Income Tax, Issue Update

Omission of clause (i) of Section 92BA (Specified Domestic Transaction) without a saving clause: Deemed obliteration from beginning

Case: Bhartia-SMSIL(JV) Vs Income Tax Officer, Ward-3(1), Gauhati ITAT

Outcome: In favour of Assessee


  • The Principal Commissioner of Income Tax (PCIT) issued a notice under section 263 of the Act on 03.12.2018 proposing to set aside the Assessment order under section 143(3) dated 28.10.2016 on the ground that the said order was erroneous and prejudicial to the interest of revenue.
  • The basis of initiation was that the Assessing Officer had failed to refer to the Transfer Pricing Officer under section 92CA related party transactions amounting to Rs.51.08 Crs which were falling within the meaning of ‘specified domestic transactions’ under section 92BA(i) of the Income Tax Act, 1961 to arrive at the Arm’s Length Price under section 92C of the Act.
  • In response to the same, the Assessee contended that since clause (i) of section 92BA was omitted with effect from 01.04.2017 and the effect of such omission was that clause (i) of section 92BA had obliterated from the statute and it would be treated that such clause (i)of section 92BA was never existed in the statute book, therefore, the PCIT could not exercise his jurisdiction under section 263 of the Act.

Key points

  • The Tribunal placed reliance on the decision in the cases of Swastik Coal Corporation Pvt Ltd and in the case of M/s Raipur Steel Casting India Pvt Ltd., wherein it was concluded that the legal effect of a provision being omitted by subsequent amendment would be deemed that clause (i) of Section 92BA was never been on the statute book.
  • In the present facts of the case, the order was revised purely on the basis that the Assessing Officer did not refer to determine the arm’s length price to the Transfer Pricing Officer.
  • Since clause (i) section 92A was omitted with effect from 01.04.2017 and the effect of such omission is that the said clause (i) never existed in the statute. Hence, the PCIT could not exercise the jurisdiction under section 263 of the Act.

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