Case Number: ITA 635/DEL/2021
Appellant: York Tech Pvt. Ltd., New Delhi
Respondent: DCIT Circle-25(1), New Delhi
Assessment Year: 2016-17
Case Filed On: 2021-05-31
Order Type: Final Tribunal Order
Date of Order: 2021-08-18
Pronounced On: 2021-08-18
In this detailed case review, we delve into the intricacies of ITA No. 635/DEL/2021, where York Tech Pvt. Ltd. contested the adjustment of Rs. 6,93,89,490 on account of Specified Domestic Transaction (SDT) related to the purchase of office space inventory from its holding company, Uphill Farms Pvt. Ltd. The primary legal issue revolves around the validity of references to the Transfer Pricing Officer (TPO) post the omission of clause (i) of Section 92BA by the Finance Act, 2017.
York Tech Pvt. Ltd., a subsidiary of Uphill Farms Pvt. Ltd., is engaged in real estate development. During the assessment year 2016-17, the company acquired a real estate business, including assets and liabilities, from its holding company through a slump sale valued at Rs. 220.5 crore. The transaction included the issuance of equity shares and a balance payment in cheques. The company reported this transaction in Form No. 3CEB, using the ‘Other Method’ prescribed under Rule 10AB of the Income-tax Rules, 1962.
The company’s return of income was selected for scrutiny, leading to the involvement of the TPO to determine the Arm’s Length Price (ALP) of the SDT. The TPO computed a significant adjustment, valuing the property based on the Noida Authority’s rates and rejecting the company’s valuation method, which included market rates and a government-approved valuer’s report.
The primary argument presented by York Tech Pvt. Ltd. was that the reference to the TPO for Domestic Transfer Pricing was invalid because clause (i) of Section 92BA had been omitted by the Finance Act, 2017, effective from April 1, 2017. The appellant argued that any proceedings initiated after the omission were legally untenable. They further supported their argument with various legal precedents, including the Karnataka High Court’s decision in PCIT vs. Texport Overseas Pvt. Ltd., which held that omitted provisions should be treated as if they never existed.
The DCIT argued that the SDT for the assessment year 2016-17 fell within the period when clause (i) of Section 92BA was still in effect. Therefore, the reference to the TPO and subsequent adjustments were valid. The DCIT relied on various judgments, including the Shree Bhagwati Steel Rolling Mills case, to assert that an omission does not nullify actions taken during the provision’s validity.
The tribunal reviewed the facts and legal arguments extensively. They considered the impact of the Finance Act, 2017, which omitted clause (i) of Section 92BA without a saving clause. The tribunal acknowledged the legal principle that if a provision is unconditionally omitted without a saving clause, it should be treated as if it never existed.
The tribunal concluded that the reference to the TPO and the adjustments made for the assessment year 2016-17 were invalid due to the omission of clause (i) of Section 92BA. They ruled in favor of York Tech Pvt. Ltd., allowing the appeal and setting aside the adjustments made by the TPO and DCIT.
Final Judgment:
In the Income Tax Appellate Tribunal, Delhi Bench “I-2” New Delhi
Before: Shri Amit Shukla, Judicial Member & Dr. B.R.R. Kumar, Accountant Member
Order:
The appeal filed by York Tech Pvt. Ltd. is allowed. The adjustments made on account of specified domestic transactions are set aside.
Order Pronounced in the Open Court on 18th August 2021.
Signed:
Dr. B.R.R. Kumar, Accountant Member
Amit Shukla, Judicial Member
Date: 18th August 2021
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