DCIT CIRCLE-1, NASHIK vs. JYOTI PAPER UDYOG LIMITED, NASHIK

Assessment Year: 2013-14 DCIT Circle-1, V Jyoti Paper Udyog Limited, Nashik. s Plot No.B-67, NICE MIDC, Satpur – 422007. PAN: AAACJ7288E Appellant/ Revenue Respondent /Assessee Assessee by None Revenue by Shri Gaurav Kr. Singh Date of hearing 07/10/2025 Date of pronouncement 30/10/2025 आदेश/ ORDER

PER DR. DIPAK P. RIPOTE, AM:

1. Whether on the facts and circumstances of the case, the Ld. CIT(A) is justified in holding that the omission of Section 92BA(1) is applicable

2. Whether on the facts and circumstances of the case, the Ld. CIT(A) is justified in overlooking the saving clause in Section 40(2)(a), which preserves the applicability of Section 92B(1) for specified domestic transactions up to A.Υ. 2016-17.

3. Whether on the facts and circumstances of the case, the Ld. CIT(A) is correct in relying on judicial precedents that did not take into account the existence of the saving clause or the legislative intent behind it, thereby arriving at the incorrect conclusion that Section 92BA(1) is inapplicable for A.Y. 2013-14.

4. Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in concluding that the provisions of Section 92BA(1) were not applicable for A.Y. 2013-14, without properly appreciating that the provision was valid and enforceable during that assessment year.

5. Whether the Ld. CIT(A) erred in holding that the transaction of purchases and sales between the Appellant and its related parties were mere paper transactions?

6. Whether the Ld. CIT(A) erred in concluding that the transaction were undertaken solely to inflate turnover for bank finance, without any supporting evidence, and in disregarding the commercial rationale and business necessity behind these transaction?

7. Whether the Ld. CIT(A) erred in rejecting the findings of the TPO, who had verified the records and confirmed that the transaction 2 Submission of ld.DR : 2. Ld.Departmental Representative(ld.DR) for the Revenue filed a written submission. Relevant paragraph of the written submission reproduced as under : “It is humbly submitted that the crux of the issue in the instant appeal pertainsto the applicability of the provisions of clause (i) of section 92BA of the Act tothe case of the assessee for AY 2013-14 in the given facts and circumstances ofthe case and in law. It is to state that, it is not in doubt that there was anamendment to section 92BA by The Finance Act, 2017 w.e.f 01.04.2017 whereby the said clause (1) is stated to be omitted by Finance Act, 2017 w.e.f 1-4-2017. The case of the assesses that are mentioned in the decisions in the table in para-14 above (except at sr no 5 therein) was that omission of the said clause (1) without a saving clause meant that it never existed on the statute from the very beginning and therefore any action initiated even during the currency of the said provision was ab initio void. Reliance in this regard has been placed mainly on the decision of M/s Texport Overseas Pvt Ltd [ITA 1772/Bang/2017] that came to be affirmed by the Karnataka High Court. The various decisions of the various tribunals have taken this decision as the base and have dealt with the issue of "repeal" & "omission" as discussed/held by the various apex court decisions which have been mentioned in the table in para-1.4 above. The decisions referred to are not mentioned here again for the sake of brevity.

2.1 It is also a fact that none of the decisions so far have considered the legislative intention of taking away of the said clause (i) of sec. 92BA of 3 Act from the statute by Finance Act, 2017 and its effective date as per the legislature i.e from AY 2017-18 onwards. Also, the reason for insertion of section 92 BA in the Income-tax Act, 1961 by Finance Act, 2012 and the reason for its omission and the effective dates of operation of such amendments have not been considered at all.”

3. At the outset of hearing, no one attended on behalf of the Assessee for hearing. This was the fifth hearing when no one appeared on behalf of the Assessee. No adjournment letter was filed. Hence, we heard the case in absence of Assessee’s Representative.

