Domestic Transaction with AE does not constitute ‘Specific Domestic Transactions’: ITAT [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the domestic transactions with an Associate Enterprise (AE) would not constitute “Specific Domestic Transactions” for the purpose of Section 92BA of the Income Tax Act, 1961.

The Principal Commissioner of Income Tax invoked his revisional jurisdiction under section 263 of the Income Tax Act, 1961 on the ground that despite the domestic transactions undertaken by the assessee covered within the ambit of Section 92BA of the Act for which prescribed form 3CEB issued by the Chartered Accountant was filed by the assessee, the AO has failed to refer the matter to the Transfer Pricing Officer (TPO) and in carrying out the necessary consequential inquiries.

As per section 92BA of the Act as existing in the statute at the relevant time of assessment, the Tribunal observed that the consequential proceedings under s.92BA for referent to TPO and other inquiries contemplated in respect of SDT would trigger only when a stipulated transaction falls within the meaning of the definition of SDT as provided under s.92BA of the Act.

“In the facts and circumstances of the case, it is an admitted fact that the so-called ‘SDT’ under the lens of the Pr.CIT primarily represents ‘sale’ made by the assessee to its sister concern. Naturally, a ‘sale’ made by the assessee gets outrightly excluded from the ambit of clause (i) of Section 92BA of the Act which is meant to deal with ‘expenditure’ incurred by the assessee to the benefit of sister concern/AE. We thereafter notice assertions made on behalf of the assessee that the assessee has not availed any benefit under s.80IA of the Act or any other provisions contemplated under s.92BA(ii) to (vi) of the Act. A reference has been made to the copy of the return filed with Revenue to demonstrate the absence of any such claim of benefit availed while determining the return of income,” the Tribunal said.

“We thus find merit in the case made out by the assessee that various clauses of Section 92BA of the Act were not applicable in the factual matrix. As a corollary, merely because a prescribed Form No. 3CEB was filed in accordance with Rule 10E r.w.s. 92BA of the Act would not make an assessee susceptible to onerous investigation proceedings on such transactions where the assessee prima facie demonstrates that Section 92BA of the Act is wholly inapplicable in any manner at the first instance. The Pr.CIT was seized with the relevant facts and could have easily satisfied himself with such prima facie assertions. A lack of inquiry in a particular manner or as per certain procedures prescribed would possibly vitiate the assessment order only when it is found that the relevant provisions were applicable to the assessee and not otherwise. The allegations made by the Pr.CIT in the instant case has been successfully rebutted on behalf of the assessee. In view of the domestic transaction with AE not falling in the sweep of Section 92BA of the Act at the threshold, any alleged inaction attributable to the AO in this regard would not vitiate assessment order as erroneous nor did it cause any prejudice to the interest of the Revenue,” the Tribunal said.