The TPO has adjusted a domestic transaction that the Assessing Officer never referred to him and that I never reported in Form 3CEB. Did he have jurisdiction?
On the law as it stood, no. The Bombay High Court held that s.92CA(2A) and s.92CA(2B), which let the TPO take up a transaction not referred to him and a transaction not reported under s.92E, spoke only of international transactions; specified domestic transactions were conspicuously absent. For a specified domestic transaction the TPO could therefore study only what the Assessing Officer had referred, and the adjustment of Rs 57.54 crores on the demerger creditors was quashed. CAUTION: that gap has since been closed. Both sub-sections were amended by Act No. 15 of 2024 with effect from 1 April 2025 to cover specified domestic transactions as well.
Decided by the High Court (Akil Kureshi J and Sarang V. Kotwal J) on 2019-03-15, reported as Writ Petition No. 3386 of 2018 (Bombay High Court). It bears on section 92CA, section 92CA(1), section 92CA(2), section 92CA(2A), section 92CA(2B), section 92CA(3), section 92BA, section 92E, section 92 of the Income Tax Act 1961, in Assessment & Scrutiny and How Tax Law Is Read matters.
The jurisdictional architecture the Court sets out survives the amendment even though the outcome does not. The TPO's authority is derivative: it comes only from the Assessing Officer's reference under s.92CA(1), and sub-sections (2A) and (2B) exist precisely because, without them, he would have none over an unreferred transaction. That is why the boundaries of those sub-sections matter and why the Court read them strictly. For any year up to and including AY 2024-25 the holding is directly usable against an adjustment to an unreferred or unreported specified domestic transaction. From the year the 2024 amendment operates it is not, and the correct route becomes the one CBDT Instruction No. 3 of 2003 always prescribed and which the Court endorsed: the TPO who finds an unreferred transaction takes the matter up with the Assessing Officer so that a fresh reference is received, because the reference is transaction and enterprise specific. The Court also declined to entertain the second adjustment in writ, holding that the statutory scheme of assessment, appeal and revision must be worked through — so choose your forum before filing.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner, a wholly owned subsidiary of Bennett, Coleman and Company Ltd, distributes television channels for the Times group. With effect from 1 April 2014 it demerged one of its business undertakings into the parent. For AY 2015-16 it filed a return on 28 November 2015 declaring total income of Rs 5.90 crores and reported two domestic transactions totalling about Rs 52.19 crores. The Assessing Officer referred only the reported transactions to the TPO. By order dated 15 October 2018 under s.92CA(3) the TPO made adjustments totalling Rs 84.09 crores — about Rs 26.55 crores on subscription fees, which had been referred, and about Rs 57.54 crores on payment of creditors in the demerger process, which the petitioner had not reported as a specified domestic transaction and which the Assessing Officer had not referred. The petitioner challenged the order in writ on the ground that the TPO had no jurisdiction over the unreferred transaction, and separately attacked the subscription fee adjustment on procedural grounds. Sub-section (2A) was inserted by the Finance Act 2011 with effect from 1 June 2011 and sub-section (2B) by the Finance Act 2012 with retrospective effect.
The TPO's order was quashed in so far as it made the adjustment towards payment of creditors in the demerger process; the remainder of the order was left undisturbed and the challenge to the subscription fee adjustment was left to the statutory route. In relation to a specified domestic transaction the TPO can undertake a transfer pricing study only in relation to transactions referred to him.
The Court reproduced s.92CA(2), (2A) and (2B) and observed that the common feature of sub-sections (2A) and (2B) is that they take within their sweep only an international transaction, the reference to any specified domestic transaction being conspicuous by its absence. That omission was deliberate: the Finance Act 2012, which extended Chapter X to specified domestic transactions, did not add them to those sub-sections. Absent those deeming provisions the TPO derives jurisdiction only from a reference under s.92CA(1); the deeming fiction exists precisely because without it he would have no authority over an unreferred transaction. The Court read its own earlier decision in Vodafone India Services as confirming that before 1 June 2011 the TPO had no power to examine an international transaction absent a reference, sub-section (2A) having conferred fresh jurisdiction. It relied on CBDT Instruction No. 3 of 2003, which states that the TPO's role begins after a reference is received and is limited to the transactions referred, and that where he finds other transactions he must take the matter up with the Assessing Officer so that a fresh reference is received, the reference being transaction and enterprise specific. Although the assessee had not reported the demerger transaction, possibly on a bona fide view of its character, the statute provided the remedy of a fresh reference. On the second adjustment the Court declined to bypass the scheme of assessment, appeal and revision in writ jurisdiction.