Findings & Analysis : 4. We have heardld.Departmental Representative for the Revenue and perused the records. Relevant paragraphs of the ld.CIT(A) are reproduced here as under : “4.4 Findings and Reasons a I have carefully considered the facts of the case, TPO & AO's orders, submissions filed by the appellant and the various judicial decisions on this issue.

On perusal of the above, it is noticed that in this year, the appellant had made payments to four related parties u/s 40A(2) and the total of such payments exceeded the threshold of Rs. 5 crore u/s 92BA as per the law applicable for the relevant AY 2013-14. The details of the same as furnished in the TP Study Report, attached at page 1B & 1C of the 4 Paper Book furnished by the appellant. On verification of the Income- tax Returns (ITR") of these four related parties attached at pages 111 to 123 of the Paper Book, it is observed that all these related parties are assessed to tax under the normal provisions of the Act and they have not claimed any tax holiday/ exemption under the special provisions of section 10A, 108, 801A, 801B etc. Thus, it is observed that the payments made by the appellant to the four related parties u/s 40A(2), exceeding Rs. 5 crore fell within the scope of Specified Domestic Transactions (SDT") as defined under clause (i) of section 92BA as existing on the Statute Books during/for the relevant period. The transactions entered with the related parties u/s 40A(2) by the appellant did not fall within the definition of SDT stipulated under any other clause i.e. clause (ii) to (vi) of section 92BA of the Act. It is noticed that the AO had made a reference to the TPO u/s 92CA(1) to determine the ALP of the above SDTs falling within the scope of clause (i) of section 92BA of the Act. b. It is a matter-of-fact that clause (i) to section 92BA was omitted by Legislature vide Finance Act, 2017 w.e.f. 01.04.2017 without inserting any savings clause thereto. It isobserved that Hon'ble Courts & Tribunals have consistently taken a view that in the absence of any savings clause inserted by the Legislature at the time of omitting clause (i) to section 92BA, the omission of clause (i) to section 92BA vide Finance Act, 2017 shall have the effect as if the said clause (i) never existed on the Statute-book even for the period prior to 01.04.2017. I find that this view has been expressed by Hon'ble Courts in the following decisions relied upon by the appellant -

1. 1. PCIT v. Texport Overseas Pvt. Ltd. [(2020) 313 CTR 485 (Karnataka High Court)]

5. Raipur Steel Casting India Pvt. Ltd. v. PCIT [ITA No.895/Kol/2019] dated 10.06.2020

6. Swastik Coal Corporation Pvt. Ltd. v. PCIT [ITA No.486/Indore/2018] dated 26.07.2019.

………….. f. Thus, it is observed that the impugned legal issue in the instant case of the Appellant is squarely covered by the decision of Hon'ble Karnataka High Court as well as the decision of Hon'ble Jurisdictional Pune Tribunal and that too in his favour, I further find that there is no contrary decision rendered by any other Hon'ble High Court on this legal issue so far.

Therefore, being under a legal obligation to follow the above cited decisions going by the well settled rule of precedents, reiterated by Hon'ble Jurisdictional Bombay High Court in its recent decision in the case of Om Siddhakala Associates v. DCIT [W.P. No. 14178/2023] dated 28/03/2024 and respectfully following the decision of Hon'ble Jurisdictional ITAT, Pune in the case of Uttam Energy Ltd (supra), the transactions entered by the appellant for the relevant AY with its related 6 40A(2) cannot be said to be covered within the meaning of Specified Domestic Transactions as defined u/s 92BA of the Act. In the preceding paras, it has already been established that the impugned transactions do not fall within the scope and ambit of clauses (ii) to (vi) of section 92BA and since clause (i) to section 92BA is deemed to have never existed on the statute, the transactions entered by the appellant with its related parties u/s 40A(2) would fall outside the meaning of SDTs u/s 92BA of the Act.

In view of the above discussion, I hold that the adjustment made u/s 92CA of Rs.17,12,37,653/- is not sustainable in law and the AO is directed to delete the same on this legal ground.

Thus, Ground Nos. 4 & 5 are allowed.”

