TMI Blog2022 (7) TMI 1367X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the category of supervisory control. All these details were filed before the AO during assessment proceedings. These facts were not properly considered by the AO. Further, from the order of the CIT(A), it is seen that he had taken note of the notification issued by the Government of Karnataka and concluded that as per the notification issued, the assessee company engaged in the development of software is covered by the Industrial Disputes Act, 1947. Further it is not the case of the Revenue that the assessee did not fulfil the conditions extracted elsewhere in this order. Considering all those factual matters we do not find any infirmity in the order of CIT(A) according relief to the assessee. In fact he had clarified the relevant portions related to Industrial Disputes Act, 1947 and IT Act while granting relief to the asssessee The facts and circumstances under which the disallowance in made in the present year is similar with the assessment year 2100-12. Respectfully following the above view, we direct the Ld.AO to consider the claims in accordance with the observations of this Tribunal in assessee s own case in the preceding assessment years. - IT(TP)A No. 561/Bang/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y analysis which is functionally dissimilar to the Appellant. (corresponding to revised ground no. 2.4 original ground no. 2.4) 2.5 Rejecting the comparability analysis undertaken by the Appellant in its TP documentation in accordance with the provisions of the Act read with the Rules and confirming the comparability analysis as adopted by the learned TPO in the TP Order. Hence, the TPO erred in retaining Infosys Ltd' in its comparability analysis which is functionally dissimilar to the Appellant. (corresponding to revise ground no. 2.5 original ground no. 2.4) 2.6 Rejecting the comparability analysis undertaken by the Appellant in its TP documentation in accordance with the provisions of the Act read with the Rules and confirming the comparability analysis as adopted by the learned TPO in the TP Order. Hence, the TPO erred in retaining `Kals Information Systems Limited (Seg.)' in its comparability analysis which is functionally dissimilar to the Appellant. (corresponding to revised ground no. 2.6 original ground no. 2.4) 2.7 Rejecting the comparability analysis undertaken by the Appellant in its TP documentation in accordance with the provisions of the Act r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Other than Transfer Pricing Related 7. On the facts and in the circumstances of the case and in law, the learned DRP erred in confirming the action of the learned AO in not allowing deduction under section 8oJJAA of the Act amounting to INR 13,07,42,470/-. (corresponding to revised ground no. 7 original ground no. 7) 8. On the facts and in the circumstances of the case and in law, the learned AO /DRP erred in disallowing deduction under section 8oJJAA of the Act amounting to INR 13,07,42,470/. The learned AO and the learned Panel failed to appreciate the fact that deduction under section 8oJJAA of the Act is assessee specific and not undertaking / unit specific. (corresponding to revised ground no. 8 original ground no. 8) 9. On the facts and in the circumstances of the case and in law, the learned AO /DRP erred in invoking the provisions of section 8oA(4) in context of deduction claimed under section 8oJJAA for ioA units. (corresponding to revised ground no. 9 original ground no. 9) 10. On the facts and in the circumstances of the case and in law, the learned AO /DRP erred in ignoring the fact that the amendment made in the Finance Act 2013, restricting the ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er being illegal and void on account of being barred by limitation in terms of section 92CA(3A) r.w.s 153 of the Act, the action of the Assessing Officer in passing the draft assessment order dated 24 March, 2014 by invoking section 144C of the Act is without jurisdiction and thus all proceedings consequent to the draft assessment order are also illegal and bad in law and liable to be quashed. (corresponding to additional ground no. 16.2) 16.3 On the facts and in the circumstances of the case and in law, the transfer pricing order being illegal and void on account of being barred by limitation in terms of section 92CA(3A) r.w.s 153 of the Act, consequently, the final assessment order dated 29 January, 2015 is also barred by limitation as prescribed under section 153 of the Act, thus making the final assessment order illegal, bad in law, null and void and liable to be quashed. (corresponding to additional ground no. 16.3) 17. On the facts and in the circumstances of the case and in law, the learned AO /DRP ought to grant deduction under section 37(1) of the Income Tax Act, 1961 for Education Cess and Secondary and Higher Education Cess (collectively referred to as `Cess') ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of other benches of ITAT, without going into specific facts in the case of the assessee and without adducing the basis for arriving at the 0% cut off for RPT filter, in the case of the assessee. 