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Writ Petition Dismissed: Delhi HC Upholds AO’s Statutory Authority in Transfer Pricing Reference


In a significant judgment, Infonox Software (P.) Ltd. v. DCIT[i], the Delhi High Court (‘DHC’) adjudicated a matter concerning the reference made by the assessing officer (‘AO’) to the transfer pricing officer (‘TPO’) under s. 92CA of the Income-tax Act, 1961 (‘Act’). The Infonox Software (P.) Ltd. (‘Petitioner’) challenged the reference on the grounds that the AO failed to consider Instruction No. 3/2016, dated 10.03.2016 (‘Instruction’), issued by the Central Board of Direct Taxes (‘CBDT’). This ruling addresses the procedural and substantive aspects of the AO’s power to make such a reference and the adequacy of remedies available under the Act.

Brief Facts

  • The Petitioner, in this case, filed a writ petition (‘WP’) seeking the quashing of a reference made by AO to the TPO under s. 92CA(1) of the Act and an order that disposed of the objections raised by the Petitioner against such reference.

  • The principal ground for challenging the reference was the AO's failure to consider the CBDT's Instruction No. 3/2016, particularly Paragraph 4.1., which outlines the role of the TPO and the methodology for determining the arm’s length price (‘ALP’).

  • The Petitioner argued that the AO did not take into account the risk parameters as framed, which should guide the exercise of the AO’s power.

  • Thus, the Petitioner invoked the court’s extraordinary jurisdiction under a. 226 of the Constitution of India ('Constitution'), challenging the procedural validity of the reference and the subsequent disposal of the objections by the AO.


  • The DHC dismissed the WP and found no justification in continuing the same, given that the Petitioner sought to invoke extraordinary jurisdiction under a. 226 of the Constitution at the preliminary stage of reference.

  • The DHC upheld that s. 92CA of the Act confers statutory power on the AO to make reference to the TPO. It held that the instructions and risk parameters issued by the CBDT are merely guidelines for the AO’s exercise of power, not binding mandates.

  • The DHC emphasized that the petitioner had adequate and efficacious remedies under the Act, which include the ability to challenge any order by the TPO, any Draft Assessment Order, any directions by the Dispute Resolution Panel (‘DRP’), and ultimately any decisions by the Income Tax Appellate Tribunal (‘ITAT’).

Our Analysis

The DHC's ruling underscores the judiciary's commitment to the procedural rigour embedded in the Act. It reiterates that the AO's reference to the TPO being a statutory exercise remains unaffected by the non-consideration of CBDT guidelines. This decision further highlights the importance of utilizing the procedural remedies prescribed under the Act before resorting to judicial intervention. The DHC's dismissal of the WP emphasizes the principle that extraordinary jurisdiction should not be invoked prematurely, particularly when adequate statutory remedies are available.

End Note

[i] [2024] 163 410 (Delhi) [22.05.2024]

Authored by Onam Singhal, Chartered Accountant at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.


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