4.1 Thus, ld.CIT(A) has followed the decision of ITAT and Hon’ble Karnataka High Court. No contrary decision of Hon’ble Jurisdictional High Court has been brought to our notice.

5. The Hon’ble Karnataka High Court in the case of PCIT Vs. Texport Overseas Pvt. Ltd., (2020) 313 CTR 485 has held as under : Quote“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 of (i) of 92BA of the Act came to be omitted w.ef 1st April, 2017 (sic) by Finance Act, 2017 (sic). As to whether omission would save the acts is an issue which is no more res integra in the light of authoritative pronouncement of Hon’ble apex Court in the matter of Kohlapur Canesugar Works Ltd vs Union of India AIR 2000 SC 811 whereunder, apex Court has examined the effect 7 The import of s 6 of General Clauses Act has also been examined and it came to be held

“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 s. 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 s. 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 thelegislature is that the pending proceedings shall not continue but fresh proceedings for the same purpose may be initiated under the new provision"

6. In fact, co-ordinate Bench under similar circumstances had examined the effect of omission of sub-s. (9) to s. 10B of the Act w.e.f. 1st April, 2004 by Finance Act. 2003 and held that there was no saving clause or provision introduced by way of amendment by omitting sub-s. (9) of s. 108. In the matter of 8 General Finance Co. vs. Asstt. CIT, which judgment has also been taken note of by the Tribunal while repelling the contention raised by Revenue with regard to retrospectivity of s. 92BA(i) of the Act. Thus, when cl. (i) of s. 92BA having been omitted by the Finance Act, 2017, w.e.f 1st July, 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 AO under the effect of s. 92BA and reference made to the order of TPO under s 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 GE Thermometrias India (P) 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.”Unquote.

6. The Hon’ble Karnataka High Court in the case of PCIT-2, Bangalore Vs. M/s.TT Steel Services India Private Limited in vide order dated 14.10.2024 has held the issue in favour of Assessee. The relevant paragraphs of the Hon’ble High Court’s Order are reproduced here as under : Quote. “2. The learned counsel for the appellants submits thatthe following substantial questions of law arise for consideration: 9

(i) "Whether the Tribunal was right inholding that the reference made to TPO forspecified domestic transaction mentioned in clause (i) of Section 92BA of the Act is notvalid as the said provision has been omittedand as such addition made in respect ofsame needs to be deleted withoutappreciating that reference made to TransferPricing Officer was in accordance withparameters of Section 92CA of the Act and the amendment takes effect from 1/4/2027 which applies to A.Y.2017-18 and subsequent years"?

(ii)" Whether on the facts and in thecircumstances of the case, the Tribunal'sorder can be said as perverse in nature inholding that omission of section 92BA(1) of the Act w.e.f 1/4/2017 would amount tononexistence of the section from the date ofinsertion when it is settled position that theamendment under the Act would beapplicable to the relevant assessment year inwhich effect is contemplated and recorded afinding contrary to scheme of the Act"?

(iii) "Whether on the facts and in thecircumstances of the case, the Tribunal wasright in law in holding that in view of section92BA (i) of the Act being omitted with effectfrom 1/4/2017 would amount tononexistence of section contrary to settledposition of law that the law during therelevant A.Y. has to be applied"?

(iv) "Whether the Tribunal was right in factand in law in restricting Transfer PricingAdjustment to International Transaction withAssociated Enterprises only even when sameis contrary to Section 92CA of the Act and when assesse is providing service to both AE and Non-AE's where assesse has not made any bifurcation of profit in book of accountas overall profit 10

………………………. 5. Having noted the submissions made by the learnedcounsel for the parties, insofar as issues No. 1 to 3 areconcerned, we find that, the Co-ordinate Bench of this Court inthe case of PR. Commissioner of Income Tax-7 and another Vs. M/s. Texport overseas Pvt. Ltd. in ITANo.392/2018 along with decided on12.12.2019 has in paragraphs No.3 onwards, has stated asunder:

“3. It is the contention of learned Advocatesappearing for revenue that tribunal was not justifiedin arriving at a conclusion that Clause (i) of Section92BA of the Act, which had been omitted w.e.f.01.04.2017 would be applicable retrospectively bypresuming the retrospectivity, particularly when thestatue itself explicitly stated it to be prospective innature. As such they have sought for formulatingsubstantial questions of law and have sought foranswering the same in favour of revenue and against the assessee.

