TMI Blog2022 (9) TMI 1236X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order framed in Assessment Years 2007-08 and 2010-11 to 2015-16 are barred by limitation and accordingly, the impugned assessment orders are liable to be quashed as void ab initio. This additional ground is, accordingly, allowed. Determination of income - consideration for use of brand [ie for Royalties ] in India as liable td tax Tat 40% as Business Income under Article 7 instead of being liable to tax as Royalties [at 15%] under Article 13 of DTAA between UK and India - assessee moved an application u/r 29 of the ITAT Rules requesting for admission of additional evidences - HELD THAT:- It is true that the entire assessment has been based on the reading of the trade mark license agreement dated August 08, 2002. It is equally true that supplementary trade mark licence agreement dated April 04, 2013 changes the color of the entire transaction. Such an agreement which goes to the root of the matter cannot be brushed aside lightly. Therefore, in the interest of justice and fair play and as contended by the ld. DR, we deem it fit to restore the entire quarrel to the file of the Assessing Officer. AO is directed to consider the agreement dated April 04, 2013 and decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer erred in passing a draft assessment order without appreciating that there was no variation in income returned by the appellant and, therefore the impugned order passed by the Assessing Officer is void ab initio and, therefore, is liable to be quashed. 8. In all the captioned Assessment Years, the assessee has also moved an application for admission of additional evidences except in Assessment Years 2013-14, 2014-15 and 2015-16. 9. The ld. DR strongly objected to the additional evidences furnished by the assessee stating that additional evidences should have been furnished by way of a separate Paper Book. 10. A perusal of our record shows that this contention of the ld. DR is factually incorrect because as per order sheet entry dated 24.10.2011, this Bench has noted that the assessee has filed additional evidences by way of a separate paper book alongwith application u/r 29 of the ITAT Rules. 11. We further find that the assessee has, for the convenience of the Bench and the ld. DR, rearranged additional evidences and merged them in a common Paper book, though filed separately as per Rules on 24.10.2011. Additional evidences are accordingly placed on recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 144C and 92B of the Act where the assessee had entered into international transactions or it is a foreign company being an eligible assessee as defined in Section 144C of the Act in respect of his income/loss, the Assessing Officer has made variation which is prejudicial to the interest of such assessee, the Assessing Officer is mandatorily required to pass proposed order of assessment, which is termed as Draft Assessment order . 20. Provisions of section 144C as they stood at the relevant point of time of the captioned Assessment Years read as under: The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. (15) For the purposes of this section,- (a) Dispute Resolution Panel means a collegium comprising of three Commissioners of Income-tax constituted by the Board54 for this purpose; (b) eligi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The controversy is thus confined to the question as to what will be the rate on which income returned by the assessee is to be taxed. While the assessee has claimed taxation @ 10% under article 11(2) of the India Cyprus DTAA, the Assessing Officer has declined the said treaty protection on the ground that the assessee was not beneficial owner of the said interest, and, accordingly, brought the income is to tax@ 40% thereof. There is, quite clearly, no variation in the quantum of income. The question whether it was a case in which the Assessing Officer could have issued the draft assessment order, on the facts of this case, needs to be examined in the light of provisions of Section 144C(1) which provides that, The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward5 a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee [Emphasis, by underlining, supplied by us]. The assessee befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, is required on these grievances at this stage. 25. This view also finds support from the Delhi Bench in the case of Silver Bells 189 ITD 678. The relevant findings read as under: 8. Provision of section 144C( 1) read as under:- 144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation [84a Words in the income or loss returned omitted by the Finance Act, 2020, w.e.f. 1-4-2020] which is prejudicial to the interest of such assessee. 