Monday, April 11, 2016

Amendments to transfer pricing provisions can be prospective only: Mumbai ITAT

Amendments to the anti-abuse legislations such as transfer pricing provisions can only be given prospective effect. Therefore, Explanation to Section 92B inserted by Finance Act, 2012, though stated to be clarificatory and effective from 1st April 2002, has to be necessarily treated as effective from the Assessment Year 2013-14
Issue
“Whether amendments to transfer pricing provisions can only be prospective and not retrospective?”
The Mumbai ITAT held as under-
1)    Transfer pricing provision is in the nature of a SAAR (specific anti-abuse rule), and that every anti-abuse legislation, whether SAAR (specific anti abuse rule) or GAAR (general anti-abuse rule), is a legislation seeking the taxpayers to organize their affairs in a manner compliant with the norms set out in such anti-abuse legislation.

2)    An anti-abuse legislation does not trigger the levy of taxes; it only tells you what behaviour is acceptable or what is not acceptable.

3)  What triggers levy of taxes is non-compliance with the manner in which the anti-abuse regulations require the taxpayers to conduct their affairs. In that sense, all anti-abuse legislations seek a certain degree of compliance with the norms set out therein. It is, therefore, only elementary that amendments to the anti-abuse legislations can only be prospective.
4)    It does not make sense that someone tells you today as to how you should have behaved yesterday, and then goes on to levy a tax because you did not behave in that manner yesterday.
5)   Therefore, Explanation to Section 92B inserted by Finance Act, 2012, though stated to be clarificatory and effective from 1st April 2002, has to be necessarily treated as effective from the Assessment Year 2013-14- [2016] 68 taxmann.com 141 (Mumbai - Trib.)


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