Omission of Section 92BA(i): The Goldbricks Transfer Pricing Ruling

Transfer pricing rules have long been central to fair taxation of deals between related parties. With the omission of Clause (i) of Section 92BA by the Finance Act, 2017, questions arose about its reach in ongoing and pending assessments on specified domestic transactions (SDTs). The recent ruling in Goldbricks Infrastructure Pvt. Ltd. vs. ACIT gives useful clarity here, and in particular on whether an adjustment can rest on an omitted clause.

This case matters to businesses because it asks whether an omitted clause can be the base for an assessment or an adjustment, where no saving clause keeps it alive. The judgment restates basic rules of law and shows how they apply in tax.

Legal Provisions and Background

Section 92BA was added by the Finance Act, 2012, to govern SDTs and to keep deals between related parties at arm's length. Among other things, Clause (i) of Section 92BA brought transactions under Section 40A(2)(b) of the Income Tax Act within its scope, and that section deals with payments to related parties.

The Finance Act, 2017, then omitted Clause (i) of Section 92BA with effect from April 1, 2017, so payments to related parties left the SDT net. The omission came with no saving clause. That left open the validity of adjustments in assessments made after that date.

Under settled rules, a provision omitted without a saving clause is treated as if it had never existed. The Supreme Court held this in Kolhapur Canesugar Works Ltd. vs. Union of India. On that rule, an omitted provision cannot hold up pending or fresh proceedings unless the law keeps it alive.

Facts of the Case

Goldbricks Infrastructure Pvt. Ltd. had entered into specified domestic transactions on interest payments to a related party at 18%. In the assessment, the Transfer Pricing Officer (TPO) benchmarked that rate at 15%. That made an upward adjustment of ₹80.07 lakh.

The assessment order came after April 1, 2017, by which time Clause (i) of Section 92BA had already gone. Goldbricks challenged the adjustment. Its case was that the omission made the adjustment invalid, since the clause was no longer in the statute.

The Revenue argued that the omission did not end open assessments, and that the adjustment held for transactions made while Clause (i) was in force.

ITAT’s Analysis and Judgment

The Income Tax Appellate Tribunal (ITAT), Raipur, looked at the rules on omitted provisions and how they bear on pending proceedings. The ITAT set out four points:

1. Effect of Omission of Clause (i) of Section 92BA

The Tribunal relied on the Supreme Court's judgment in Kolhapur Canesugar Works Ltd. That judgment held that a provision omitted without a saving clause is treated as if it never existed. The ITAT held that this applies to Clause (i) of Section 92BA, so it could not apply to any assessment or adjustment made after the omission. The TPO's adjustment then had no legal base.

2. Precedents Supporting the Principle

The ITAT referred to the Karnataka High Court's ruling in PCIT vs. Texport Overseas Pvt. Ltd., which held that an omitted provision could not hold up ongoing or future proceedings. In lining up with that ruling, the ITAT confirmed that changes in the law must be respected in full.

3. Jurisdictional Lapse by the Revenue

The Tribunal found that the TPO and Assessing Officer (AO) went past their jurisdiction in making adjustments under an omitted clause. Clause (i) was no longer part of the statute, so it could not be the base for any adjustment.

4. Invalidation of the Adjustment

The ITAT held that the upward adjustment of ₹80.07 lakh was invalid and deleted it, ruling for Goldbricks Infrastructure Pvt. Ltd.

Practical Implications of the Ruling

The judgment in Goldbricks Infrastructure Pvt. Ltd. has wide effects for taxpayers and for tax authorities. It shows how much rests on keeping to changes in the law, and on respecting the non-retrospective effect of an omitted clause unless the law keeps it alive.

For taxpayers, the ruling brings clarity and relief. Businesses with domestic transactions once classed as SDTs under Section 92BA(i) no longer have to benchmark those transactions under transfer pricing rules. That cuts the compliance load and removes the risk of arbitrary adjustments.

For tax authorities, the judgment marks the limits of their jurisdiction. An adjustment must rest on a provision that still exists, and reliance on an omitted section only brings needless litigation and reversals.

The judgment also backs the need for consistency across rulings, in line with earlier decisions of several high courts and tribunals. That makes tax administration predictable and fair, and builds taxpayer confidence.

Conclusion

The ruling in Goldbricks Infrastructure Pvt. Ltd. vs. ACIT shows how much a change in the law can do to a tax assessment and to a transfer pricing adjustment. By confirming that an omitted clause cannot hold up ongoing or future proceedings, the ITAT has given clarity to taxpayers and to professionals working through complex tax rules.

The judgment is a guide for businesses and tax practitioners. It stresses keeping track of changes to the law, and using settled rules to challenge unfair assessments. As transfer pricing keeps changing, the case shows that tax rules must respect both what the law intended and how business really works.