Vodafone India Service (P.) Ltd. v. UOI

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The Tax Publishers2013 TaxPub(DT) 2842 (Bom-HC) : (2013) 359 ITR 0133 : (2013) 262 CTR 0133 : (2014) 227 TAXMAN 0001 : (2013) 093 DTR 0129 Vodafone India Service (P.) Ltd. v. UOI, Ministry of Finance, New Delhi INCOME TAX ACT, 1961 --Transfer pricing--Computation of ALPInternational transactions not referred by AO--Two unreported transactions were the sale of the call centre business by petitioner to HWP (India) and alleged assignment of call options by assessee to V. Holdings. TPO determined ALP of these unreported transactions suo motu in exercise of powers under section 92CA(2A) and/or (2B). Assessee challenged jurisdiction of TPO to determine ALP on various grounds of these transactions. *Held:* Not acceptable. TPO could have taken suo motu cognizance of any transactions without it being expresslly referred to him by AO for relevant assessment year since there was a return filed which disclosed some international transactions. Sub-section (2A) entitles the TPO to consider any international transaction whether reported or not by the assessee in Form 3CEB. Sub-section (2B), however, entitles the TPO to consider only unreported international transactions, i.e., international transactions not referred in Form 3CEB irrespective of whether or not the Form 3CEB was filed reporting other international transactions. Thus, this retrospective effect of sub-section (2B) is only in respect of certain international transactions, viz., unreported transactions and to reported transactions not referred by the AO to the TPO. [Para 57] Thus, in the present case the TPO had jurisdiction to consider suo motu the two unreported and unreferred transactions under sub-section (2A) as well as under sub-section (2B) of section 92CA. In the result, therefore, the contention that the TPO had no jurisdiction to consider the said international transactions is rejected. [Para 61] Income Tax Act, 1961, Section 92C Income Tax Act, 1961, Section 92CA(2A) CONSTITUTION OF INDIA, 1950 --Writ petition--MaintainabilityExistence of alternative remedy--On availability of alternative remedy, writ petition would not be maintainable. The petitioner's remedy against the order of the TPO is not before the AO. The AO must make the assessment in conformity with the TPO's order. The AO is not entitled to either question the TPO's order in any respect or to make the assessment contrary thereto. However, the assessee is entitled to challenge not merely the determination of the arm's length price, but also the TPO's conclusion that a particular transaction is an international transaction before the DRP. Alternatively, the assessee can wait till the final assessment order is passed without raising any objections upon the receipt of the report from the TPO and challenge the same before the CIT(A). The petitioner, therefore, has an alternate remedy of challenging all aspects of such a matter either before the DRP or before the CIT(A). The alternate remedy is, therefore, clearly there. In fact, from the order of the DRP or the CIT, the petitioner is entitled to file a further appeal before the ITAT. These appellate authorities are entitled to go into all questions of law and of fact. It is not suggested that either the CIT or the ITAT cannot consider the question as to whether a transaction is an international transaction or not. [Para 94] The TPO lacked inherent jurisdiction to proceed to consider a transaction suo moto, the petitioner's invocation of the extraordinary jurisdiction of this Court would be justified, although even in that case, the court would always be entitled to exercise it's discretion in relegating it to the alternate remedy. However, this Court would be justified in exercising its discretion in entertaining a writ petition on the question as to whether the TPO lacked inherent jurisdiction to exercise powers under sub-sections (2A) and (2B) of section 92CA only if it is invoked at the appropriate time, viz., at the outset or soon thereafter. In any event, in such matters there would be no question of exercising jurisdiction after the TPO has made the order or has proceeded to a considerable extent in the determination of the arm's length price. [Para 102] The petitioner, therefore, appeared before the DRP not voluntarily, but without prejudice to its rights and contentions in this Writ Petition. When a litigant appears in such proceedings without prejudice to its rights and contentions and the Court expressly permits him to do so, it would be a travesty of justice for the Court to thereafter refuse to entertain the Writ Petition merely on that ground. [Para 118] In view thereof, it follows that the petition ought not to be dismissed merely because the DRP passed its order and the AO has now passed the final assessment order. This was also pursuant to the orders of this Court and without prejudice to the petitioner's rights. [Para 119] In this case, court does not decline to exercise jurisdiction because the impugned order of the TPO and the draft order of the AO have merged in the order of the DRP and the final assessment order of the AO respectively. The orders were passed in proceedings the petitioner pursued without prejudice to its rights and pursuant to the orders of this Court. Court decline to interfere in view of the fact that the TPO's lack of jurisdiction does not render the further proceedings void as in certain other cases. Take, for instance, a case where the first court or authority lacked subject matter jurisdiction to decide a question and on account thereof, the proceedings are null and void ab initio and throughout. The appellate authority would also lack inherent jurisdiction over the subject matter of the proceedings. The appellate forum can in such cases only declare the entire proceedings to be non-est for want of subject-matter jurisdiction and, therefore, bring them to an end. The appellate authority would have jurisdiction to decide the issue of jurisdiction alone. The findings of the appellate forum on merits would be non-est in such cases. In such cases, compelling a party to challenge or further challenge the order before the authorities under the Act by way of appeal, revision or review would be futile and an unnecessary waste of time, money and resources. There is, however, a fundamental difference between such proceedings and proceedings relating to transfer pricing under Chapter X and section 144C of the IT Act. This distinction establishes the parameters for determining whether an assessee ought to be left to avail the alternate remedy under the Act or whether he ought to be permitted to invoke the extra-ordinary jurisdiction of this Court under article 226 in transfer pricing cases. Court has already indicated the difference to the effect that the further proceedings under Chapter X do not come to an end on account of a TPO's lack of jurisdiction. [Para 130] In the result, court is unable to agree with assessee's contention that the TPO's lack of jurisdiction to consider the transaction relating to the sale of the call centre business/BTA is so obvious and clear as to entitle the petitioner to invoke the extra-ordinary writ jurisdiction of this Court instead of being compelled to file an appeal before the ITAT. It cannot be said that he 'clutched at jurisdiction' or that his decision with respect to the jurisdictional facts was 'so patently and loudly obtrusive' that it has left on it 'an indelible stamp of infirmity or vice which cannot be obliterated or cured on appeal or revision' and, therefore, warrants interpretation in a writ petition. There are several issues of fact and of law on every material aspect which must be considered by the authorities under the Act. This is not a fit case for invoking the extra-ordinary jurisdiction under article 226. [Para 195] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 2842 (Bom-HC) : (2013) 359 ITR 0133 : (2013) 262 CTR 0133 : (2014) 227 TAXMAN 0001 : (2013) 093 DTR 0129

