NYMPHEA DEVELOPERS PVT. LTD.,NEW DELHI V. ITO,WARD-18(3), NEW DELHI

ITA 3054/DEL/2022

AI Insights

Nymphea Developers Pvt. Ltd. appealed against the final assessment order passed by the Assessing Officer, which included an upward adjustment of INR 68,80,48,216 to the company's income based on specified domestic transactions with its associated enterprise. The case involved multiple rounds of scrutiny and adjustments by the TPO and the Assessing Officer, culminating in a dispute over the validity of the transfer pricing adjustments made under section 92BA of the Income Tax Act. The Tribunal's decision hinged on the legal interpretation of the applicability of section 92BA post its amendment and the judicial precedents concerning the effect of legislative omissions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 102485 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2014-2015
• Other Referred Cases: Panacea Biotech Ltd. Vs. ACIT, PCIT Vs. Taxport Overseas Pvt. Ltd., DLF Urban Pvt. Ltd. Vs. DCIT, Yorkn Tech Pvt. Ltd. Vs. DCIT, SMR Automotive Systems (I) Ltd. Vs. ACIT, Shahi Exports Pvt. Ltd. Vs. ACIT, Fibre Boards Pvt. Ltd. Vs. CIT, Shree Bhagwati Steel Rolling Vs. Commissioner of Central Excise, Madhu Koda Vs. State through CBI
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHARM VEER SINGH
• Assessee Lawyers: MEENAL GOYAL
• Keywords: Set aside; Opportunity of being heard; Transfer pricing; International transaction; Retrospective amendment; Question of law; Commercial expediency; Right to appeal; Arm length price
• Section: 143(3); 143(2); 271(1)(c); 22; 113; 13; 92CA; 274; 144C; 10B; 92E; 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘I’: NEW DELHI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.3054/Del/2022 (ASSESSMENT YEAR 2014-15) Nymphea Developers Pvt. Ltd. C-3/260, Janakpuri, New Delhi-110058. PAN-AABCO5609H Vs. Assessment Unit, Income Tax Department, ITO, Ward-18(3), New Delhi. (Appellant) (Respondent) Assessee by Shri Meenal Goyal, Advocate Department by Shri Dharm Veer Singh, CIT-DR Date of Hearing 05/03/2025 Date of Pronouncement 16/04/2025 O R D E R PER MANISH AGARWAL, AM: This appeal is filed by the assessee against the order passed by the AO u/s 143(3) r.w.s. 254 r.w.s. 144B of the Income Tax Act, 1961 (the Act in short) dated 22.12.2022 for A.Y. 2014-15. 2. Brief facts of the case are that assessee is a private limited company and had filed its return of income on 06.02.2015 declaring total income at Rs. 119,64,540/-. The case was taken up for scrutiny by way of issue of notice u/s 143(2) of the Act. The assessee company is engaged in the business of real estate development and during the year under consideration it had made specified domestic transaction 2 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO with its associates enterprises (AE) thus, the AO referred to matter to Transfer Pricing Officer (TPO) u/s 92CA(3) of the Act for determination of Arm’s Length Price of such specified domestic transaction. The TPO vide its order dated 06.10.2017 has proposed adjustment of Rs. 68,80,48,216/-. Based on such recommendation of the TPO, the final order was passed u/s 143(3) r.w.s. 144C of the Act on 30.12.2017 at a total income of Rs. 70,00,12,756/-. Against this order, an appeal was filed before ld. CIT(A) who vide order dated 30.08.2019 had dismissed the appeal of the assessee. Aggrieved by the said order of ld. CIT(A), the assessee preferred second appeal before the Tribunal. The coordinate bench of ITAT vide its order dated 03.02.2020 in ITA No. 7555/Del/2019 had restored back the issue of determination of Arm Length Price on specified domestic transaction to the file of AO / TPO for deciding afresh. 3. In compliance to the directions, the TPO vide its order dated 29.01.2022 u/s 92CA(3) of the Act had proposed adjustment of Rs. 68,80,48,216/- on account of specified domestic transaction. Thereafter the draft assessment order was passed on 11.02.2022 u/s 143(3) r.w.s. 254 r.w.s. 144C(1) of the Act. The assessee filed the objections against such draft order before the Hon’ble DRP. The Hon’ble DRP-1, New Delhi vide its order passed u/s 144C(5) dated 19.11.2022 had issued certain directions in para 4.1 of its order on the merits of the issue which are as under: “4.1 The Grounds (No. 02 & 03) are taken together as the issues are similar nature. The assessee has contested the disallowance by the TPO on account of collaboration expenses incurred to the tune of 3 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO 68,80,48,216/- made by the assessee to its associated enterprises OIPL in the financial year 2013-14. From the documents submitted by the assessee, it indicates that the TPO issued a show cause notice to the assessee on 11.02.2022 DIN No. ITBA/AST/C/F/144C/2011- 2022/1039670510(1) whereby the TPO had calculated the collaboration expenses at 36,56,49,743/- and requested the assessee to explain as to why and adjustment of Rs. 32,23,98,473/- (Rs. 68,80,48,216 – Rs. 36,56,49,743) should not be made. However the TPO has proposed enhancement of income of the assessee of amount Rs. 68,80,48,216/- for AY 2014-15, even ignoring his own calculation which as per the show cause notice where the proposed adjustment was pegged at Rs. 32,23,98,473/-. Further the above adjustment was done without rebutting the assessee objections / clarifications filed through submission dated 27.01.2022 and 28.01.2022. In the above scenario the DRP directs the TPO to pass a speaking order taking into cognizance of documents submitted by the assessee. The order of the TPO needs to be communicated to the assessing officer. 4. Before the ld. DRP, the assessee had taken an additional ground that the clause (i) of section 92BA of the Act has been omitted vide Finance Act, 2017 meaning thereby the provision were not in existence or never existed in the statute therefore, the jurisdiction exercised by the AO in referring to the matter to TPO is not valid after such amendment. The DRP after considering the arguments of the assessee has rejected this additional ground by observing in para 6.1 that there is no binding judgement of the jurisdictional High Court or of the Hon’ble Supreme Court on this issue of nullifies the operation of provision of section 92BA for A.Y. 2014-15. 