these domestic transactions as per Section 92BA(i) of the Act. The impugned assessment order passed u/s 143(3) r.w.s. 144C(3) of the Act on 26/12/2019 after following the order of the TPO u/s 92CA(3) of the Act and income of the assessee was determined at Rs.7,32,93,932/- which has given rise to a tax demand of Rs.3,09,25,470/-. 4 Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) 6. Aggrieved with the assessment order, the assessee carried the matter in appeal before the ld. First Appellate Authority. The ld. First Appellate Authority has allowed the appeal of the assessee substantially but rejected its grounds partially. Hence, both the parties are before us.
7. During the pendency of appeal before the ld. CIT(A), it was pleaded that Clause (i) to Section 92BA, accepting the domestic transactions between the AEs u/s 40A(2)(b) of the Act has been omitted by the Finance Act, 2017 w.e.f. 01/04/2017 and in view of the effect of such omission, when the above provision was not in existence or never existed in the statute, whatever exercise has been done by the T.P.O or the Assessing Officer would become redundant but this aspect was not adjudicated in favour of the assessee by the ld. First Appellate Authority. Hence, the assessee has raised these two grounds of appeal
under the head additional grounds, which we have extracted supra. If these two grounds are decided in favour of the assessee by holding that since the transactions which required determination of ALP, has been omitted from the Act for carrying out such exercise, then whole adjustment made by the Assessing Officer on the recommendation of the TPO would become redundant because it does not have any support with the law. Therefore, we have specifically heard the parties on the preliminary issue only.
8. The ld. Counsel for the assessee while contending in his support submitted that this issue is covered by a series of orders passed at the end of the Tribunal. He placed on record copy of the order of the Co-ordinate Bench of ITAT Kolkata in the case of M/s. DVC Emta Coal Mines Ltd. vs. ACIT, CC-3(1) (& two other appeals), Kolkata in Assessment Year 2013-14; order dt. 01/05/2019. According to the ld. Counsel for the assessee, the Tribunal has decided the appeals of three assessee's by way of a common order. In all these three appeals, the common issue involved relates to sustainability of ALP qua transactions enumerated in 92BA(i), which has been omitted by the Finance Act, 2017. The Tribunal after following the decision of the Co-ordinate Bench of ITAT Bangalore in the case of Texport Overseas Private Limited vs. DCIT; IT(TP)A No. 1722/Bang/2017 Assessment Year 2013-14, order dt. 22/12/2017, held that omission of the provision would mean that it has to be presumed with such clause was never there in the statute and all consequential proceedings including the ones pending at the time when the omission had taken place, have to be dropped. He further placed reliance on the order of the ITAT 5 Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) Ahmedabad Bench in the case of Amman India Pvt. Ltd. vs. ACIT in Assessment Year 2014-15, order dt. 03/01/2022, copy of which is placed on record. Lastly he placed reliance on the order of the Co-ordinate Bench of ITAT Kolkata, in the case of M/s. Raipur Steel Casting India (P) Ltd. vs. PCIT-5, Kolkata in ITA No. 895/Kol/2019. Copy of all these decisions are placed on record.