6. On the facts and in the circumstances of the case the Disputes Resolution Panel erred in directing the AO to grant percentage of risk adjustment at .1 /0 to the average margin on account of risk level assumed by the assessee relying upon the decision of ITAT, Hyderabad bench in the case of DCIT Vs. Hello Soft Pvt. Ltd. (2013) without appreciating the fact that assessee is captive service provider with no risk at all since the services are rendered to the AEs only. 7. On the facts and in the circumstances of the case, the Dispute Resolution Panel erred in law in directing the AO to allow depreciation at the rate of 60% as against 15% allowed by AO on servers, switches, routers etc. without appreciating the fact that the servers, workstations equipments etc. cannot be classified under the head of asset Computer since there is no definition for computer system as explained in Explanation (a) to Clause (xi) of Sec.36(1) of the Act to be eligible for depreciation other than the one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of being barred by limitation in terms of section 92CA(3A) r.w.s 153 of the Act, the action of the Assessing Officer in passing the draft assessment order dated 24 March, 2014 by invoking section 144C of the Act is without jurisdiction and thus all proceedings consequent to the draft assessment order are also illegal and bad in law and liable to be quashed. 16.3. On the facts and in the circumstances of the case and in law, the transfer pricing order being illegal and void on account of being barred by limitation in terms of section 92CA(3A) r.w.s 153 of the Act, consequently, the final assessment order dated 29 January, 2015 is also barred by limitation as prescribed under section 153 of the Act, thus making the final assessment order illegal, bad in law, null and void and liable to be quashed. It is humble prayer of the Appellant that the transfer pricing order, draft assessment order and the final assessment order are bad in law, null and void and liable to be quashed. 4. It has been submitted that no new facts needs to be considered in order to dispose of the additional grounds raised by the assessee vide application dated 06.09.2021. It is submitted that the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re India Pvt. Ltd. vs. JCIT in W.P. No. 32699 of 2019, judgment dated 07.09.2020, High Court of Madras Decision of Coordinate Bench of this Tribunal in case of Swiss Re Global Business Solution India Pvt. Ltd. vs. DCIT in IT(TP)A Nos. 290 438/Bang/2015 vide order dated 30.12.2021 11. The Ld.CIT.DR submitted that the order passed by the TPO is not barred by the limitation and submitted that such illegality is capable of being cured and it is merely a case of irregularity in assessment proceedings by the Ld.TPO. 12. The Ld.CIT.DR submitted that assuming there is a delay in passing order u/s. 92CA(3), at best, it would be a curable defect. We have perused submissions advanced by both sides in the light of records placed before us. Firstly we look at the various provisions which are cited before us. 13. Section 92CA (3A) of the act reads as under: [(3A) Where a reference was made under sub-section (1) before the 1st day of June, 2007 but the order under subsection (3) has not been made by the Transfer Pricing Officer before the said date, or a reference under subsection (1) is made on or after the 1st day of June, 2007, an order under sub-section (3) may be made at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year commencing on the 1st day of April, 2009 or any subsequent assessment year and during the course of the proceeding for the assessment of total income, a reference under sub-section (1) of section 92CA-- (i) is made before the 1st day of July, 2012, but an order under sub-section (3) of that section has not been made before such date; or (ii) is made on or after the 1st day of July, 2012, the provisions of clause (a) shall, notwithstanding anything contained in the first proviso, have effect as if for the words two years , the words three years had been substituted.] [Extracted from taxmann.com as amended by the Finance Act 2012] 15. Therefore accordingly the order u/s 143(3) for AY 2010-11 should have been passed by 31.3.2014. 16. Based on the facts narrated above we hereby tabulate the relevant dates pertaining to the proceedings before the various authorities for the impugned AY. 1. Date of filing of return of income - 04.10.2010 2. 143(2) issued on - 26.08.2011 3. Reference by the Ld.AO made on - 23.07.2012 4. Time period within which 143(3) is to be passed as per sec. 153(1) 31.03.2014 5. Date by which order u/s. 92CA(3) wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rried out in this provision thereafter. Subsection (3A) of section 92CA containing the relevant time limit for the passing of the order by the TPO, reads as under : - (3A) Where a reference was made under sub- section (1) before the 1st day of June, 2007 but the order under subsection (3) has not been made by the Transfer Pricing Officer before the said date, or a reference under subsection (1) is made on or after the 1st day of June, 2007, an order under sub-section (3) may be made at any time before sixty days prior to the date on which the period of limitation referred to in section 153, or as the case may be, in section 153B for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires.. 6.3. It transpires from a reading of the above provision that where a reference is made to the TPO after 1.6.2007, an order under sub-section (3) may be made at any time before 60 days prior to the date on which the period of limitation referred to in section 153, or, as the case may be, in section 153B, for making the order of assessment or re-assessment, etc., expires. 