4. Sri.E.I.Sanmathi, learned counsel appearing forrevenue/appellant in wouldcontend that even the disallowance made by the AOunder Section 14A r/w Section 8(2)(iii) of IncomeTax Rules for a sum of Rs.14,88,870/- by holdingthat there was no exempted income and as suchdisallowance could not have been made even thoughsaid provision was rightly invoked by AO, and assuch setting aside the disallowance is erroneous.Hence, he prays for substantial question of law asformulated in the appeal memorandum 11

“37. The position is well known that atcommon law, the normal effect ofrepealing a statute or deleting a provisionis to obliterate it from the statute-book ascompletely as if it had never been passed,and the statute must be considered as alaw that never existed. To this rule, anexception is engrafted by the provisionsof Section 6(1). If a provision of a statuteis unconditionally omitted without asaving clause in favour of pendingproceedings, all actions must stop wherethe omission finds them, and if final reliefhas not been granted before the omissiongoes into effect, it cannot be grantedafterwards. Savings of the naturecontained in Section 6 or in special Actsmay modify the position. Thus theoperation of repeal or deletion as to thefuture and the past largely depends onthe savings applicable. In a case where aparticular provision in a 12 [A] statute is omittedand in its place another provision dealingwith the same contingency is introducedwithout a saving clause in favouropending proceedings then it can bereasonably inferred that the intention ofthe legislature is that the pendingproceedings shall not continue but freshproceedings for the same purpose may be initiated under the new provision.”

8. Insofar as question No.2 is concerned, we findfrom the order of the Tribunal that issue relating tothe deletion of disallowance made by the AssessingOfficer has been remitted back to the AssessingOfficer which finding is based on factual aspectswhich would not call for interference by us, that too,by formulating substantial question of law. TheAssessing Officer has to undertake the exercise offactual determination. As such, without expressingany opinion on merits with regard to question No.2formulated by the revenue in the respective appeals,we proceed to pass the following:

ORDER i) Both the appeals i.e., are dismissed. ii) Order dated 22.12.2017 passed by theIncome Tax Appellate Tribunal, Bangalorein IT(TP)A No.1722/Bang/2017 is affirmed.”

………………

7. The Hon’ble Bombay High Court in the case of Smt.Godavaridevi Saraf Vs. CIT, 113 ITR 589(Bom) has held as under : Quote ,“Until contrary decision is given by any other competent High Court, which is binding on a Tribunal in the State of Bombay, it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of the land. When the Tribunal set aside the order of penalty it did not go into the question of intra vires or ultra vires. It did not go into the question of constitutionality of section 15 140A(3). That section was already declared ultra vires by a competent High Court in the country and an authority like an Income-tax Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question.” Unquote 7.1 Thus, as explained by the Hon’ble Bombay High Court(supra), the decisions of Hon’ble Karnataka High Court(supra) are binding precedents. Hence, respectfully following Hon’ble Karnataka High Court(supra), in these facts and circumstances of the case, we find no infirmity in the order of ld.CIT(A) holding that the Transactions entered by the Assessee for A.Y.2013-14 cannot be said to be covered within the meaning of specified domestic transaction as defined u/s.92BA(i) of the Act, since sub-clause (i) to Section 92BA was deemed to have never existed on the statute, once it was omitted w.e.f. 01.04.2017 without any saving clause.

7.2 Accordingly, Ground Nos.1, 2, 3 and 4 raised by the Revenue are dismissed.

8. Ld.DR for the Revenue has not argued Ground Nos.5, 6 and 7 raised by the Revenue. Therefore, Ground Nos.5, 6 and 7 become academic in nature and hence, dismissed as unadjudicated.