9. The ld. CIT D/R, on the other hand, also placed reliance of the order of the ITAT Kolkata Bench in the case of M/s. Raipur Steel Casting India (P) Ltd. (supra). He mainly relied upon the written submissions filed by the ld. D/R on that case. He read over paragraph no. 10 of this order, where the stand of the revenue has been noticed by the Tribunal. This paragraph reads as under:- "10. On the other hand, Shri Vijay Shankar, (CIT- DR), on behalf of the Revenue vehemently argued that clause (i) of section 92BA has been "repealed" and not "omitted." Effect of such "Repeal" means the clause (i) of section 92BA was in existence till 01.04.2017 and it was removed by the Finance Act, 2017. In the assessee`s case under consideration, ld PCIT has exercised his jurisdiction under section 263 of the Act, for the assessment year 2014-15. In the assessment year 2014-15, the clause (i) of section 92BA was in force therefore, the exercise of the jurisdiction under section 263 of the Act during the currency of the Act is very much valid. Shri Vijay Shankar, (CIT-DR), also submitted before the Bench that the judgments of Hon`ble Supreme Court, which were used by the assessee, in the case of Kolhapur Canesugar Works Ltd. V Union of India (2002) 2 SCC 536 and in Royala Corporation P. Ltd. V Director of Enforcement (1969) 2 SCC 412 and in the case of General Finance Co. Vs. Asstt. CIT (2002) 257 ITR 338 (SC) were overruled by the Hon`ble Supreme Court by its subsequent judgments in the case of M/s. Shree Bhagwati Steel Rolling Mills vs. C.I.T. Excise & Others - 2015(326) ELT 209(S.C.), and M/s. Fibre Boards 62 Taxmann.com 135 (S.C.), therefore, the assessee can not use them in his favour. In addition to these verbal arguments, Shri Vijay Shankar, (CIT-DR) submitted written submissions Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) before the Bench, the same is reproduced below, in brief, to the extent applicable for our discussion: "In the present case, the Principal Commissioner of Income Tax-5, Kolkata passed an order u/s.263 holding that specified domestic transactions shown by the assessee were not taken into cognizance by the A.O. and not referred to the TPO before completing the assessment, which he was required to do statutorily, for the correct Benchmarking of the domestic transactions undertaken by the assessee with specified domestic parties. The notice for 263 proceedings was issued dated 20.11.2018. The assessee is contesting the jurisdiction of the Pr. C.I.T.-5, Kolkata in initiating proceedings u/s.263 on the ground that the reference to the TPO on the specified domestic transactions was not applicable to him since Section 92BA(i) was omitted by Finance Act, 2017 w.e.f. 01.04.2017. The assessee is relying on Section-6 of the General Clause Act, 1897(GCA 1897) to contend that an omission is not entailed in repeal, and upon omission, the provision results in obliteration from the very beginning. The appellant has relied on the decision of ITAT, Bangalore in the case of M/s. Texport Overseas (P) Ltd. vs. DCIT, A.Y. 2013-14, No.1722/Bang/2017, order dated 22.12.2017 for the proposition that since clause 92BA(i) was omitted w.e.f. 01.09.2017 it is to be treated as if it never existed in the statute and thus no adverse inference can be drawn against the appellant under the said provisions. Against this it is submitted that Section-6 of GCA, 1897 has to be read in consonance with Section-6A of GCA, 1897. The relevant portion of the GCA, 1897 is reproduced as under- Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) "6. Effect of repeal- Where this Act, or any [Central Act} or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not - (a) revive anything not in force or existing at the time at which the repeal takes effect; or (b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or (d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid; and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed. 6A. Repeal of Act making textual amendment in Act or Regulation. - Where any [Central Act] or Regulation made after the commencement of this Act repeals any enactment by which the text of any [Central Act] or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal."
Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) Copy of General Clause Act, 1897 enclosed as Annexure-A 1. The following decisions, (1) M/s. Shree Bhagwati Steel Rolling Mills vs. C.I.T. Excise & Others - 2015(326) ELT 209(S.C.), M/s. Fibre Boards 62 Taxmann.com 135 (S.C.) interpret the matter in favour of the Revenue's stand that omission of a provision shall have to be interpreted as per sec.6 and sec.6A of GCA 1897 and read in togetherness. For proceedings which stem from the omitted provision, or part thereof, including consequential proceedings, it shall not mean an obliteration from the very beginning; it will have the effect as if the omitted part is in full force before such omission of the provision, or part thereof. The Hon'ble Bangalore Bench in the case of M/s. Texport Overseas Pvt. Ltd. (supra) has given the finding on the basis of Apex Court decision in the case of General Finance Company 257 ITR 338. This is an old decision pronounced on 04/09/2002. However, it may kindly be pointed out that the Hon'ble Bench of Bangalore Tribunal did not take into consideration the subsequent decision of the Apex Court constitutional bench on the same issue in the case of M/s. Shree Bhagwati Steel Rolling Mills (supra) and M/s. Fibre Boards (supra). The constitutional bench in the above cases, orders passed in 2015, have held that repeal, delete and omit can be used interchangeably and, therefore, section 6 of the General Clauses Act would also save provisions which have been omitted from the Act. Therefore, the proceedings initiated during the omission of provision will continue. It cannot be obliterated from the very beginning."