6.4. The ld. DR vehemently contended that the use of the wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules made under this Act or, as the case may be, the rules in Schedule III, the market value of any asset is to be taken into account in such assessment, the Assessing Officer may refer the valuation of any asset to a Valuation Officer- (a) in a case where the value of the asset as returned is in accordance with the estimate made by a registered valuer if the Assessing Officer is of opinion that the value so returned is less than its fair market value; (b) in any other case, if the Assessing Officer is of opinion- (i) that the fair market value or the asset exceeds the value of the asset as returned by more than such percentage of the value of the asset as returned or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do. In Raj Paul Oswal vs. CWT (1988) 171 ITR 489 (P H), there arose a quarrel as to the meaning of the word `may used in section 16A in the context of making reference to the Valuation Officer. Settling the controversy, the Honble High Court held that the word `may' used in section 16A(1)(b), should be read as `shall'. It held that if the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limit as mandatory and not directory. As such, it is held that the TPO is bound by the given time limit for passing of his order. 6.9. Having held that the word `may in section 92CA(3A) should be read as `shall, we once again note that prior to the insertion of section 144C by the Finance Act, 2009, the time limit for completion of assessment was contained in section 153 and accordingly the time limit for the passing of the order by the TPO was also set out accordingly in section 92CA w.r.t. the time limit for the completion of assessment as per section 153. However, with the insertion of section 144C, the time limit for the completion of assessment, or in other words, for passing of the final assessment order, stood shifted to sub- sections (4) or (13) of section 144C and got detached from section 153. Along with this, passing of draft order also became mandatory, for which we have held above that the same is required to be passed within a reasonable time and it has got no relation with the time limit given in section 153. When the position is such that the draft order has to be passed independent of the time limit given in section 153, there appears some logic in not continuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al assessment order. However the passing of the time barred order by the TPO, which is again a mandatory procedure prescribed under the Act, would be a noncurable defect, having the consequence as if it was not passed. In such circumstances, though the final assessment order would be saved but the addition on account of transfer pricing adjustment arising from the determination of the ALP of the international transactions by the TPO as emanating from his time barred order, would be unsustainable. We hold accordingly and direct the deletion of addition on account of transfer pricing adjustment made in the final assessment order. 8. In view of our decision on the above legal ground, there remains no need to deal with the contentions raised before us on the merits of the addition on account of transfer pricing adjustment. In the present facts, the Ld.CIT.DR has in the written submission mentioned that the order of the Ld.TPO is passed on 29.01.2014 or 30.01.2014 but dated 31.01.2014. Then, the order of the Ld.TPO is not only irregular, wrong or illegal but is also null and void. Such action cannot be considered to be of any irregularity in the procedure, so as to get any kind o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g with this, passing of draft order also became mandatory, for which we have held above that the same is required to be passed within a reasonable time and it has got no relation with the time limit given in section 153. When the position is such that the draft order has to be passed independent of the time limit given in section 153, there appears some logic in not continuing with the time limit for the passing of the order by the TPO tagged with the time limit given in section 153. It has led to incoherence in the provisions. This position can be set right only with a suitable legislative amendment. 6.10 Having held that the time limit given in sub-section (3A) of section 92CA is mandatory for the passing of the order by the TPO, let us find out the time available with the TPO for the passing of his order. It has been noticed above that the time limit as per section 153(1) read with the third proviso and clause (viii) of the Explanation to the section, comes at 7th June, 2014. Period of 60 days prior to such time limit coming as per section 153, available with the TPO for passing his order, comes to an end on 8th April, 2014. As against this, the order was actually passed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of adjustment on account of transfer pricing adjustment arising from the determination of the ALP of the international transactions to be time barred order, cannot be sustained. All issues raised by assessee on the grounds of appeal as well as the additional grounds vide applications dated 13/03/2017 16/01/2018, and Additional Grounds 18-19 raised in application dated 06/09/2021 stands academic at this stage. Accordingly the additional grounds nos. 16.1 to 16.3 raised by the assessee vide application dated 06/09/2021 stands allowed. Consequentially appeal filed by the revenue stands dismissed as the issues alleged therein are against the relief granted to the assessee on the transfer pricing adjustment, 22. Addition made by the Ld.AO in respect of Corporate tax issues are alleged by the assessee in Ground no.7-10 and are adjudicated as under. 