5. Thereafter, the Assessing Officer has passed the final assessment order u/s 143(3) r.w.s. 254 r.w.s. 144B of the Act dated 22.12.2022 wherein an upward adjustment of Rs. 68,80,48,216/- was made on account of specified domestic transaction of collaboration expenses paid to M/s Oriss Infrastructure Pvt. Ltd. (an 4 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO AE) as suggested by the TPO in its order giving effect to the direction of Hon’ble DRP and the total income of the assessee was assessed at Rs. 70,00,12,760/-. 6. Aggrieved with the final assessment order, the assessee is in appeal before this Tribunal on the strength of following grounds of appeal:- “1. That the assessing officer erred on facts and in law the order dated 22.12 2022 passed us 143(3) r.w.s. 254 read with Section 144B of the Income-tax Act, 1961 (the Act) imputing/confirming a total addition amounting to Rs 68,80,48,216/-under Section 92BA of the Act. 2. That the Hon'ble DRP erred on facts and in law in failing to appreciate that since clause (1) of Section 92BA of the Act has been omitted vide Finance Act. 2017 means that the provisions were not in existence or never existed in the Statute Therefore, jurisdiction exercised by the TPO is legally invalid, thereby rendering the impugned transfer pricing addition amounting to Rs 68,80,48,216/ as unwarranted, bad in law and liable to be deleted. 3. That the Hon'ble DRP erred on facts and in law in not following the binding judicial precedents while confirming the impugned addition of Rs 68,80,48,216/- u/s 92BA of the Act. 4. That the Ld. TPO/DRP erred on facts and in law in disregarding the commercial expediency of the sub-lease to third party and computed the ALP in respect of collaboration expense at NIL. 5. That the Ld. TPO/DRP erred on facts and in law in disregarding the TP benchmarking adopted by the Appellant without placing on record any cogent material to the contrary and arbitrarily proceeded to arrive at an ALP of Nil. 6. That the Ld. TPO erred on facts and in law in passing a non-speaking order u/s 92CA(3) of the Act. 5 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO 7. That on facts and circumstances of the case, and in law, the AO erred in initiating penalty proceedings under Section 274 read with Section 271(1)(C) of the Act. The appellant craves leave to add. amend, alter, vary, withdraw or otherwise modify the grounds mentioned herein above at or before the time of the hearing.” 7. The ground of appeal No. 1 is general in nature. 8. In ground of appeal No. 2, the assessee has challenged the jurisdiction of the TPO on the ground that the clause (i) of section 92BA has been omitted by Finance Act, 2017, meaning thereby the provision was never in existence in the statute and thus reference to the TPO and further adjustments proposed by TPO on specified domestic transaction cannot be made and therefore, the assessee prayed that transfer price adjustment of Rs. 68,80,48,216/- is unwarranted and bad in law and liable to be deleted. 9. Before us, the ld. AR of the assessee submitted that in view of omission of clause (i) of section 92BA w.e.f. 01.04.2017, the action taken under this clause is invalid and bad in law. 10. For this proposition, reliance is placed on the judgment of coordinate bench of the tribunal in the case Panacea Biotech Ltd. Vs. ACIT in ITA No. 807/Del/2021 for A.Y. 2016-17 dated 22.05.2024 wherein the Coordinate Bench of the tribunal after considering the decision of Hon’ble Supreme court in Shree Bhagwati Steel Rolling Mills reported in Civil appeal No. 4280nof 2007 and in the case of M/s Fiber Boards Pvt. Ltd. Vs. CIT reported in 62 taxmann.com 135 (SC) has held that “no transfer pricing adjustment can be made on 6 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO account of domestic transaction which has been referred by ld. AO after omission of clause (i) of section 92BA of Finance Act, 2017”. 11. Assessee had also placed reliance on the judgment of Hon’ble Karnataka High Court in the case of PCIT Vs. Taxport Overseas Pvt. Ltd. [ITA No. 392/2018 dated 12.12.2019] which order was followed by the various benches of Tribunal in following cases including Delhi Benches in the case of DLF Urban Pvt. Ltd. Vs. DCIT (ITA No. 1962/Del/2022 dated 08.04.2024), Yorkn Tech Pvt. Ltd. Vs. DCIT (ITA No. 635/Del/2021), SMR Automative Systems (I) Ltd. Vs. ACIT (ITA No. 6597/Del/2018), Shahi Exports Pvt. Ltd. Vs. ACIT (ITA No. 843/Del/2021). In all these cases, it is held that since section 92BA(i) has been omitted by Finance Act, 2017, Transfer Pricing reference and impugned proceedings and subsequent order by TPO and final order by AO will lapse and become invalid in law even for the earlier assessment years. It is also held that the omission of clause (i) of 92BA by Finance act, 2017 w.e.f. 01.04.2017 is without any saving clause of General Clauses Act thus the said clause never existed in statute books and therefore transfer pricing reference and impugned subsequent proceedings become invalid in law even for earlier assessment years. 12. The ld. AR also brought to our notice the explanatory note to Finance Act, 2017 where the scope of section 92BA of Act related to specified domestic transaction was explained. Ld. AR thus submitted that in view of the aforesaid judgements, the reference transfer 7 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO pricing officer for determination of arm length price of specified domestic transaction cannot be made and therefore the entire addition based on such proposal of adjustment by TPO is bad in law and deserves to be deleted. 13. On the other hand, ld. DR argued that the by the amendment through Finance Act, 2017, the clause(i) of 92BA was omitted w.e.f. 1.4.2017 and in the explanatory notes it is very clearly stated that this amendment will apply from AY 2017-18 and subsequent assessment years. Ld. DR further submitted that the provisions of section 92BA is part of Chapter X, which deals with special provisions relating to tax avoiding and the same have to be strictly applied. He further submitted that the Hon’ble SC in the case of Fibre Boards Pvt. Ltd. (supra) has held that omission and repeal of any law is governed by the General Clauses Act. In the aforesaid case of Fiber Boards, the Hon’ble SC has considered its earlier decision in the case of Kohlapur Canesugar Works Ltd. Vs. Union of India, AIR 2000 SC 811 and other decision including Rayala Corporation Pvt. Ltd. Reported in (1969) 2 SCC 412 and came to the conclusion that the decision rendered in earlier cases is per incuriun. He submitted that the Hon’ble SC came to the conclusion that the ratio laid down in Rayala Corporation (supra) and Kolhapur Canesugar (supra) cannot be said to the ratio decidendi at all and it is in the nature of obtior dicta. 