Aztec Software & Technology Services Ltd vs. ACIT (Karnataka High Court)

5 Member Special Bench Transfer Pricing verdict affirmed without examining merits

In Aztec Software vs. ACIT 294 ITR (AT) 32 / 107 ITD 41, a 5 member Special Bench judgement of the Tribunal answered several questions such as (a) Whether it is a legal requirement under the provisions contained in Chapter X of the Income-tax Act, 1961 that the Assessing Officer should prima facie demonstrate that there is tax avoidance before invoking the relevant provisions?, (b) Whether it is a legal requirement under the provisions contained in Chapter X of the Income-tax Act, 1961 that the Assessing Officer should prima facie demonstrate that any one or more of the circumstances set out in clauses (a), (b), (c) and/or (d) of sub-section (3) of section 92C of the said Act are satisfied in the case of any assessee, before his case is referred to the Transfer Pricing Officer under sub-section (1) of section 92CA for computation of the arm’s length price?, (c) Whether the Assessing Officer is required to record his opinion/reason before seeking the previous approval of the Commissioner under section 92CA(1) of the Income-tax Act, 1961?, (d) Whether before making a reference to the Transfer Pricing Officer under section 92CA(1) read with section 92C(3) of the Income-tax Act, 1961, is it is a condition precedent that the Assessing Officer shall provide to the assessee an opportunity of being heard?, (e) Is the approval granted by the Commissioner under section 92CA(1) justiciable ? If so, can it be called in question in appeal on the ground that it was accorded without due diligence or proper application of mind?, (f) What is the legal effect of Instruction No. 3 of 2003 dated 20-5-2003 issued by the Central Board of Direct Taxes on Transfer Pricing matters?, (g) What is the role of the Assessing Officer after receipt by him of the order passed by the Transfer Pricing Officer under section 92CA(3) of the Income-tax Act, 1961 etc. After laying down the principles of law, the matter was remanded to the AO. On appeal by the assessee against the principles of law laid down by the Special Bench, HELD by the High Court dismissing the appeal:

We notice that in this appeal, the assessee has raised as many as 30 substantial questions of law. In our considered opinion, it is not really necessary to consider any of these questions, as in the first instance, the order of the Tribunal is not at all adverse to the interest of the appellant but is one to set aside the order passed by the Lower Appellate Authority and remanding the matter. We notice that all questions are left open, for redetermination by the Lower Appellate Authority.

8. In a matter which is remanded for a reexamination, no question of law arises for examination by the High Court in an appeal under Section 260-A of the Act, unless any part of the remand order suffers from a patent illegality or is an order perverse in nature, and is left to the Lower Appellate Authority to redetermine.

9. in this view of the matter, we do not propose to examine this appeal on merits any further but dismiss the appeal without expressing any opinion on any of the aspects and leaving it open to the assessee to urge all such contentions as are available to the assessee before the authority to which the matter is remanded.