In brief his contentions was that if a provision repealed then, actions taken earlier will be protected by clause 6 & 6A of the General Clauses Act, 1897. Making reference to the decision of the Hon'ble Supreme Court in the case of M/s. Shree Bhagwati Steel Rolling Mills vs. CIT Excise & Others - 2015 (326) ELT 209 (S.C.), he contended that the Hon'ble Supreme Court in this 9 Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) judgment has observed that an omission is also one of the modes to repeal the provision. In other words, according to the ld. CIT D/R, there is not distinction between "repeal" or "omission" and both are to be read as synonymous to each other and if omission is also to be treated as repealed then action taken under the provision when it was in subsistence would continue even after it is repealed.
11. We have duly considered the rival contentions and gone through the record carefully. We find that though all these arguments have been duly considered by the ITAT in the orders for the earlier years, particularly in the case of M/s. Raipur Steel Casting India (P) Ltd. (supra), but after taking note of the m, the issue was decided in favour of the assessee. In the case of M/s. DVC Emta Coal Mines Ltd. (supra), ITAT Kolkata as reproduced the finding of the ITAT Bangalore and thereafter held that effect of Finance Act, 2017 for omission of sub-clause to Section 92BA is that it would be deemed that such clause was never been on the statute book and, therefore, no Transfer Pricing adjustment can be examined with regard to the transactions falling u/s 40A(2)(b) of the Act. The finding recorded by the Tribunal in this case reads as under:- 3. At the outset itself, the Ld. Counsel drew our attention to the grounds of appeal
wherein the legal issue has been raised, which is as under: "A. Grounds of appeal arising out of legal/jurisdictional view; read with chapter X of Income Tax Act, 1961.
1. That on the facts and circumstances of the case and in law, the assessment order passed by the Assessing Officer (AO) pursuant to the directions of Hon'ble Dispute Resolution Panel (DRP) is bad in law and invalid.
2. Since Finance Act 2017 omitted section 92BA( 1) the impugned transactions are outside the definition of specified domestic transaction, therefore the order passed by Hon'ble assessing officer be annulled. 2.1. That the facts and circumstances of the case and the law the Assessing Officer/ TPO as well as DRP erred in not appreciating the fact that the transactions were since restricted and subjected to supervision by state government Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) nominated directors, therefore there was no scope of tax arbitrage being enjoyed by AE and hence outside the preview of section 92BA of the Act.
3. That on the facts of the case and in law the Ld. A.O. erred in passing assessment order dated 27.09.2017 under section 143(3) read with section 92CA(3) and 144C(5) of Income Tax Act, 1961, as such the order so passed subsequent to limitation under section 144C(4) is without jurisdiction, illegal, bad in law and therefore be annulled.
4. That on the facts and circumstances of the case and in law, Ld. TPO/the Ld. AO/ and the Hon'ble DRP have erred on facts and in law in enhancing the income of the appellant by Rs. 13,52,49,494/-. "
4. The Ld. Counsel first of all brought to our notice that the aforesaid legal issue that has been raised is no longer res integra and has been adjudicated by Coordinate Bench of this Tribunal Bangalore Bench in the case of IT(TP)A No. 1722/Bang/2017 in Texport Overseas Private Limited Vs. DCIT for AY 2013-14 vide order dated 22.12.2017 and submitted that the matter may be remanded back to the AO with the direction given in the said order. We note that the legal issue raised by the assessee goes to the root of the matter and we note that the AO has made a reference u/s. 92 Ld. CIT(A) having observed that the assessee has entered into specified domestic transactions since this case was covered u/s. 92BA of the Act but later on there was an amendment in Sec. 92BA by Finance Act, 2019 w.e.f. 01.04.2017 whereby clause (ii) of sec. 92BA relating to any expenditure in respect of which payment have been made or is to be made to a person referred to clause (b) of sub- section (2) of section 40A of the Act was omitted and, according to Ld. AR, on account of its omission, the impugned transaction would not fall within the definition of specified domestic transaction and referred to the judgment of Hon'ble Supreme Court in the case of CIT Vs. General Finance Co. Vs. ACIT 257 ITR 338 (SC) in which the Apex Court has held that the principle underlying section 6 of General Clauses Act as saving the right to initiate proceedings for liabilities incurred during the currency of the Act will not apply to omission of a provision in an Act but only to repeal of the provision of the Act. The Ld. AR also referred to the decision of the Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) Hon'ble Supreme Court in the case of Kolhapur Canesugar Works Ltd. Vs. Union of India in Appeal (Civil) 2132 of 1994 by judgment dated 01.02.2000 in which the Constitution Bench has held that section 6 of General Clauses Act only applies to repeals and not to omissions, and applies when the repeal is of a Central Act or Regulation and not as a Rule. It was further clarified by the Hon'ble Apex Court that in such a case, the Court is to look into the provision in the rule which has been introduced after omission of the previous rule to determine whether a pending proceeding will continue or lapse. If there is a provision therein that pending proceedings shall continue and be disposed of under the old rule as if the rule has not been deleted or omitted then such a proceeding will continue. If the case is covered by section 6 of the General Clauses Act or there is a pari material provision in the statute under which the rule has been framed in that case also the pending proceeding will not be affected by omission of the rule. We note that this issue has been adjudicated by the Tribunal vide order dated 22.12.2017 wherein the Tribunal has held as under: "2. During the course of hearing, the learned counsel for the assessee has moved an application for the admission of the additional grounds with a request that since the additional grounds goes to the root of the case it should be admitted and be disposed off at the threshold. The admission of the additional grounds were strongly objected by the learned DR on the premise that these grounds were never raised before the DRP nor were they raised in the original grounds of appeal
. Therefore, it cannot be admitted.