8 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO 14. Ld. DR also relied upon judgement of Hon’ble SC in the case of Shree Bhagwati Steel Rolling Mills vs. Commissioner of Central Excise in Civil Appeal No. 4280 of 2007 wherein after reconsidering the judgement of Fiber Boards (supra), the Hon’ble SC again clarified and held that the Fiber Boards (supra) still holds and Hon’ble Apex Court declined to interfere in the judgement of Fiber Boards (supra). 15. Ld. DR thus argued that the omission or repeal since is not defined in the Act and thus is governed by the General Clauses Act which are applicable to all rule and regulations. For this he refer section 6 of the General Clauses Act, 1897 which provides the effect of repeal and submit that unless a different intention appears, the repeal shall not affect the previous operation of any enactment so repeal or anything duly done or suffered thereunder and all such legal proceedings or remedy may be continued for enforced as if the repealing rule and regulation had not been passed. As per ld. DR since the general rules with regard to the omission / repeal / amendment are common for all laws, therefore, what is important is the basic principle which regulate the effect the such omission / repeal. Ld. DR also placed reliance on the judgment of Hon’ble Delhi High Court in the case of Madhu Koda Vs. State through CBI in CRL.A. No. 1186/2017 dated 22.05.2020 wherein it was claimed by the appellant that “whether the appellant is liable to be acquitted in view of the enactment of the PC (Amendment) Act, 2018. It was contended on behalf of the appellant that he is entitled to the benefit of the doctrine of beneficial construction. Since the misconduct as 9 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO contemplated u/s 13(1)(d) of the PC is no longer an offence punishable under the PC Act as amended by virtue of the PC Amendment Act 2018, the benefit of the same ought to be extended to the appellant. Mr. Bhandari had sought to draw strength from the decision of the Supreme Court in T. Barai (supra) for canvassing the above contention.” The Hon’ble Court in para 54 of the said order has held that “In view of the above, section 6(d) of the General Clauses Act is applicable and persons convicted of committing the offence of criminal misconduct under section 13(1)(d) of the PC Act would not be absolved of their offences or the liability incurred prior to the PC Act coming into force. It is also relevant to note that the offence of criminal misconduct as falling under the provisions of Section 13(1)(d) of the PC Act prior to its amendment, is not the same offence as is now covered under the amended provision.” 16. The Ld. DR thus prayed that by making amendment vide Finance Act, 2017, all the previous proceedings should not be hold invalid. 17. In rejoinder, the ld. AR submitted that the coordinate bench of the tribunal in the case of Yorkn Tech Pvt. Ltd. (supra) after considering the judgement of Hon’ble SC in the Fiber Boards (supra) has allowed the appeal of the assessee by observing as under: \"10. ....During the course of argument a reference was made to the judgment of Hon'ble Supreme Court in the case of Fiber Boards (P) Ltd., Bangalore v. Commissioner of Income Tax, Bangalore, (2015) 10 SCC 333 and Shree Bhagwati Steel Rolling v. Commissioner of Central Excise (2016) 3 SCC 643 to convass the point that the earlier judgments of Constitutional Bench in the case of Rayala Corporation 10 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO Pvt. Ltd., 1970 SCR 1 (69) and Kohlapur Cane Sugar [supra] have been not followed or have been overruled. First of all, nowhere the Hon'ble Apex Court in both the judgments have overruled earlier two judgment of the Constitutional bench of the Hon'ble Apex Court rather they have explained it in detail and went on to held that the word repealed in both section of 6A and Section 24 of General Clauses Act would include repeals by expression ‘omission' and the expression 'delete and omission' are used interchangeably.\" 18. The ld. AR further submitted that in para 11.2 of its order, Tribunal discussed the specific facts of the case, for the findings recorded by the SC which are as under: \"11.2 The Apex Court held that the idea of omitting section 280ZA and introducing Section 54G on the same date was to do away with the tax credit certificate scheme together with the prior approval required by the Board and to substitute the repealed provision with the new scheme contained in Section 54G. Once Section 280ZA is omitted from the statute book, section 280Y (d) having no independent existence would for all practical purposes also be \"dead\". On this reasoning, the Apex Court decided in favour of the appellant by holding that omission of section 280ZA and its re-enactment with modification in section 54G, section 24 of the General Clauses Act would apply, and the notification dated 22.9.1967 would be continued under and for the purposes of Section 54G.\" 19. Further the findings in Shree Bhagwati Steel Rolling have been distinguished from para 12 onwards in the order of the Tribunal. 20. With regard to the judgment of Madhu Koda (supra) the ld. AR distinguished the same on facts by making following submission: A. Case dealt with the substituted provision of Section 13 of Prevention of Corruption (Amendment) Act, 2018 (Criminal Law does not apply retrospectively) - Present appeal deals with omission of Section 92BA(1) of the Act, vide Finance Act, 2017 b. Subject matter has attained finality before the amendment came into force. The subject matter in the present matter has not attained any finality. Impugned proceedings are barred by enforcement of Finance Act, 2017. 11 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO 21. The ld. AR accordingly prayed that after the amendment in section 92BA (i) vide Finance Act, 2017 the jurisdiction of the AO for making reference to TPO to determine the arm length price in specified domestic transaction has gone and therefore, any reference made thereafter is bad in law and all the subsequent proceedings based on such reference are without jurisdiction. In the instant case also, the reference was made by the AO to the TPO after the amendment made in Finance Act, 2017 therefore, such reference itself is bad in law and accordingly all the consequent proceedings including the order of TPO and final order making upward adjustments to the total income of the assessee deserves to be deleted. 