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2020 (1) TMI 1632 - ITAT CHENNAIEligible assessee u/s.144C - Reference to DRP - Necessity of passing of the draft assessment order - AO found that the assessee is not the beneficial owner of the royalties, hence, the assessment order is passed within the time frame consequent to the direction of the DRP - Assessee is aggrieved only by the observation of the Assessing Officer that the assessee is not a beneficial owner of the royalty - HELD THAT:- As passing of the draft assessment order itself is not warranted. Section 144C(1) of the Act mandates the AO to pass draft assessment order after first day of October 2009, in case there was any variation in the income or loss returned which is prejudicial to the interests of the assessee. In this case, there was no variation in the income or loss returned by the assessee. Admittedly, the income returned by the assessee was accepted by the AO. Therefore, there is no question of any prejudice to the assessee. Hence the Assessing Officer is not expected to pass any draft assessment order. As rightly submitted by Assessing Officer has to pass an order within 33 months from the end of the relevant assessment order. Admittedly 33 months from the end of the assessment order falls on 31.12.2016. In this case, admittedly the assessment order was passed on 28.09.2017, which is beyond the period of limitation. When the DRP was clear in their mind that the objection of the assessee could not be adjudicated, then there cannot be any question of making further observation with regard to beneficial ownership of the royalty. Therefore this Tribunal is of the considered opinion that the DRP has exceeded its jurisdiction in making such an observation with regard to beneficial ownership of the royalty. Therefore the observation with regard to beneficial ownership of the royalty cannot be a binding precedent in the subsequent years to come. Accordingly the finding / observation of the DRP that the assessee is not a beneficial owner of the royalty and the assessee is not eligible for the benefit of Indo Cyprus DTAA are set aside. However the issue whether the assessee is eligible for benefits of Indo Cyprus DTAA and whether the assessee is a beneficial owner of royalty or not are kept open to be decided by the appropriate authorities in the year in which the variations in the international transactions are to be made. With the above observation, the appeal of the assessee stands allowed.
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