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Facts
The assessee, Mahalaxmi Continental Limited, filed appeals against the CIT(A) order upholding additions made by the AO/TPO for specified domestic transactions for AY 2015-16 and 2016-17. The core dispute revolves around the AO's jurisdiction to make these additions given the retrospective omission of Section 92BA(i) of the Income Tax Act.
Held
The Tribunal held that the omission of clause (i) of Section 92BA of the Income Tax Act by the Finance Act, 2017, with effect from 01/04/2017, was retrospective. Consequently, the actions taken by the AO/TPO based on this provision were invalid. The additions made to the assessee's income were directed to be deleted.
Key Issues
Whether the omission of Section 92BA(i) of the Income Tax Act, 1961, by the Finance Act, 2017, operates retrospectively, rendering the AO's jurisdiction and subsequent additions invalid.
Sections Cited
250, 92BA, 92BA(i), 10B, 92BI, 92CA
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Income Tax Appellate Tribunal, GAUHATI BENCH, GUWAHATI
Before: SHRI DUVVURU RL REDDY & SHRI RAJESH KUMAR
Assessee represented by Shri Kamal Chopra, FCA Department represented by Shri Santosh Kumar Karanani, Addl. CIT Date of hearing 09/03/2026 Date of pronouncement 13/03/2026 O R D E R PER: BENCH 1. The present appeals filed by the assessee arise from order dated 29/12/2024 passed u/s 250 of the Income Tax Act, 1961 (In short, “the Act”) by the Ld. Commissioner of Income Tax (Appeals), Central NER, Guwahati [in short, “the Ld. CIT(A)] for the A.Y. 2015-16 and 2016-17 respectively. Since these appeals relating to same assessee and are involving common issues, therefore, these are being disposed of by this consolidated order for the sake of brevity and convenience. We would first take up the appeal A.Y. 2015-16.
The only issue raised by the assessee in the various grounds of appeal is against the order of the ld. CIT(A) in upholding the addition of Rs. 50,64,220/- as made by the AO/TPO for the specified domestic transactions entered into by the assessee.
& 54/GTY/2025 Mahalaxmi Continental Ltd. Vs DCIT/ACIT
At the time of hearing, the ld. Counsel for the assessee submitted that the AO has no jurisdiction to refer the issue of determination of Arms Length Price of the specified domestic transactions of purchases with the AEs to the transfer pricing officer under clause (i) of u/s 92BA of the Act as the said section omitted with retrospective effect. In other words clause (i) of Section 92BA of the Act has been omitted by the Finance Act, 2017 w.e.f. 01/04/2017 without any saving clause and therefore, operates retrospectively. The ld. A.R. submitted that the issue involved in the appeal is squarely covered by the decision of the Hon’ble Karnataka High Court in the case of Pr.CIT-7 & Anr Vs. M/s Texport Overseas Pvt. Ltd. order dated 12th December, 2019 and prayed that the appeal of the assessee may be allowed following the said decision.
On the other hand, the ld. Sr.DR heavily relied on the orders of the lower authorities by submitting that any subsequent omission of any provision of the Act would not operate retrospectively unless it specifically provided in the Act. The ld. Sr.DR while referring to the provisions of the Act submitted that there is no specific mention of fact that the omission is from retrospective effect, therefore, the argument placed by the ld. AR may kindly be dismissed.
We have considered the rival submissions and perused the material on record. We find that in this case, the Assessing Officer has, inter alia, made addition in respect of specified domestic transactions of purchases made by the assessee from its Associated Enterprises (AE). Accordingly, the issues were referred to the Transfer Pricing Officer for determination of Arm’s Length Price (ALP). The Transfer Pricing Officer suggested that the transfer pricing adjustment of Rs. & 54/GTY/2025 Mahalaxmi Continental Ltd. Vs DCIT/ACIT 50,64,220/- to the specified domestic transactions by the assessee. Consequently, the AO added the same to the total income of the assessee.
6. In the appellate proceedings, the ld. CIT(A) noted that the Transfer Pricing Officer has followed Transactional Net Margin Method (TNMM) as most appropriate method and rightly made the adjustments by selecting suitable comparables considering the size and nature of business of comparables as against the Comparable Uncontrolled Price Method (CUP) followed by the assessee to benchmark the said transactions. Thus, the ld. CIT(A) justified the addition.
We have carefully perused the decision of the Hon’ble Karnataka High Court in the case of Pr.CIT-7 & Anr. Vs. M/s Texport Overseas Pvt. Ltd. (supra) and find that the same issue has been decided by the Hon’ble High Court holding that where there is omission in the statute book more particularly clause (i) of Section 92BA of the Act w.e.f. 01/04/2017 by the Finance Act, 2017, the same is retrospective as if the said provision never existed on the statute book. The operative part of the decision of the Hon’ble High Court are as under: “5. Having heard learned Advocates appearing for parties and on perusal of records in general and order passed by tribunal in particular it is clearly noticeable that Clause (i) of Section 92BA of the Act came to be omitted w.e.f. 01.04.2017 by Finance Act, 2017, As to whether omission would save the acts is an issue which is no more res-intigra in the light of authoritative pronouncement of Hon'ble Apex Court in the matter of KOHLAPUR CANESUGAR WORKS LTD. v. UNION OF INDIA reported in AIR 2000 SC 811 whereunder Apex Court has examined the effect of repeal of a statute vis- a-vis deletion/addition of a provision in an enactment and its effect thereof. The import of Section 6 of General Clauses Act has also been examined and it came to be held:
& 54/GTY/2025 Mahalaxmi Continental Ltd. Vs DCIT/ACIT "37. The position is well known that at common law, 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 been passed, and the statute must be considered as a law that never existed. To this rule, an exception is engrafted by the provisions of Section 6(1). 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. Savings of the nature contained in Section 6 or in special Acts may modify the position. Thus the operation of repeal or deletion as to the future and the past largely depends on the savings applicable. In a case where a particular provision in a statute is omitted and in its place another provision dealing with the same contingency is introduced without a saving clause in favour of pending proceedings then it can be reasonably inferred that the intention of the legislature is that the pending proceedings shall not continue but fresh proceedings for the same purpose may be initiated under the new provision."