22. We have heard the rival submission and perused the material available on record. In the instant case, it is an admitted position that the reference was made to the TPO after 01.04.2017 i.e. the date when the clause (i) of section 92BA was omitted by Finance Act, 2017. Under identical facts, the coordinate bench of ITAT in the case of DCIT Vs. DLF Urban Pvt. Ltd. in ITA No. 2078/Del/2022 and 1962/Del/2022 vide order dated 08.04.2024 has held as under: 26. We now take up the preliminary issue with regard to applicability of clause (i) of section 92BA of the Act, and at outset, we find no force in the contention of the Id. DR that as the assessee had prepared a transfer pricing report and had disclosed specified domestic transaction in Form 3CEB which is to be furnished u/s 92E of the Act disclosing international transactions and specified domestic transaction, therefore, the assessee cannot now escape from the liability to get this transaction benchmarked and so the TPO was justified to make the adjustments. The ld. DR has himself admitted that 12 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO the assessee while filing the transfer pricing study report had mentioned that as a matter of abundant caution the transaction is being reported for the purpose of section 92E of the Act. We are of the considered view that when the law had provided for penalty in case of non-compliance of a provision of the Act and the assessee reserving a right to protest at appropriate stage, makes the compliance, the assessee cannot be estopped by own act and conduct to dispute the applicability of the said provisions during the assessment. 27. Coming to merits of the additional ground, having given a thoughtful consideration to the matter on record and the submissions we observe that the Id. DR could not dispute the fact that the Hon'ble Karnataka High Court in case of Texport Overseas Pvt. Ltd. (supra) and the coordinate Benches of this Tribunal in several cases, as referred by the Id. AR has held that once this section is omitted w.e.f 01.04.2017, the resultant effect is that it had never been passed to be considered as a law and never been existed. However, in the light of the Explanatory Notes to the Finance Act, 2017 relied by the Id. DR along with the judgement of the Hon'ble Supreme Court in the case of Fiber Boards Pvt. Ltd. (supra) and Shree Bhagwati Steel Rolling Mills (supra) which have been considered by the Mumbai Bench in the case of Firemenich Aromatics (India) Pvt. Ltd. (supra) we need to decide the impact of the judgement of the Hon'ble non-jurisdictional High Court in a situation in which these decisions canvassed a view contrary to what has been decided by another non-Jurisdictional High Court. 28. In this context, without much indulgence on our part, we would like to rely on the order of the Mumbai Bench of the Tribunal in the case of Sirn Slimpharma Pvt. Ltd. vs. ITO in ITA No.847/Mum/2016, order dated 09.09.2021 wherein while dealing with somewhat similar question of law, the Mumbai Tribunal has indicated that in the absence of judgment of Jurisdiction High Court, the non-jurisdictional High Court judgment has persuasive value and should be generally followed. The relevant part of the decision in paras 7 and 8 is as follows: “7. While on this issue we may usefully take note of the observations of Hon'ble Supreme Court in the case of ACCE v. Dunlop India Ltd. [(1985) 154 ITR 172 (SC)], wherein the Their Lordships quoted, with approval, from the decision of House of Lords to the effect that \"We desire to add and as was said in Cassell & Co. Ltd. v. Broome [1972] AC 1027 (HL), we hope it will never be necessary for us to say so again that \"in the hierarchical system of courts\" which exists in our country, \"it is necessary for each lower tier\", including the High Court, \"to accept loyally the 13 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO decision of the higher tiers\". \"It is inevitable in hierarchical system of courts that there are decisions of the Supreme appellate Tribunal which do not attract the unanimous approval of all members of the judiciary... But the judicial system only works if someone is allowed to have the last word, and that last word, once spoken, is loyally accepted\" and observed that... \"the better wisdom of the Court below must yield to the higher wisdom of the Court above. That is the strength of the hierarchical judicial system.\" The principle is thus unambiguous As a rule, therefore, judicial discipline warrants that the wisdom of a lower tier in the judiciary has to make way for higher wisdom of the tiers above. Unlike the decisions of Hon'ble jurisdictional High Court, which bind us in letter and in spirit on account of the binding force of law, the decisions of Hon'ble non-jurisdictional High Court are followed by the lower authorities on account of the persuasive effect of these decisions and on account of the concept of judicial propriety In the case of CIT Vs 19791 Godavari Devi Saraf [(1979) 113 ITR 589 (Bom)], Hon'ble jurisdictional High Court took note of a non-jurisdictional High Court and held that the Tribunal, outside the jurisdiction of that Hon'ble High Court and in the absence of a jurisdictional High Court decision to the contrary, could not be faulted for following the same Their Lordships observed that, \"It should not be overlooked that the Income-tax Act is an All-India statute..... Until a 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\" Of course, these observations were in the context of a provision being held to be unconstitutional, an issue on which the Tribunal could not have adjudicated anyway, as evident from the observation \"Actually, the question of authoritative or persuasive decision does not arise in the present case because a Tribunal constituted under the Act has no jurisdiction to go into the question of constitutionality of the provisions of that statute\" but nevertheless the respect for the higher judicial forum was unambiguous. In Tej International Pvt Ltd Vs DCIT [(2000) 69 TTJ 650 (Del)), a coordinate bench has, on this issue, observed that \"In the hierarchical judicial system that we have, better wisdom of the Court below has to yield to higher wisdom of the Court above and, therefore, one a authority higher than this Tribunal has expressed an opinion on that issue, we are no longer at liberty to rely upon earlier decisions of this Tribunal even if we were a party to them. Such a High Court being a non-jurisdictional High Court does not alter the position...