The two said transactions were not reported by the assessee. Hence when the Assessing Officer made a reference on January 25, 2010, under Section 92CA(1) of the Income Tax Act (hereinafter referred as Act) to the Transfer Pricing Officer to determine the arm’s length price of certain other transactions entered into by the assessee with the Associated Enterprises, the said two transactions were not a part of the reference.

The Transfer Pricing Officer took suo motu cognizance of the said two transactions and held that though the sale of the centre business was between two domestic companies, it was pursuant to the share sale agreement with Vodafone International and hence would come under ‘international transaction’ under Section 92B(2) of the Act. He also held that the assignment of the call options was the transfer of a capital asset giving rise to capital gains. Accordingly, he made an adjustment of Rs 8,590 crore. The assessee did not raise any objection on the jurisdiction of the Transfer Pricing Officer to consider the two said unreferred transactions though it filed objections on the merits before the Dispute Resolution Panel.

During the pendency of the proceedings in Dispute Resolution Panel, the assessee filed a writ petition in the Bombay High Court alleging that the Transfer Pricing Officer had no jurisdiction to go beyond the reference made by the Assessing Officer, as Section 92CA(2A) of the Act which was inserted on June 1, 2011, to provide that the Transfer Pricing Officer can suo motu take cognizance of an unreferred international transaction is a substantive provision and cannot apply retrospectively to a reference made on January 25, 2010. It was contended that as there was an inherent lack of jurisdiction in the Transfer Pricing Officer and as the Dispute Resolution Panel did not have jurisdiction under Section 144C(8) of the Act to quash the Transfer Pricing Officer’s order, the writ petition was maintainable.

The High Court, without going into the merits of the case, dismissed the petition and held:

• The Transfer Pricing Officer had the jurisdiction to consider unreported and unreferred transactions in proceedings that were pending before him on June 1, 2011 as though Section 92CA (2A) of the Act (which came in effect from June 1, 2011) is a substantive provision and not a procedural one and confers fresh jurisdiction on Transfer Pricing Officer, it applies to all proceedings that are pending before the said date.
• Section 92CA (2B) of the Act is applicable not only in the cases where an assessee does not furnish a report under Section 92E in Form 3CEB and thereafter an international transaction comes to the notice of the Transfer Pricing Officer, but also when the furnished report does not include a particular international transaction.
• As the Assessing Officer is bound to pass an order under Section 92CA (4) “in conformity” with the “Transfer Pricing Officer’s order, he cannot revisit the Transfer Pricing Officer’s determination.
• The contention that the sale of the call centre business was between two domestic companies and hence, could not be regarded to be pursuant to the share sale agreement for purposes of Section 92-B(2), could not prima facie be accepted because the sale of the call centre business appeared to be foreshadowed by the shares sale agreement.
• Though Section 144C(8) refers to the DRP’s powers to only “confirm, reduce or enhance”, its powers are wider and it can decide upon the question as to whether the unreported transactions are international transactions or not or even whether what the Transfer Pricing Officer considered was a transaction at all. Hence, the alternative remedy of Dispute Resolution Panel was available to the assessee.

Though the High Court dismissed the petition, it pointed that in cases where the Transfer Pricing Officer lacks inherent jurisdiction to proceed under Section 92CA(2A)/(2B), a writ petition filed at the proper time i.e., at the outset or soon thereafter, may be entertained.

The decision of the High Court is commendable as it is in accordance with the set fundamental principle of judicial procedure according to which the court cannot exercise its extraordinary jurisdiction if the alternative remedy is available. The court has given a very clear message to the tax payers to be careful in approaching it under Article 226 of the Constitution as the discretionary power would be exercised by the court in a very limited and restricted manner, and it is only where extraordinary circumstances prevail that they would want to interfere.

However, the question remains over circumstances that would be considered ‘extraordinary’ for this purpose. In the above case, Vodafone’s argument that the department is exceeding its jurisdiction by bringing domestic transactions within the ambit of transfer pricing regulations and treating the assignment of call options as their ‘transfer’, sounds plausible as the transaction has been brought to tax which is not allowed by a plain reading of the Statute. It is arguable whether such action on the part of the department would entail intervention by the High Court under Article 226 or not.

In the midst of these arguments, however, the decision of the High Court puts across the message that writ petitions are not the methods of jumping the queue of legal authorities. Indeed a positive step.