Vodafone India Service (P.) Ltd. v. UOI, Ministry of Finance, New Delhi

INCOME TAX ACT, 1961

--Transfer pricing--Computation of ALPInternational transactions not referred by AO--Two unreported transactions were the sale of the call centre business by petitioner to HWP (India) and alleged assignment of call options by assessee to V. Holdings. TPO determined ALP of these unreported transactions suo motu in exercise of powers under section 92CA(2A) and/or (2B). Assessee challenged jurisdiction of TPO to determine ALP on various grounds of these transactions. Held: Not acceptable. TPO could have taken suo motu cognizance of any transactions without it being expresslly referred to him by AO for relevant assessment year since there was a return filed which disclosed some international transactions.

Sub-section (2A) entitles the TPO to consider any international transaction whether reported or not by the assessee in Form 3CEB. Sub-section (2B), however, entitles the TPO to consider only unreported international transactions, i.e., international transactions not referred in Form 3CEB irrespective of whether or not the Form 3CEB was filed reporting other international transactions. Thus, this retrospective effect of sub-section (2B) is only in respect of certain international transactions, viz., unreported transactions and to reported transactions not referred by the AO to the TPO. [Para 57] Thus, in the present case the TPO had jurisdiction to consider suo motu the two unreported and unreferred transactions under sub-section (2A) as well as under sub-section (2B) of section 92CA. In the result, therefore, the contention that the TPO had no jurisdiction to consider the said international transactions is rejected. [Para 61]

Income Tax Act, 1961, Section 92C

Income Tax Act, 1961, Section 92CA(2A)

CONSTITUTION OF INDIA, 1950

--Writ petition--MaintainabilityExistence of alternative remedy--On availability of alternative remedy, writ petition would not be maintainable.