\" There can, however, be exceptions to this situation on 14 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO account of a variety of reasons, and these exceptions come into play only when the views are of non-jurisdictional High Court which, do not, legally speaking bind the lower tiers of judiciary In our considered view, so far as the precedence value of a non- jurisdictional High Court's judgment is concerned, the position has been very well summed up by a coordinate bench decision in the case of Bank of India (supra), wherein, speaking through one of us (Le the Vice President), the coordinate bench has observed as follows: While dealing with judicial precedents from non- jurisdictional High Courts, we may usefully take of observations of Hon'ble jurisdictional High Court in the case of CIT Vs Thang Electricity Co Ltd (1994) 206 ITR 727 (Bom)], to the effect of one High Court is neither binding precedent \"The decision of for another High Court nor for the courts or the Tribunals outside its own territorial jurisdiction. It is well-settled that the decision of a High Court will have the force of binding precedent only in the State or territories on which the court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect\". Unlike the decisions of Hon'ble jurisdictional High Court, which bind us in letter and in spirit on account of the binding force of law, the decisions of Hon'ble non-jurisdictional High Court are followed by the lower authorities on account of the persuasive effect of these decisions and on account of the concept of judicial propriety-factors which are inherently subjective in nature. Quite clearly, therefore, the applicability of the non-jurisdictional High Court is never absolute, without exceptions and as a matter of course, That is the principle implicit in Hon'ble Supreme Court's judgment in the case of ACIT Vs Saurashtra Kutch Stock Exchange Ltd [(2008) 305 ITR 227 (SC)] wherein Their Lordships have upheld the plea that \"non-consideration of a decision of Jurisdictional Court or of the Supreme Court can be said to be a mistake apparent from the record\". The decisions of Hon'ble non-jurisdictional High Courts are thus placed at a level certainly below the Hon'ble High Court, and it's a conscious call that is required to be taken with respect to the question whether, on the facts of a particular situation, the non-jurisdictional High Court is required to be followed. The decisions of non-jurisdictional High Courts do not, therefore, constitute a binding judicial precedent in all situations. To a forum like us, following a jurisdictional High Court decision is a compulsion of law and absolutely 15 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO sacrosanct that way, but following a non-jurisdictional High Court is a call of judicial propriety which is never absolute, as it is inherently required to be blended with many other important considerations within the framework of law, or something which cannot be, in deserving cases, deviated from. [Emphasis, by underlining, supplied by us] 8. ………………. At one place, this decision, inter alia, states that \"To a forum like us, following a jurisdictional High Court decision is a compulsion of law and absolutely sacrosanct that way, but following a non-jurisdictional High Court is a call of judicial propriety.....which can...be, in deserving cases, deviated from\". Implicit in this observation is the fact that not following non-jurisdictional High Court decision is more of an exception than the rule. There have to be very strong and good reasons not to follow even non jurisdictional High Court decisions 29. On the basis of the aforesaid principles of law of precedents and taking into consideration the fact that in a coordinate bench decision dated 20.07.2023 here in Delhi, in the case of Relaxo Footwear Ltd., Versus Assessing Officer, National e-Assessment Centre, New Delhi, ITA No.590/Del/2021, wherein one of us (the Judicial member) was on the Bench we had followed the decision of the Hon'ble Karnataka High Court in the case of Texport Overseas Pvt. Ltd (supra), we are of the considered view that the indulgence sought by ld. DR to accept the view of Mumbai Tribunal in Firemenich Aromatics (India) Pvt. Ltd., is not sustainable. 30. We have also taken into consideration the order relied by Id. DR of Mumbai Tribunbal in the case of Firemenich Aromatics (India) Pvt. Ltd. (supra) and the order of coordinate Bench of Delhi in the case of Yorkn Tech Pvt, Ltd. (supra) relied by ld. AR and there is no doubt the coordinate Bench at Delhi has distinguished the Mumbai Bench order in the case of Firemenich Aromatics (India) Pvt. Ltd. (supra) and held that even after the judgement of the Hon'ble Supreme Court in the case of Shree Bhagwati Steel Rolling Mills (supra) and Fiber Boards Pvt. Ltd. (supra) clause (i) of section 92BA which has been omitted from 01.04.2017 has to be considered to have never been part of the statute and, accordingly, no transfer pricing adjustment can be made on a domestic transaction. 16 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO 31. We will also like to distinguish the Mumbai Tribunal order in Firemenich Aromatics (India) Pvt. Ltd. (supra) by observing that in that case the issue was with regard to omission of sub- section (2A) of section 253 of the Act which was initially inserted by Finance Act, 2014 with retrospective effect from 01.06.2013 and which was then omitted by Finance Act, 2016 from 01.06.2016. The said provisions related to right to file appeal and in that case, the AO had filed the appeal during the currency of section 253(2A) of the Act and for that reason, the Mumbai Bench had considered the issue of repeal omission made in a statute and the consequences thereof. Since right to appeal is a substantive and, certainly, if it was there in the statute when the appeal was filed and, subsequently, if the statute had omitted the provision, the substantive right of appeal vested in a party would not be taken away by holding the repeal to be retrospective However, However, in the case in hand, a substantive provision, being infact a charging provision, has been omitted/deleted and consequently benefit of the same has to be given to the assessee. Thus, we are inclined to follow the Hon'ble Karnataka High Court judgement and, on