3. The learned counsel for the assessee has further contended that AO has made a reference under section 92CA, having observed that the assessee has entered into specified domestic transaction as this case is covered under section 928A of the IT Act but later on there was amendment in section 92BA by the Finance Act, 2017 w.e.f. 01.04.2017 whereby clause (ii) of section 92BA relating to any expenditure in respect of which payment has been made or is to be made to a person referred to clause (b) of sub section 2 of section 40A was omitted 12 Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) and on account of its omission, the impugned transaction would not fall within the definition of specified domestic transaction. Therefore, it has become necessary for the assessee to raise this additional ground before the Tribunal.
The learned counsel for the assessee has further invited bur attention that provision of section 928A was brought on statute by the Finance Act, 2012 w.e.f. 01.04.2013 relevant to assessment year 2013-14. Therefore, it is the first year when the transactions are to be examined in the light of provision of section 928A of the Act. Since the transactions under clause (i) exceeded the prescribed limit, the AO considered it to be specified domestic transaction and made a reference to TPO for computation of ALP. Accordingly, TPO ·has computed the ALP which was objected to by the assesses before the DRP and DRP disposed off the objections with certain findings/directions.
The learned counsel for the assessee further contended that sub clause (i) of section 92BA under which assessee has undertaken the transactions which has exceeded the prescribed limit, was omitted by the Finance Act, 2017 w.e.f. 01.04.2017. Since clause (i) has been omitted from the statute by virtue of the, amendment, this particular sub clause shall be deemed not to be on the statute since the beginning. In support of his contention, the learned counsel for the assessee has placed a heavy reliance upon the judgment of the Apex Court in the case of Kolhapur Canesugar Works Ltd., Vs. Union of India in Appeal (Civil) 2132 of 1994 vide judgment dated 01.02.2000 in which the constitution bench has held that section 6 only applies to repeals and not to omissions, and applies when the repeal is of a Central Act or Regulation and not as a Rule. It was further clarified by the Apex Court that in such a case the court is to look to the provisions in the rule which has been introduced after omission. of the previous rule to determine whether a pending proceeding 13 Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) will continue or lapse. If there is a provision therein that pending proceedings shall continue and be disposed of under the old rule as if the rule has not been deleted or omitted then such a proceeding will continue. If the case is covered by Section 6 of the General Clauses Act or there is a pari-materia provision in the statute under which the rule has been framed in that case also the pending proceeding will not be affected by omission of the rule. A further reliance was also placed upon the judgment of the Apex Court in the case of General Finance Co. Vs. Assistant Commissioner of Income- tax 257 ITR 338 (SC) in which the Apex Court has held that the principle underlying section 6 as saving the right to initiate proceedings for liabilities incurred during the currency of the Act will not apply to omission of a provision in an Act but only to repeal, omission being different from repeal as held in the aforesaid decisions. Reliance was also placed upon the order of the Tribunal in lT(TP)A No. l 722/Bang/2017 Page 4 of7 the case of CIT Vs. GE Thermometrics India Pvt. Ltd., in in which while dealing the omission sub- section (9) of Section 1 OB the Hon'ble High Court has held that once the section is omitted from the statute book, the result is it had never been passed and be considered as a law that never exists and therefore, when the assessment orders were passed, the AO was not justified in taking note of a provision which was not in the statute book and denying benefit to the assessee. Therefore, in the light of these judicial pronouncements, sub-section (i) of section 928A shall be deemed to be not on the statute since beginning.