The petitioner's remedy against the order of the TPO is not before the AO. The AO must make the assessment in conformity with the TPO's order. The AO is not entitled to either question the TPO's order in any respect or to make the assessment contrary thereto. However, the assessee is entitled to challenge not merely the determination of the arm's length price, but also the TPO's conclusion that a particular transaction is an international transaction before the DRP. Alternatively, the assessee can wait till the final assessment order is passed without raising any objections upon the receipt of the report from the TPO and challenge the same before the CIT(A). The petitioner, therefore, has an alternate remedy of challenging all aspects of such a matter either before the DRP or before the CIT(A). The alternate remedy is, therefore, clearly there. In fact, from the order of the DRP or the CIT, the petitioner is entitled to file a further appeal before the ITAT. These appellate authorities are entitled to go into all questions of law and of fact. It is not suggested that either the CIT or the ITAT cannot consider the question as to whether a transaction is an international transaction or not. [Para 94] The TPO lacked inherent jurisdiction to proceed to consider a transaction suo moto, the petitioner's invocation of the extraordinary jurisdiction of this Court would be justified, although even in that case, the court would always be entitled to exercise it's discretion in relegating it to the alternate remedy. However, this Court would be justified in exercising its discretion in entertaining a writ petition on the question as to whether the TPO lacked inherent jurisdiction to exercise powers under sub-sections (2A) and (2B) of section 92CA only if it is invoked at the appropriate time, viz., at the outset or soon thereafter. In any event, in such matters there would be no question of exercising jurisdiction after the TPO has made the order or has proceeded to a considerable extent in the determination of the arm's length price. [Para 102] The petitioner, therefore, appeared before the DRP not voluntarily, but without prejudice to its rights and contentions in this Writ Petition. When a litigant appears in such proceedings without prejudice to its rights and contentions and the Court expressly permits him to do so, it would be a travesty of justice for the Court to thereafter refuse to entertain the Writ Petition merely on that ground. [Para 118] In view thereof, it follows that the petition ought not to be dismissed merely because the DRP passed its order and the AO has now passed the final assessment order. This was also pursuant to the orders of this Court and without prejudice to the petitioner's rights. [Para 119] In this case, court does not decline to exercise jurisdiction because the impugned order of the TPO and the draft order of the AO have merged in the order of the DRP and the final assessment order of the AO respectively. The orders were passed in proceedings the petitioner pursued without prejudice to its rights and pursuant to the orders of this Court. Court decline to interfere in view of the fact that the TPO's lack of jurisdiction does not render the further proceedings void as in certain other cases. Take, for instance, a case where the first court or authority lacked subject matter jurisdiction to decide a question and on account thereof, the proceedings are null and void ab initio and throughout. The appellate authority would also lack inherent jurisdiction over the subject matter of the proceedings. The appellate forum can in such cases only declare the entire proceedings to be non-est for want of subject-matter jurisdiction and, therefore, bring them to an end. The appellate authority would have jurisdiction to decide the issue of jurisdiction alone. The findings of the appellate forum on merits would be non-est in such cases. In such cases, compelling a party to challenge or further challenge the order before the authorities under the Act by way of appeal, revision or review would be futile and an unnecessary waste of time, money and resources. There is, however, a fundamental difference between such proceedings and proceedings relating to transfer pricing under Chapter X and section 144C of the IT Act. This distinction establishes the parameters for determining whether an assessee ought to be left to avail the alternate remedy under the Act or whether he ought to be permitted to invoke the extra-ordinary jurisdiction of this Court under article 226 in transfer pricing cases. Court has already indicated the difference to the effect that the further proceedings under Chapter X do not come to an end on account of a TPO's lack of jurisdiction. [Para 130] In the result, court is unable to agree with assessee's contention that the TPO's lack of jurisdiction to consider the transaction relating to the sale of the call centre business/BTA is so obvious and clear as to entitle the petitioner to invoke the extra-ordinary writ jurisdiction of this Court instead of being compelled to file an appeal before the ITAT. It cannot be said that he 'clutched at jurisdiction' or that his decision with respect to the jurisdictional facts was 'so patently and loudly obtrusive' that it has left on it 'an indelible stamp of infirmity or vice which cannot be obliterated or cured on appeal or revision' and, therefore, warrants interpretation in a writ petition. There are several issues of fact and of law on every material aspect which must be considered by the authorities under the Act. This is not a fit case for invoking the extra-ordinary jurisdiction under article 226. [Para 195]