that basis, the additional ground raised by the assessee deserves to be allowed and consequently the whole exercise done by ld. AO to bench mark the transaction of purchase of development right, stands being void. 32. Similarly in the case of SMR Automotive Systems (I) Ltd. (supra) the coordinate bench of Tribunal in para 14 and 15 of the order has held the reference made to the TPO u/s 92CA of the Act to be invalid and bad in law. The relevant observations of the tribunal as contained in para 14 & 15 are as under: “14. We find that an identical issue came up for adjudication before the coordinate bench, Bangalore in IT(TP)A No. 1722/2017. The relevant findings of the coordinate bench read as under: \"7. Having carefully examined the orders of authorities below in the light of rival submissions and relevant provisions and various judicial pronouncements, we find that by virtue of the insertion of section 92BA on the statute as per clause (i), any expenditure in respect of which payment has been made or is to be made to person referred to in clause (b) of sub section 2 of section 40A exceeds the prescribed limit, it would be a specified domestic transaction for which AO is required to make a reference to TPO 17 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO under section 92CA of the Act for determination of the LP In the instant case, since the transaction exceeds the prescribed limit it becomes the specified domestic transaction for which reference was made by the AO to the TPO under section 92CA for determination of the ALP Consequently, the TPO submitted a report which was objected to by the learned counsel for the assessee and filed a objection before the ORP Having adjudicated the objections, the ORP has issued certain directions and consequently the AO passed an order Subsequently, by Finance Act, 2017 w.e.f. 01.04.2017, clause (1) of section 92BA was omitted from the statute. Now the question arises as to whether on account of omission of clause (1) from the statute, the proceedings already initiated or action taken under clause (i) becomes redundant or otiose. In this regard, our attention was invited to judgment of the Apex Court in the case of Kolhapur Canesugar Works Ltd., (supra) in which the impact of omission of old rule 10 and 1 OA was examined. Having carefully examined the issue in the light of provisions of section 6 of the General Clauses Act, their Lordship has observed \"that in such a case, the court is to look to the provisions in the rule which has been introduced after omission of the previous rule to determine whether a pending proceeding will continue or lapse. If there is a provision therein that pending proceedings shall continue and be disposed of under the old rule as if the rule has not been deleted or omitted then such a proceeding will continue. If the case is covered by Section 6 of the General Clauses Act or there is a pari-materia provision in the statute under which the rule has been framed in that case also the pending proceeding will not be affected by omission of the rule. In the absence of any such provisions in the statute or in the rule, the pending proceeding will lapse under rule under which the notice was issued or proceeding being omitted or deleted\" 8. In the case of General Finance Co., Vs. ACIT, their Lordship Of the Apex Court has again examined the issue and held that the principle underlying section 6 as saving the right to initiate proceedings for liabilities incurred during the currency of the Act will not apply to omission of a provision in an Act but only to repeal, omission being different from repeal as held in different cases. Following the aforesaid judgments, the jurisdictional High Court has also expressed the same view in the case of CIT Vs. GE Thermometrics India Pvt Ltd. The relevant observation of the jurisdictional High Court is extracted hereunder 18 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO \"8. Admittedly, in the instant case, there is no saving clause or provision introduced by way of an amendment while omitting sub- section (9) of Section 1 OB. Therefore, once the aforesaid section is omitted from the statute book, the result is it had never been passed and be considered as a law that never exists and therefore, when the assessment orders were passed in 2006, the AO was not justified in talking note of a provision which was not in the statute book and denying benefit to the assessee. The whole object of such omission is to extend the benefit under Section 1 OB of the Act irrespective of the fact whether during th$ period to which they are entitled to the benefit, the ownership continues with the original essessee or it is transferred to another person. Benefit is to the undertaking and not to the person who is running the business. We do not see any merit in these appeals. The substantial question of law is answered in favour of the assessee and against the revenue. Accordingly, the appeals are dismissed. 9. From the aforesaid judgments, it has become abundantly clear that once a particular provision of section is omitted from the statute, it shall be deemed to be omitted from its inception unless and until there is some saving clause or provision to make it clear that action taken or proceeding initiated under that provision or section would continue and would not be left on account of omission. 10. In the instant case, undisputedly, by the Finance Act, 2017, clause (1) of section 92BA has been omitted wef 01.04.2017 Once this clause is omitted by subsequent amendment, it would be deemed that clause (1) was never been on the statute. While omitting the clause (1) of section 928A, nothing was specified whether the proceeding initiated or action taken on this continue. Therefore, the proceeding initiated or action taken under that clause would not survive at all. In this legal position, the cognizance taken by the AO under section 92B(1) and reference made to ΤΡΟ under section 92CA is invalid and bad in law. Therefore, the consequential order passed by the TPO and DRP is also not sustainable in the eyes of law. 11. Under these circumstances, where this clause (t) is omitted from the statute since its inception, the AO ought have required to frame the assessment in normal course after making necessary enquiries of particular claim of expenditure in accordance with law. But this exercise could not have been done on account of provisions of section 92BA Clause (1) of the Act. Now when this clause (i) has been omitted from the statute by virtue of the aforesaid amendments, the AO is required to adjudicate the issue of claim of expenditures in accordance with law after affording opportunity of being heard to the 19 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO assessee. We therefore set aside the orders of the AO and the DRP and restore the matter to the AO with the direction to re-adjudicate the issue of claim of expenditure incurred in respect of which payment has been made or is to be made to person referred to in clause (b) of sub section 2 of section 40A of the Act Accordingly, since we have restored the matter to the AO, we find no justification to deal with the other issues on merit. Accordingly, appeal of the assessee stand allowed for statistical purposes.