The learned DR on the other-hand has contended that even if it is held that the clause (i) of section 928A relating to expenditures in respect of which payment has been made or is to be made to person referred to in clause (b) of sub section 2 of section 40A of the Act is not on the statute since beginning in view of the amendment and in the light of various judicial pronouncements 14 Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) the reference made by AO to TPO is bad in law, the AO is required to examine the claim of the assessee in the light of other provisions of the Act.
Having carefully examined the orders of authorities below in the light of rival submissions and relevant provisions and various judicial pronouncements, we find that by virtue of the insertion of section 92BA on the statute as per clause (i), any expenditure in respect of which payment has been made or is to be made to person referred to in clause (b) of sub section 2 of section 40A exceeds the prescribed limit, it would be a specified domestic transaction for which AO is required to make a reference to TPO under section 92CA of the Act for determination of the ALP. In the instant case, since the transaction exceeds the prescribed limit it becomes the specified domestic transaction for which reference was made by the AO to the TPO under section 92CA for determination of the ALP. Consequently, the TPO submitted a report which was objected to by the learned counsel for the assessee and filed a objection before the ORP. Having adjudicated the objections the ORP has issued certain directions and consequently the AO passed an order. Subsequently, by Finance Act, 2017 w.e.f. 01.04.2017, clause (i) of section 92BA was omitted from the statute. Now the question arises as to whether on account of omission of clause (i) from the statute, the proceedings already initiated or action taken under clause (i) becomes redundant or otiose. In this regard, our attention was invited to judgment of the Apex Court in the case of Kolhapur Canesugar Works Ltd., (supra) in which the impact of omission of old rule 10 and 1 OA was examined. Having carefully examined the issue in the light of provisions of section 6 of the General Clauses Act, their Lordship has observed "that in such a case, the court is to look to the provisions in the rule which has been introduced after omission of the previous rule to determine whether a pending proceeding will continue or lapse. If there is a provision therein that pending 15 Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) proceedings shall continue and be disposed of under the old rule as if the rule has not been deleted or omitted then such a proceeding will continue. If the case is covered by Section 6 of the General Clauses Act or there is a pari-materia provision in the statute under which the rule has been framed in that case also the pending proceeding will not be affected by omission of the rule. In the absence of any such provisions in the statute or in the rule, the pending proceeding will lapse under rule under which the notice was issued or proceeding being omitted or deleted".
In the case of General Finance Co., Vs. ACIT, their Lordship Of the Apex Court has again examined the issue and held that the principle underlying section 6 as saving the right to initiate proceedings for liabilities incurred during the currency of the Act will not apply to omission of a provision in an Act but only to repeal, omission being different from repeal as held in different cases. Following the aforesaid judgments, the jurisdictional High Court has also expressed the same view in the case of CIT Vs. GE Thermometrics India Pvt. Ltd. The relevant observation of the jurisdictional High Court is extracted hereunder: "8. Admittedly, in the instant case, there is no saving clause or provision introduced by way of an amendment while omitting sub- section (9) of Section 10B. Therefore, once the aforesaid section is omitted from the statute book, the result is it had never been passed and be considered as a law that never exists and therefore, when the assessment orders were passed in 2006, the AO was not justified in taking note of a provision which was not in the statute book and denying benefit to the assessee. The whole object of such omission is to extend the benefit under Section 10B of the Act irrespective of the fact whether during the period to which they are entitled to the benefit, the ownership continues with the original assessee or it is transferred to another person. Benefit is to the undertaking and not to the 16 Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) person who is running the business. We do not see any merit in these appeals. The substantial question of law is answered in favour of the assessee and against the revenue. Accordingly, the appeals are dismissed."
9. From the aforesaid judgments, it has become abundantly clear that once a particular provision of section is omitted from the statute, it shall be deemed to be omitted from its inception unless and until there is some saving clause or provision to make it clear that action taken or proceeding initiated under that provision or section would continue and would not be left on account of omission.