In relation to a specified domestic transaction, the TPO can undertake transfer pricing study only in relation to those transactions which are referred to him under sub-section (1) of Section 92C of the Act.
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Handle my notice → Ask a CA on WhatsAppOn the law as it stood, no. The Bombay High Court held that s.92CA(2A) and s.92CA(2B), which let the TPO take up a transaction not referred to him and a transaction not reported under s.92E, spoke only of international transactions; specified domestic transactions were conspicuously absent. For a specified domestic transaction the TPO could therefore study only what the Assessing Officer had referred, and the adjustment of Rs 57.54 crores on the demerger creditors was quashed. CAUTION: that gap has since been closed. Both sub-sections were amended by Act No. 15 of 2024 with effect from 1 April 2025 to cover specified domestic transactions as well. This was decided by the High Court (Akil Kureshi J and Sarang V. Kotwal J) and bears on section 92CA, section 92CA(1), section 92CA(2), section 92CA(2A), section 92CA(2B), section 92CA(3), section 92BA, section 92E, section 92 of the Income Tax Act 1961. It is reported as Writ Petition No. 3386 of 2018 (Bombay High Court). The jurisdictional architecture the Court sets out survives the amendment even though the outcome does not. The TPO's authority is derivative: it comes only from the Assessing Officer's reference under s.92CA(1), and sub-sections (2A) and (2B) exist precisely because, without them, he would have none over an unreferred transaction. That is why the boundaries of those sub-sections matter and why the Court read them strictly. For any year up to and including AY 2024-25 the holding is directly usable against an adjustment to an unreferred or unreported specified domestic transaction. From the year the 2024 amendment operates it is not, and the correct route becomes the one CBDT Instruction No. 3 of 2003 always prescribed and which the Court endorsed: the TPO who finds an unreferred transaction takes the matter up with the Assessing Officer so that a fresh reference is received, because the reference is transaction and enterprise specific. The Court also declined to entertain the second adjustment in writ, holding that the statutory scheme of assessment, appeal and revision must be worked through — so choose your forum before filing. If it applies to you, the first step is this: Establish the year first: for AY 2024-25 and earlier the sub-sections did not reach specified domestic transactions; from the operation of Act No. 15 of 2024 with effect from 1 April 2025 they do.
The petitioner, a wholly owned subsidiary of Bennett, Coleman and Company Ltd, distributes television channels for the Times group. With effect from 1 April 2014 it demerged one of its business undertakings into the parent. For AY 2015-16 it filed a return on 28 November 2015 declaring total income of Rs 5.90 crores and reported two domestic transactions totalling about Rs 52.19 crores. The Assessing Officer referred only the reported transactions to the TPO. By order dated 15 October 2018 under s.92CA(3) the TPO made adjustments totalling Rs 84.09 crores — about Rs 26.55 crores on subscription fees, which had been referred, and about Rs 57.54 crores on payment of creditors in the demerger process, which the petitioner had not reported as a specified domestic transaction and which the Assessing Officer had not referred. The petitioner challenged the order in writ on the ground that the TPO had no jurisdiction over the unreferred transaction, and separately attacked the subscription fee adjustment on procedural grounds. Sub-section (2A) was inserted by the Finance Act 2011 with effect from 1 June 2011 and sub-section (2B) by the Finance Act 2012 with retrospective effect. The matter was decided on 2019-03-15 by the High Court (Akil Kureshi J and Sarang V. Kotwal J). On those facts the High Court held as follows. The TPO's order was quashed in so far as it made the adjustment towards payment of creditors in the demerger process; the remainder of the order was left undisturbed and the challenge to the subscription fee adjustment was left to the statutory route. In relation to a specified domestic transaction the TPO can undertake a transfer pricing study only in relation to transactions referred to him.
