ACIT, CIRCLE-1(1)(1), VADODARA V. FARMSON PHARMACEUTICAL GUJARAT PRIVATE LIMITED, VADODARA

ITA 1835/AHD/2025

AI Insights

The case involves the ACIT, Circle-1(1)(1), Vadodara as the appellant and Farmson Pharmaceutical Gujarat Pvt. Ltd. as the respondent. The dispute centered on the transfer pricing adjustments made by the TPO concerning the purchases of parecetamoal by the assessee. The TPO had made a substantial adjustment of Rs. 8,93,76,234, which was contested by the assessee. The CIT(A) partly allowed the assessee's appeal, leading to the Revenue's appeal to the Tribunal. The Tribunal's decision was influenced by the legal interpretation of the omitted section 92BA(i) and its applicability, which was found to be prospective and not applicable to the assessment year in question.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 841134 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 29-09-2025
• Other Referred Cases: PCIT vs. Texport Overseas Pvt. Ltd. 114 taxmann.com 568
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHER SINGH
• Assessee Lawyers: AMRIN PATHAN
• Keywords: Transfer pricing; TDS; Bogus
• Section: 37; 115JB; 92E

Judgement Text

" THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before Dr. BRR Kumar, Vice President And Ms. Suchitra Kamble, Judicial Member The ACIT, Circle-1(1)(1), Vadodara (Appellant) Vs Farmson Pharmaceutical Gujarat Pvt. Ltd., 14 GTDC Industrial Estate, Nadesari, Vadodara PAN: AAACF3358B (Respondent) Assessee by: Ms. Amrin Pathan, A.R. Revenue by: Shri Sher Singh, CIT-D.R. Date of hearing : 17-12-2025 Date of pronouncement : 23-02-2026 आदेश/ORDER Per Suchitra Kamble, Judicial Member: This is an appeal filed against the order dated 17-07- 2025 passed by CIT(A), Ahmedabad-13 for assessment year 2015-16. 2. The grounds of appeal are as under:- “(1) Whether on the facts and in circumstances of the case and in law, the Ld.CIT(A) was justified in deleting the transfer pricing adjustment by holding that the omission of section 92BA(i) of the Act, 1961 rendered the provision non-existent ab initio, without appreciating that the omission takes effect only from 01.04.2017 and applies prospectively to AY 2017-18 and subsequent years? ITA No. 1835/Ahd/2025 Assessment Year 2015-16 Printed from counselvise.com I.T.A No. 1835/Ahd/2025 Farmson Pharmaceutical Gujarat Pvt. Ltd., A.Y. 2015-16 2 (ii) Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in holding the reference to the TPO as invalid when the assessee has itself disclosed the impugned purchases as specified transaction in Form 3CEB under section 92E? (iii) Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in granting relief solely on jurisdictional grounds, without examining the merits of the ALP determination made by the TPO in accordance with the provision applicable for the relevant year? (iv) The appellant craves leaves to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal.” 3. The assessee is engaged in the business of manufacturing of sale of parecetamoal. The return of income was filed on 28- 11-2016 declaring total income of Rs. 13,41,14,490/- and book profit u/s. 115JB of the Act at Rs. 12,97,69,573/-. The assessee’s case was selected for complete scrutiny. Various statutory notices were issued and served upon the assessee. The assessee’s case was referred to the transfer pricing officer in the order u/s. 92CA(3) of the Act was passed by the TPO on 31-10- 2018 thereby making total adjustment of Rs. 8,93,76,234/- on account of purchase of parecetamoal. The A.O. passed draft assessment order u/s. 144(1) on 26-11-2018. On the basis of the findings of the draft assessment order, the A.O. observed that during the assessment proceedings, details of commission payment from Reynolds Petro-Chems Ltd. was furnished by the assessee and it clearly states that the assessee paid sales commission to Reynolds Petro-Chems Ltd. During the survey action at Mumbai and Surat Premises of M/s. R.P. Chems Ltd., it was found that the assessee company paid commission of Rs. 58,20,000/- instead of Rs. 31,01,136/- mentioned in the show cause notice. Thus, the contention of the assessee that the Printed from counselvise.com I.T.A No. 1835/Ahd/2025 Farmson Pharmaceutical Gujarat Pvt. Ltd., A.Y. 2015-16 3 expenditure to that extent is allowable u/s. 37 as the TDS has been deducted on the commission payments was rejected by the A.O. The A.O. made the addition of Rs. 58,20,000/- for bogus commission. The A.O. also made addition of Rs. 8,93,76,234/- thereby making upward adjustment made by the Transfer Pricing Officer. 4. Being Aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The ld. D.R. submitted that the reference to the TPO was validly made by the A.O. and the CIT(A) was not right in holding that the reference to the TPO was in-valid when the assessee itself discloses the purchases as specified transaction in the form of 3CEB u/s. 92E of the Act. The ld. D.R. further submitted that the CIT(A) was not justified in deleting transfer pricing adjustment by holding that the omission of section 92BA(1) of the Act, 1961 rendered the provision as non-existent ab initio without appreciating that the omission takes effect only from 01- 04-2017 and applies prospectively to assessment year 2017-18 and subsequent years. The ld. D.R. further submitted that the CIT(A) was not justified in granting the relief solely without examining the merits of the ALP determination made by the TPO in accordance with the provisions applicable for the relevant year. 6. The ld. A.R. relied upon the assessment order and the order of the CIT(A). Printed from counselvise.com I.T.A No. 1835/Ahd/2025 Farmson Pharmaceutical Gujarat Pvt. Ltd., A.Y. 2015-16 4 7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that section 92BA(i) was omitted w.e.f. 01-04-2017 and there was no saving clause. Thus, the CIT(A) while taking cognizance of the same has categorically held that the provisions never existing in the statute book and hence the reference to TPO was bad in law and the consequential order passed by the TPO is also invalid. The Hon’ble Karnatka High Court in case of PCIT vs. Texport Overseas Pvt. Ltd. 114 taxmann.com 568 held that since the effect of omission of the provision tantamount to non-existent of such provision in the Act, the action of the A.O. in referring the case to TPO for determining the ALP of specified domestic transaction is without jurisdiction and therefore not valid. Thus, the CIT(A) has rightly deleted the addition. Hence, the appeal of the Revenue is dismissed. 8. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 23-02-2026 Sd/- Sd/- (Dr. BRR Kumar) (Suchitra Kamble) Vice President Judicial Member Ahmedabad : Dated 23/02/2026 a.k. आदेश क\u0006 \u0007\bत ल प अ\u000fे षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. Printed from counselvise.com I.T.A No. 1835/Ahd/2025 Farmson Pharmaceutical Gujarat Pvt. Ltd., A.Y. 2015-16 5 By order/आदेश से, उप/सहायक पंजीकार आयकर अपील\u0012य अ\u0013धकरण, अहमदाबाद Printed from counselvise.com "