9. A perusal of the aforesaid provisions shows that the Assessing Officer shall forward the draft of the proposed order if he proposes to make any variation in the income or loss returned. The aforestated proposal in the draft assessment order clearly show that the Assessing Officer did not intend to make any variation in the income of the assessee, therefore, the assessment order should have been framed as per the provisions of section 153 r. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14-Aug-13 - 31-Mar-l 3 30-Oct-13 2011-12 30-Sep-11 28-Jan-14 15-Oct-14 - 31-Mar-l 4 25-Nov-14 2012-13 12-Sep-12 19-Feb-15 - 29-Apr-15 31-Mar-l 5 30-Apr-15 2013-14 04-Sep-13 28-Mar-16 - 08-Apr-16 31-Mar-l 6 08-Apr-16 2014-15 15-Sep-14 07-Dec-16 - 27-Dec-16 31-Dec-16 06-Jan-17 2015-16 26-Aug-15 03-Nov-17 - 13-Dec-17 31-Dec-17 18-Dec-17 29. The Hon'ble High Court of Madras in the case of Roca Bathroom Products Pvt Ltd in Writ Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within one month from the end of the month in which the directions are received. It goes without saying that if no objections are filed by the Assessee to the draft order, the assessing officer has to pass the final assessment order based on the draft order within one month from the end of the month in which the period for filing the objection had expired as per section 144C(4). As per the proviso to Section 92CA (3A), if the time limit for the TPO to pass an order is less than 60 days, then the remaining period shall be extended to 60 days. This implies that not only the time frame is mandatory but also the TPO has to pass an order within 60 days. Further, the extension in the proviso referred above also automatically extends the period of assessment to 60 days as per the second proviso to Section 153. That apart, but for the reference to the TPO, the time limit for completing the assessment would only be 21 months from the end of the assessment year. It is only if a reference has been made during the course of assessment and is pending, the department gets another 12 months as per second proviso to Section 153 (1) and under Section 153(4) after amendment. In Section 153(2A), a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 31.12.2014. The Learned Judge relying upon the findings in the batch of cases which was decided first and rendered additional findings, which have been extracted in paragraphs 10 and 11 above, has allowed the writ petitions holding that the time limit under Section 153 (2A) was not adhered to and in any case, the proceedings have not been concluded within a reasonable time. 20. As rightly contended by the learned senior counsels and affirmed by the Learned Judge, the DRP proceedings is a continuation of assessment proceedings. To put it further, it is a part of assessment proceedings, once the objections are filed and under section 144C (12) a period of 9 months is prescribed, within which, directions are to be issued by the DRP, failing which any directions are to be treated as otiose. As seen from the timeline discussed in the earlier paragraphs, the original assessment proceedings are to be completed within 21 months and the additional time of 12 months is granted when proceedings before TPO is pending. The TPO has to pass orders before 60 days prior to the last date. Then 30 days time is given to the assessee to file their objection before the DRP and the DRP is given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the time, will not indefinitely extend the time and can have no impact on the time lines. It is an inter-department arrangement and it cannot defeat the rights of the assessee. 22. Insofar as the non-obstante clause in Section 144C(13) is concerned, we concur with the view of the Learned Judge. The exclusion of applicability of Section 153 or Section 153 B is for a limited purpose to ensure that dehors larger time is available, an order based on the directions of the DRP has to be passed within 30 days from the end of the month of receipt of such directions. The section and the sub-section have to be read as a whole with connected provisions to decipher the meaning and intentions. At this juncture it would be useful to refer to the following decisions: (i) Sultana Begum v. Prem Chand Jain, (1997) 1 SCC 373 at page 381: 11. The statute has to be read as a whole to find out the real intention of the legislature. 