10. In the instant case, undisputedly, by the Finance Act, 2017, clause (i) of section 92BA has been omitted w.e.f. 01.04.2017. Once this clause is omitted by subsequent amendment, it would be deemed that clause (i) was never been on the statute. While omitting the clause (i) of section 92BA, nothing was specified whether the proceeding initiated or action taken on this continue. Therefore, the proceeding initiated or action taken under that clause would not survive at all. In this legal position, the cognizance taken by the AO under section 92B(i) and reference made to TPO under section 92CA is invalid and bad in law. Therefore, the consequential order passed by the TPO and DRP is also not sustainable in the eyes of law.
Under these circumstances, where this clause (i) is omitted from the statute since its inception, the AO ought have required to frame the assessment in normal course after making necessary enquiries of particular claim of expenditure in accordance with law. But this exercise could not have been done on account of provisions of section 92BA Clause (i) of the Act. Now when this clause (i) has been omitted from the statute by virtue of the aforesaid amendments, the AO is required to adjudicate the issue of claim of expenditures in accordance with law after affording opportunity of being heard to the assessee. We therefore set aside the orders of the AO and the DRP and restore the matter to the AO with the direction to readjudicate the issue of claim of expenditure incurred in respect of which payment has been made or is to be made to person referred to in clause (b) of sub section 2 of section 40A of the Act. Accordingly, since we have restored the matter to the 17 Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) AO, we find no justification to deal with the other issues on merit. Accordingly, appeal of the assessee stand allowed for statistical purposes."
5. Respectfully following the aforesaid order of the Tribunal, we note that in the instant case, by the Finance Act, 2017, clause (i) of section 92BA has been omitted w.e.f. 01.04.2017. The legal effect of a provision being omitted by subsequent amendment, then it would be deemed that clause (i) was never been on the statute book. While omitting the clause (i) of section 92BA, we note that nothing was specified whether the proceeding initiated or action taken on this continue. Therefore, the proceeding initiated or action taken under that clause would not survive at all. In the light of this legal position, the cognizance taken by the AO under section 92BA(i) and reference made to TPO under section 92CA is invalid and bad in law. Therefore, the consequential order passed by the TPO and DRP is also not sustainable in the eyes of law. Therefore, the legal effect is when this clause (i) is omitted from the statute it has to be taken as though there is no clause (i) since its inception. And when looked from that angle, the AO should have framed the assessment as in normal course after making necessary enquiries of particular claim of expenditure in accordance with law. But this exercise could not happen on account of provisions of section 92BA clause (i) of the Act. Therefore, since this clause (i) has been omitted from the statute by virtue of the aforesaid amendments, the AO is required to adjudicate the issue of claim of expenditures in accordance with law after affording opportunity of being heard to the assessee. We therefore set aside the orders of the AO and the DRP and restore the matter back to the AO with the direction to readjudicate the issue of claim of expenditure incurred in respect of which payment has been made or is to be made to person referred to in clause (b) of sub section 2 of section 40A of the Act. Accordingly, since we have restored the matter to the AO, we find no justification to deal with the other issues on merit. Accordingly, appeal of the assessee stand allowed for statistical purposes. Therefore, all the appeals of assessee are allowed for statistical purposes."
The discussion by the Tribunal in other judgments are on the same line. Therefore, respectfully following the order of the various Co-ordinate of the Tribunal (supra), we are of the view that the transactions of the assessee referred to the TPO for determination of ALP could not be made subject to TP adjustment after the Finance Act, 2017, as discussed above. Consequently, no addition on account of TP Adjustment is sustainable because it has been categorically held that omission of a provision would mean that it was never on the 18 Assessment Year: 2015-2016 Rahee Jhajharia E to E (JV) statue book. In other words it has to be deemed that it was not in existence in A.Y. 2014-15 and if there was no such provision for recommending the transactions u/s 40A(2)(b) for determination of ALP, there cannot be any adjustment in the income of the assessee on the ground of TP adjustment. Accordingly these grounds of the assessee are allowed. The additions made in the income of the assessee on account of TP adjustment in the domestic transaction are deleted”.
In view of the above discussion, the appeal of the assessee is partly allowed and the additions made on account of domestic transfer pricing adjustment are deleted. Grounds No. 1 to 5 and 6(a) to 6(f) are allowed.