\" 16. This decision of the coordinate bench was confirmed by the Hon'ble Karnataka High Court in ITA No. 392/2018 along with ITA No 170/2019 The relevant findings of the Hon'ble High Court read as under: \"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 Clause (1) of Section 92BA of the Act came to be omitted w.e.f 01.04.2019 by Finance Act 2014. As to whether omission would save the acts is an issue which is no more res-intigra in the light of authoritative pronouncement of Hon'ble Apex Court in the matter of KOHLAPUR CANESUGAR WORKS LTD. v. UNION OF INDIA reported in AIR 2000 SC 811 whereunder Apex Court has examined the effect of repeal of a statute visa-vis deletion/addition of a provision in an enactment and its effect thereof. The import of Section 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 37 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 Section 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 Section 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 the legislature is that the pending 20 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO proceedings shall not continue but fresh proceedings for the same purpose may be initiated under the new provision.\" 6. In fact, Coordinate Bench under similar circumstances had examined the effect of omission of sub-section (9) to Section 10B of the Act we.f 01.04.2004 by Finance Act, 2003 and held that there was no saving clause or provision introduced by way of amendment by omitting sub-section (9) of Section 10B. In the matter of GENERAL FINANCE CO vs. ACIT, which judgment has also been taken note of by the tribunal while repelling the contention raised by revenue with regard to retrospectivity of Section 92BA(1) of the Act. Thus, when clause (i) of Section 92BA having been omitted by the Finance Act, 2017, with effect from 01.07.2017 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 Assessing Officer under the effect of Section 92BI and reference made to the order of Transfer Pricing Officer-TOP under Section 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 M/S.GE Thermometrias India Private 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\" 15. Respectfully following the decision of the co-ordinate bench [supra] which has been upheld by the Hon'ble High Court of Karnataka [supra] we have no hesitation in holding that the cognizance taken by the Assessing Officer u/s 92CA is invalid and bad in law. Therefore, the consequential order passed by the TPO and DRP is also not sustainable in the eyes of law. 33. The analysis of various judgments of Hon’ble Supreme Court on the issue of application of any provision after its omission from statute is as under: 21 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO In the case of Rayala Corporation (P) Ltd. Vs. Director of Enforcement, New Delhi (1969) 2 SCC 412, the question which arose for consideration before the Hon’ble Supreme Court in this case was if Rule 132-A of the Defence of India Rules, 1952 (the DI Rules) was omitted by a notification of the Ministry of Home Affairs dated 30th March 1965, can a prosecution in respect of an offence punishable under that Rule be instituted on 17th March, 1968 when the Rule itself had ceased to exist? The Hon’ble Court brought to the fore Section 6 of the General Clauses Act, 1897 (the GC Act) for the purpose of distinguishing between the terms ‘repeal’ and ‘omission’ since Section 6 saves the power of prosecution and punishment for acts committed in a repealed legislation. The Hon’ble Court while differentiating the two terms held that: “Section 6 of the General Clauses Act cannot obviously apply on the omission of Rule 132-A of the DI Rules for the two obvious reasons that Section 6 only applies to repeals and not to omissions, and applies when the repeal is of a Central Act or Regulation and not of a Rule.” In the case of Kolhapur Canesugar Works Ltd. Vs. Union of India (2000) 2 SCC 536, the Hon’ble Court dealt with the definitions of ‘Central Act’, ‘enactment’, ‘regulation’, ‘rule’ as defined in Sections 3(7), 3(19), 3(50) and 3(51) respectively in the General Clauses Act and held that Section 6 only applies to Central Act and regulations. The Court further stated that — 22 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO “When the Legislature by clear and unambiguous language has extended the provision of Section 6 to cases of repeal of a ‘Central Act’ or ‘regulation’, it is not possible to apply the provision to a case of repeal of a ‘rule’….Section 6 is applicable where any Central Act or Regulation made after commencement of the General Clauses Act repeals any enactment. It is not applicable in the case of omission of a “rule”.” This judgment neither deals with the distinction between the terms omission and repeal, nor were any arguments regarding the same raised before the Bench. It simply deals with the applicability of Section 6 of the GC Act in context of the rules and upholds Rayala Corporation judgment. But reading between the lines of Kolhapur Canesugar judgment, it can be said that it makes no distinction between repeal and omission. In para 37 of the judgment, the Hon’ble Court states that — “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 Section 6(1). If a provision of a statute is unconditionally omitted without a saving clause in favor 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 Section 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.” From the aforementioned, it can be seen that the Hon’ble Court uses the term repeal, omission and deletion interchangeably. This is also inferable that in case a provision is omitted, Section 6 may change the position which is contrary to what Rayala Corporation judgment says. Rayala