12. In Canada Sugar Refining Co. v. R. [1898 AC 735 : 67 LJPC 126] , Lord Davy observed: Every clause of a statute should be construed with reference to the context and other clauses of the Act, so as, as far as possible, to make a consistent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. State of Karnataka [(1992) 1 SCC 335 : 1992 SCC (L S) 286 : (1992) 19 ATC 507 : AIR 1992 SC 81] .) Such a construction has the merit of avoiding any inconsistency or repugnancy either within a section or between two different sections or provisions of the same statute. It is the duty of the court to avoid a head-on clash between two sections of the same Act. (See Sultana Begum v. Prem Chand Jain [(1997) 1 SCC 373 : AIR 1997 SC 1006]). (iii) Franklin Templeton Trustee Services (P) Ltd. v. Amruta Garg, (2021) 6 SCC 736 : 2021 SCC OnLine SC 88 at page 752: 17. The concept of absurdity in the context of interpretation of statutes is construed to include any result which is unworkable, impracticable, illogical, futile or pointless, artificial, or productive of a disproportionate counter-mischief [ See Bennion on Statutory Interpretation, 5th Edn., p.969.] . Logic referred to herein is not formal or syllogistic logic, but acceptance that enacted law would not set a standard which is palpably unjust, unfair, unreasonable or does not make any sense. [Bennion on Statutory Interpretation, 5th Edn., p. 986.] When an interpretation is beset with practical difficulties, the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the DRP within 9 months as contemplated under Section 144C (12) of the Income Tax Act, (c) Irrespective of whether the DRP concludes the proceedings and issues directions or not, within 9 months, the Assessing officer is to pass orders within the stipulated time, (d) In matter involving transfer pricing, upon remand to DRP, the Assessing officer is to pass a denova draft order and the entire proceedings as in the original assessment, would have to be completed within 12 months, as the very purpose of extension is to ensure that orders are passed within the extended period, as otherwise the extension becomes meaningless. (e) The outer time limit of 33 months in case of reference to TPO under Section 153, would not refer to draft order, but only to final order and hence, the entire proceedings would have to be concluded within the time limits prescribed, (f) The non-obstante clause would not exclude the operation of Section 153 as a whole. It only implies that irrespective of availability of larger time to conclude the proceedings, final orders are to be passed within one month in line with the scheme of the Act, (g) When no period of limitation is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived 80% directly or indirectly from the assessee and the Assessing Officer came to the conclusion that Shri Anmol Dar constituted the dependent agent PE [DAPE] of the assessee in terms of Article 5(4) of the Indo-UK DTAA. 36. Taking a leaf out of the TDS certificate filed with the return of income, the Assessing Officer found that the assessee has received total payment of Rs. 1,75,42,082/- which is 50% of the amount receivable by it as per the terms of the agreement. 37. The Assessing Officer estimated 85% of the total receipts and treated balance 15% business income of the assessee as taxable @ 40%. 38. The assessee challenged the assessment before the ld. CIT(A) but without any success. 39. Before us, the ld. counsel for the assessee, as mentioned elsewhere, moved an application u/r 29 of the ITAT Rules requesting for admission of additional evidences. 40. The ld. counsel for the assessee vehemently stated that additional evidences sought to be filed are relevant for deciding the issue of existence of PE. The ld. counsel for the assessee brought to our notice trade mark licence agreement dated 04.04.2013 which is said to be effective from 09.08.2002. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire transaction. 47. Such an agreement which goes to the root of the matter cannot be brushed aside lightly. Therefore, in the interest of justice and fair play and as contended by the ld. DR, we deem it fit to restore the entire quarrel to the file of the Assessing Officer. 48. The Assessing Officer is directed to consider the agreement dated April 04, 2013 and decide the issue afresh after giving reasonable and adequate opportunity of being heard to the assessee. Thus, ITA No. 3115/DEL/2010 is allowed for statistical purposes. 49. In the result, the appeals of the Revenue are disposed of as under: ITA No. 3115/DEL/2009 [A.Y 2005-06) - Allowed for statistical purposes ITA No. 2609/DEL/2011 [A.Y 2007-08) - Allowed ITA No. 654/DEL/2014 [A.Y 2010-11) - Allowed ITA No. 189/DEL/2015 [A.Y 2011-12) - Allowed ITA No. 4461/DEL/2016 [A.Y 2012-13) - Allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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