The Court reproduced s.92CA(2), (2A) and (2B) and observed that the common feature of sub-sections (2A) and (2B) is that they take within their sweep only an international transaction, the reference to any specified domestic transaction being conspicuous by its absence. That omission was deliberate: the Finance Act 2012, which extended Chapter X to specified domestic transactions, did not add them to those sub-sections. Absent those deeming provisions the TPO derives jurisdiction only from a reference under s.92CA(1); the deeming fiction exists precisely because without it he would have no authority over an unreferred transaction. The Court read its own earlier decision in Vodafone India Services as confirming that before 1 June 2011 the TPO had no power to examine an international transaction absent a reference, sub-section (2A) having conferred fresh jurisdiction. It relied on CBDT Instruction No. 3 of 2003, which states that the TPO's role begins after a reference is received and is limited to the transactions referred, and that where he finds other transactions he must take the matter up with the Assessing Officer so that a fresh reference is received, the reference being transaction and enterprise specific. Although the assessee had not reported the demerger transaction, possibly on a bona fide view of its character, the statute provided the remedy of a fresh reference. On the second adjustment the Court declined to bypass the scheme of assessment, appeal and revision in writ jurisdiction. In the words reproduced by the source cited on this page: "In relation to a specified domestic transaction, the TPO can undertake transfer pricing study only in relation to those transactions which are referred to him under sub-section (1) of Section 92C of the Act." The decision followed or applied Vodafone India Services Pvt Ltd v. Union of India & Ors. (Bombay High Court) — relied on; Calcutta Discount Co Ltd v. ITO — relied on for the scope of writ jurisdiction over an act without jurisdiction; CIT v. Chhabil Dass Agarwal — relied on for declining writ jurisdiction over the second adjustment; CBDT Instruction No. 3 of 2003 and Instruction No. 15 of 2015 — relied on.
It was decided by the High Court on 2019-03-15 and is reported as Writ Petition No. 3386 of 2018 (Bombay High Court). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 92CA, section 92CA(1), section 92CA(2), section 92CA(2A), section 92CA(2B), section 92CA(3), section 92BA, section 92E, section 92, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The TPO's order was quashed in so far as it made the adjustment towards payment of creditors in the demerger process; the remainder of the order was left undisturbed and the challenge to the subscription fee adjustment was left to the statutory route. In relation to a specified domestic transaction the TPO can undertake a transfer pricing study only in relation to transactions referred to him. It arises in Assessment & Scrutiny and How Tax Law Is Read matters, on section 92CA, section 92CA(1), section 92CA(2), section 92CA(2A), section 92CA(2B), section 92CA(3), section 92BA, section 92E, section 92 of the Income Tax Act 1961, and was decided by Akil Kureshi J and Sarang V. Kotwal J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Obtain the Assessing Officer's letter of reference and check it transaction by transaction — the reference is transaction and enterprise specific. Where an adjustment relates to a transaction outside the reference, plead absence of jurisdiction rather than arguing the arm's length price, and cite Instruction No. 3 of 2003 for the proposition that the TPO's route was to seek a fresh reference. Choose the forum with care: the Court quashed the jurisdictional limb in writ but sent the merits of the other adjustment back to the statutory route. Do not treat a bona fide belief that a transaction need not be reported as an answer on jurisdiction — the Court accepted the belief may have been bona fide but rested the outcome on the statutory boundary.
Superseded by amendment. Superseded prospectively, not retrospectively. The department's live s.92CA page carries footnotes 6, 7, 8 and 9 recording that in sub-section (2A) the words 'any other international transaction [other than an international transaction' were substituted, that 'if such other international transaction is an international transaction' was substituted, and that in sub-section (2B) 'such transaction is an international transaction' was substituted, all by Act No. 15 of 2024 with effect from 1 April 2025, so that both sub-sections now read 'international transaction or specified domestic transaction'. For assessment years to which the pre-amendment text applies the judgment remains directly in point; for years governed by the amended text it does not. The separate cut-off in s.92CA(2C), barring use of sub-section (2B) to assess or reassess under s.147 or to enhance under s.154 for any assessment year whose proceedings were completed before 1 July 2012, is unchanged. I did not check whether any special leave petition was filed against this judgment or how it has been treated by other High Courts. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
A ?type=print fetch of this judgment returned twenty-three neatly numbered paragraphs that were paraphrase, not the Court's words; nothing from that fetch is quoted here. The facts, the statutory extracts, the 'Conspicuous by absence' reasoning, the extract from Instruction No. 3 of 2003 and the operative sentences were re-retrieved verbatim through /docfragment/ across four separate fetches. One date in the paraphrased fetch could not be verified: it dated Instruction 3 of 2003 as 20 May 2003 in one place, while the verbatim fragment of the judgment reads 'In an instruction 3 of 2003 dated 20.5.2013' — the year in the judgment as reproduced appears to be a typographical error for 2003. I have not reproduced the paragraph numbers of the operative holding because I could not verify them verbatim. The judgment as reproduced refers to "sub-section (1) of Section 92C" and to "Sub-section (2A) and (2B) of Section 92C"; the sub-sections discussed are those of s.92CA, and the reference to s.92C appears to be a slip. The quotation is reproduced as printed. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The TPO's order was quashed in so far as it made the adjustment towards payment of creditors in the demerger process; the remainder of the order was left undisturbed and the challenge to the subscription fee adjustment was left to the statutory route. In relation to a specified domestic transaction the TPO can undertake a transfer pricing study only in relation to transactions referred to him.
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