23. Ground no.7-8 is in respect of disallowance of deduction under section 80 JJAA of the Act, amounting to Rs.13,07,42,470/-. 24. Ground Nos.9-10 is in respect of disallowance under section 80JJAA in respect of additional wages paid to the employees working in 10 A units read with section 80A(4). 25. It is submitted that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly, the assessee is required to compute deduction u/s 80JJAA in respect of each eligible unit separately. While doing so, all the conditions stipulated would be applied taking each unit as the reference point, i.e The additional wages are required to be restricted by excluding the additional wages payable to 100 workmen in respect of each unit. There should be increase in workmen in each year to the extent of minimum 10% of the existing workmen at each unit level. It is required to be seen that the workmen employed for less than 300 days during the previous year under reference to be excluded from the computation of additional wages payable. In the instant case, the assessee has not considered each unit as a basis for the purpose of fulfillment of conditions enumerated above as per working given in Form 10DA. In a sense, the assessee has considered total number of employees/workmen working in all the units put together as basis in order to reckon 10% increase in workforce during the year under reference, inclusion of only 100 employees in respect of all the units for the purpose of quantifying the additional wages paid instead of considering 100 employees for incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10A of the Act, is profit linked. In so far as deduction u/s.80JJA is concerned, a look at sub-section (1) of the said section is required, which is reproduced below : 80JJAA(1) : Where the gross total income of an assessee, being an Indian company, includes any profits and gains derived from any industrial undertaking engaged in the manufacture of production of article or thing, there shall, subject to the conditions specified in sub-section (2)m be allowed a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed by the assessee in the previous year for three assessment years including the assessment year relevant to the previous year in which such employment is provided. A reading of the above sub-section would clearly show that the deduction is given on profits and gains derived from industrial undertaking engaged in manufacture of production of article or thing. It is only for quantification of the amount that 30% is applied. In our opinion the deduction is very much linked to the profits of the undertaking. We are therefore unable to accept this line of argument taken by the counsel. In the result, we hold that assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the conditions for claiming relief under s. 80JJAA. However, I find that the appellant has claimed deduction of Rs. 2,55,81,220 with reference to the additional wages of Rs. 8,52,70,736 which included the wages of Rs. 4,87,64,029 in respect of the new workmen employed during the year ended 31st March, 2000 relevant to the asst. yr. 2000-01. As there was no claim for relief under s. 80JJAA for the asst. yr. 2000-01, the relief in respect of the workers employed in asst. yr. 2000-01 cannot be considered for relief under s. 80JJAA in the asst. yr. 2001-02. As such the appellant will be entitled for relief under s. 80JJAA of Rs. 1,09,52,012 being 30 per cent of the additional wages of Rs. 3,65,06,707 (Rs. 8,52,70,736 Rs. 4,87,64,029) in respect of the new workmen employed during the previous year relevant to the asst. yr. 2001-02. Similarly, for asst. yr. 2002-03 the appellant has claimed deduction of Rs. 4,78,05,176 being 30 per cent of the wages of Rs. 1,59,30,588 which also included the wages of Rs. 4,38,68,182 pertaining to the new workers employed in the previous year 1999- 2000. For the reasons mentioned above the appellant is not entitled for relief under s. 80JJAA in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) according relief to the assessee. In fact he had clarified the relevant portions related to Industrial Disputes Act, 1947 and IT Act while granting relief to the asssessee which are extracted at pp. 5 and 6 of this order. After carefully considering the same, we are inclined to accept the reasons shown by the learned CIT(A). The learned CITDepartmental Representative could not assail the finding reached by the learned CIT(A) by bringing in any valid materials. The order of the CIT(A) is confirmed. It is ordered accordingly. There is no case for the Revenue that assessee had failed to file details of software engineers employed by it. In our opinion software engineers newly employed by it fell within the meaning of the word 'workmen'. 17. We are of the view that ground Nos.6 and 6.4 should be decided in the light of the directions given above by the AO afresh after affording opportunity of being heard to the assessee. 26. The facts and circumstances under which the disallowance in made in the present year is similar with the assessment year 2100-12. Respectfully following the above view, we direct the Ld.AO to consider the claims in accordance with the observati ..... 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