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 by the Assessing Officer under the effect of Section 92BI and reference made to the order of Transfer Pricing Officer-TOP under Section 92CA could be invalid and bad in law.
7. 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 & 54/GTY/2025 Mahalaxmi Continental Ltd. Vs DCIT/ACIT 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.”
Perusal of the above decision reveals that the omission of clause (i) of Section 92BA of the Act by the Finance Act, 2017 w.e.f. 01/04/2017 without any saving clause and is retrospective in nature. Therefore, we are not in agreement with the conclusion drawn by the ld. CIT(A) on this issue. Consequently, we set aside the order of the ld. CIT(A) on this issue and direct the AO to delete the addition.
In the result, this appeal of the assesse is allowed. for the A.Y. 2016-17. In this appeal, the only issue raised by the assessee in the various grounds of appeal is against confirmation of addition of Rs. 1,45,08,356/- by the ld. CIT(A) as made by the A.O. by relying on the decision of the AO/Transfer Pricing Officer in the preceding assessment year i.e. A.Y. 2015-16.
11. The facts of the case in brief are that the case of the assessee was selected for scrutiny. The Assessing Officer noted from the Form 3CEB furnished by the assessee, the assessee has entered into a purchase transactions with its Associated Enterprises amounting to Rs.37,86,81,489/- out of its total purchases of Rs. 3,73,31,37,156/-. The Assessing Officer by following the order of the Transfer Pricing Officer in A.Y. 2015-16 calculated the adjustment in respect of the purchases made by the assessee from its Associated Enterprises at Rs. 1,45,08,356/- and added the same to the income of the assessee, though, no reference was made to the Transfer Pricing Officer. Therefore, & 54/GTY/2025 Mahalaxmi Continental Ltd. Vs DCIT/ACIT during the instant financial year, there is no adjustments suggested by the Transfer Pricing Officer but the AO on the basis of the previous year order of Transfer Pricing Officer/AO calculated the adjustments on the same lines.
12. In the appellate proceedings, the ld. CIT(A) confirmed the order of the AO by holding as under: “5.3. Decision on Ground(s) of Appeal No(s). 2: The Appellant contended that the AO should not have made the addition of Rs. 50,64,220/-. It is observed from records that the Transfer Pricing Officer (TPO) had adopted Transactional Net Margin Method (TNMM) in respect of the concerned transactions. The TPO had proposed downward adjustment of Rs. 1,45,08,356/-and the same amount was added back by the AO. The Appellant contends that it had adopted Comparable Uncontrolled Price (CUP) method to determine the purchase price from Associated Enterprises (AE) and the same should have been accepted by the AO. It is clear from records that TNMM is the Most Appropriate Method (MAM) for the Appellant's case and the TPO/ AO has rightly made the adjustment on objective basis by selecting suitable comparables relevant to the size & nature of the business. There is no infirmity in the order and the Appellant's contentions are liable to be rejected. Ground No. 2 is dismissed accordingly.”
13. After hearing the rival submissions and perused the material on record, we find that the AO calculated the adjustment in respect of the purchases made by the assessee from its Associated Enterprises on the same lines as was calculated in A.Y. 2015-16. We note that in A.Y. 2015-16, a reference was made to the Transfer Pricing Officer and the Transfer Pricing Officer suggested the downward adjustment for benchmarking the transactions on the ground that the method followed by the assessee for benchmarking the transaction i.e. CUP method is not appropriate and the correct method is TNMM method. Since we have already deleted the addition made in A.Y. 2015-16 on the ground that & 54/GTY/2025 Mahalaxmi Continental Ltd. Vs DCIT/ACIT clause (i) of Section 92BA of the Act was repealed by the Finance Act, 2017 w.e.f. 01/04/2017 and the amendment is retrospective effect meaning thereby the said provision never existed in the statute book by following the decision of the Hon'ble Karnataka High Court in the case of Pr.CIT-7 & Anr. Vs. M/s Texport Overseas Pvt. Ltd. (supra). Therefore, the addition made by the AO on the same benchmarking by the Transfer Pricing Officer in A.Y. 2015-16 is not correct and therefore, the order passed by the ld. CIT(A) on this issue appears to be wrong and cannot be sustained. Consequently, we set aside the order of the ld. CIT(A) on this issue and direct the AO to delete the addition. The appeal of the assessee is allowed.
In the result, both the appeals of the assessee are allowed. Order pronounced in the open court on 13/03/2026.