Corporation clearly states that Section 6 of GCA is only applicable to the 23 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO matters of repeal. So even though it upheld Rayala Corporation judgment, it did not distinctly lay out the distinction between the two terms. In the case of Fibre Boards (P) Ltd., Bangalore V. CIT, Bangalore (2015) 10 SCC 333, the matter was however finally dealt in length in a two-Judge Bench judgment of Fibre Boards (P) Ltd., Bangalore v. Commissioner of Income Tax, Bangalore, where the Hon’ble Court stated that the view in Rayala Corporation needs a reconsideration for omission of a provision results in abrogation or obliteration of that provision in the same way as it happens in repeal. The Hon’ble Court discussed the two terms as follows: “It is clear that even an implied repeal of a statute would fall within the expression \"repeal\" in Section 6 of the General Clauses Act. This is for the reason given by the Constitution Bench in M.A. Tulloch & Company that only the form of repeal differs but there is no difference in intent or substance. If even an implied repeal is covered by the expression \"repeal\", it is clear that repeals may take any form and so long as a statute or part of it is obliterated, such obliteration would be covered by the expression \"repeal\" in Section 6 of the General Clauses Act.” “we find that once it is held that Section 6 of the General Clauses Act would itself not apply to a rule which is subordinate legislation as it applies only to a Central Act or Regulation, it would be wholly unnecessary to state that on a construction of the word \"repeal\" in Section 6 of the General Clauses Act, \"omissions\" made by the legislature would not be included. Assume, on the other hand, that the Constitution Bench had given two reasons for the nonapplicability of Section 6 of the General Clauses Act. In such a situation, obviously both reasons would be ratio decidendi and would be binding upon a subsequent bench. However, once it is found that Section 6 itself would not apply, it would be wholly superfluous to further state that on an interpretation of the word \"repeal\", an 24 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO \"omission\" would not be included. We are, therefore, of the view that the second so-called ratio of the Constitution Bench in Rayala Corporation (P) Ltd. cannot be said to be a ratio decidendi at all and is really in the nature of obiter dicta.” The Hon’ble Court even declared that the two five-Judge Bench decisions (Rayala Corporation and Kolhapur Canesugar) were per incuriam as they did not consider Section 6-A of the GC Act and with this effect held that: “A reading of this section would show that a repeal by an amending Act can be by way of an express omission. This being the case, obviously the word “repeal” in both Section 6 and Section 24 would, therefore, include repeals by express omission. The absence of any reference to Section 6-A, therefore, again undoes the binding effect of these two judgments on an application of the ‘per incuriam’ principle.” In the case of Bhagwati Steel Rolling V. Commissioner of Central Excise (2016) 3 SCC 643, the same two-Judge Bench of Fibre Boards case, once again after a month decided the present issue in detail in Shree Bhagwati Steel Rolling v. Commissioner of Central Excise and held that delete and omit are used interchangeably, so that when the expression repeal refers to delete, it would necessarily take within its ken an omission as well. The Court further observed that all these expressions only go to form and not to substance. It also reiterated its stand in Fibre Boards case and held that: “This again does not take us further as this statement of the law in Rayala Corporation is no longer the law declared by the Supreme Court after the decision in the Fibre Boards case.” 25 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO In the case of Bhagat Ram Sharma V. Union of India, the Hon’ble Supreme Court in Bhagat Ram Sharma v. Union of India gave the same view and held that: “It is a matter of legislative practice to provide while enacting an amending law, that an existing provision shall be deleted and a new provision substituted. Such deletion has the effect of repeal of the existing provision. There is no real distinction between ‘repeal’ and an ‘amendment’.” In the case of Madhu Koda V. State (Delhi HighCourt) 2020 SCC MADHU KODA V. STATE (DELHI HIGH COURT) 2020 SCC OnLine Del 599 In Madhu Koda v. State, the Delhi High Court declined to grant the benefit of the amendment to Madhu Koda, convicted under the PC Act. The Hon’ble Court observed that: “Section 6(d) of the General Clauses Act is applicable and persons convicted of committing the offence of criminal misconduct under Section 13(1) (d) of the PC Act would not be absolved of their offences or the liability incurred prior to the PC Act coming into force.” 34. The facts of the case of the instant case are identical of the facts of the aforesaid cases wherein the coordinate bench of the tribunal has held that clause (i) of section 92BA has been omitted w.e.f. 01.04.2017 thus the same is to be considered as has never been part of the statute and accordingly no transfer pricing adjustment can be made for domestic specified transactions. This view gets support by the decision of Hon’ble Karnataka High Court in Texport Overseas (supra). Thus by respectfully following the judgements of Hon’ble Supreme Court as stated above and also the judgment of Hon’ble Karnataka High Court in the case of Taxport Overseas Pvt. Ltd. (supra) and judgements of various benches of ITAT as referred above, 26 ITA No.3054/Del/2022 Nymphea Developers Pvt. Ltd. vs. ITO we are of the considered view that in the present case reference was made to the TPO for determination of arm length price of specified domestic transaction with its AE after 01.04.2017 when the provisions of section 92BA(i) stood omitted from the statute therefore, no reference could be made to the TPO. As a result, the ground of appeal No. 2 of the assessee is allowed. 35. Since we have already allowed the legal ground taken by the assessee, the other grounds of appeal taken on merits become academic and thus not adjudicated. 36. In the result, appeal of the assessee is allowed. Order pronounced on 16/04/2025. Sd/- Sd/- (MAHAVIR SINGH) (MANISH AGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 16/04/2025 PK/Sr. Ps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "