TMI Blog2023 (4) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... .e. 31.03.2013 is to be computed? - Hon ble Madras High Court in case of M/s. Pfizer Healthcare India Pvt. Ltd. [ 2021 (2) TMI 1152 - MADRAS HIGH COURT ] while dealing with the issue held that for computing the period of 60 days, the last date as per section 153 should be excluded. Also see Honda Trading Corporation [ 2015 (9) TMI 846 - ITAT DELHI ] Computation period of 60 days given by the taxpayer cannot be faulted with on any ground because from 26.02.2022, the date of passing order of the AO, 60 days was to be computed by excluding the date of order i.e. 31.01.2021. So while excluding the date of passing assessment order i.e. 26.02.2022, the order was required to be passed by the Ld. TPO by 29.01.2021 whereas the impugned order has been passed on 31.01.2021 which is barred by limitation. Thus as per mandate of section 92CA (3) read with section 153 of the Act, impugned order passed by the ld. TPO is barred by limitation which was required to be passed by 29.01.2021 and as such is hereby quashed. Decided in favour of assessee. - ITA No.796/M/2022 - - - Dated:- 6-2-2023 - SHRI BASKARAN BR, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER For the Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 1448 of the Act which are compulsory in the process of law, Hence, the entire proceedings are invalid and bad in law. 7. In view of the above grounds the entire proceedings are bad in law as the same are not in line with the provisions of the Act, hence the orders passed as bad in law, void and should be quashed. Without prejudice to the above grounds of objection on maintainability of order, we wish to raise the below grounds of objection: Transfer Pricing grounds Reference to the TPO 8. erred in making a reference of the Appellant's case to the TPO, without complying to provisions of Section 92CA, thereby making a transfer pricing (TP ) adjustment of Rs.7,36.21,080 in respect of the international transaction of provision of freight forwarding services, which is bad in law; Rejection of economic analysis undertaken by the Appellant 9. erred in rejecting the transfer pricing analysis undertaken by the Appellant for the international transaction of provision of freight forwarding services in accordance with the provisions of the Act read with the Rules and imputing a transfer pricing adjustment by modifying the economic analysis for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income pertaining to the said expenses i.e. 'provision for bad debts written back and miscellaneous income have been considered as non-operating; 16 . without prejudice to the above , the learned AO/ TPO erred in passing rectification order under Section 154 of the Act for considering the issue of margin computation and treatment of items of income, without appreciating that the said issue is debatable in nature and cannot be rectified by passing order under section 154 of the Act, 17. erred in incorporating the rectification order dated 24 January 2022 passed by the learned TPO in the final assessment order dated 26 February 2022 passed pursuant to the DRP directions issued on 28 January 2022, whereas separate draft order was required to be passed, which makes enhancement made pursuant to rectification order as bad in law: Grant of economic adjustment 18. erred in not allowing Appellant the benefit of working capital adjustment which is required to be undertaken to account for the difference in working capital levels between the comparable companies and the Appellant; Incorrect consideration of losses to compute the revised assessed income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Interest paid on loan 53,07,534 10. Claims (payable) -7,28,820 11. Recovery of travel expenses 6,36,361 12. Training/Conference and personnel expenses 39,45,414 13. Claims (receivable) 29,410 14. Recovery of Travel Expenses 23,937 Total 624,38,58,482 3. Taxpayer in order to benchmark its international transactions applied CUP with OP/OC as the profit level indicator (PLI) and computed its margin as per TP study at (-) 0.15% OP/OC. Transfer Pricing Officer (TPO) after applying various filters finally selected 6 comparables having margin of (-)1.50% as against taxpayer's margin of (-)0.15% and thereby proposed the proportionate adjustment at Rs.4,19,53,631/-. 4. The taxpayer carried the matter before the Ld. DRP by way of filing objections which have been disposed of partly in favour of the taxpayer. Feeling aggrieved with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound by the taxpayer is allowed without prejudice to the merits of this case. 9. Since taxpayer has raised jurisdictional issue which goes to the roots of the case, we would decide the additional ground nos.18 19 first before going into the grounds raised on merits. 10. The Ld. A.R. for the taxpayer challenging the impugned order passed by the AO/DRP/TPO contended inter-alia that the order passed by the TPO dated 31.01.2021 was barred by limitation and as such consequent assessment order is also not sustainable being passed on the basis of time barred TP order; that the due date for passing the TP order under section 92CA(3) i.e. 60 days prior to the date prescribed under section 153 of the Act i.e. due date for passing TP order under section 92CA(3A) was 29.01.2021 whereas the impugned order has been passed on 31.01.2021 and relied upon Hon ble Madras High Court in case of M/s. Pfizer Healthcare India Pvt. Ltd. vs. JCIT WP No.32699/2019 judgment dated 07.09.2020. 11. However on the other hand the Ld. D.R. for the Revenue to repel the argument addressed by the Ld. A.R. for the taxpayer contended that the Ld. TPO has passed TP order in this case well within time on 31.01. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded since Section 92CA(3A) states before 60 days prior to the date on which the period of limitation referred to Section 153 expires . Excluding 31.12.2019, the period of 60 days would expire on 01.11.2019 and the transfer pricing orders thus ought to have been passed on 31.10.2019 or any date prior thereto. Incidentally, the Board, in the Central Action Plan also indicates the date by which the Transfer Pricing orders are to be passed as 31.10.2019. The impugned orders are thus, held to be barred by limitation. 17. In the case at hand Ld. A.R. for the taxpayer computed the limitation period under section 92CA(3A) for the year under consideration in tabulated form as under: Financial Year 2016-17 Assessment Year 2017-18 End of Assessment Year 31-03-2018 Due date for completion of assessment under Section 153(1) i.e. 21 months from the end of A.Y. 31-12-2019 Extension of 12 months in case of transfer pricing as per Section 153(4) of the Act 31-12-2020 Extension of 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 31.5.2014, which was time barred and, hence, the same should be annulled leading to the quashing of the final assessment order. In the opposition, the ld. DR supported the Revenue's stand. 6.2. We have heard the rival submissions and perused the relevant material on record. It has been noticed above that the provisions of section 92CA requiring the passing of the order by the TPO determining the ALP of the international transactions, came into being by the Finance Act, 2002. As per sub-section (3) of section 92C, the TPO is required to pass the order determining the ALP of the international transactions. No time limit was initially given for the passing of order by the TPO. It is only by the Finance Act, 2007, that sub-section (3A) was inserted providing time limit for the passing an order by the TPO. No amendment has been carried out in this provision thereafter. Sub-section (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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also subordinate to him'. Dispute arose in Sahara Hospitality Ltd. vs. CIT (2013) 352 ITR 38 (Bom) as to whether or not giving the assessee a reasonable opportunity of being heard before the transfer of case by the Chief Commissioner, in the backdrop of the use of the word `may' in the provision, be considered as mandatory. The Hon'ble Bombay High Court has held that the word `may' in section 127 should be read as `shall' and hence the granting opportunity to the assessee is mandatory. 6.7. Section 16 of the Wealth-tax Act, 1957 deals with the assessment of wealth. Section 16A having marginal note of `Reference to Valuation Officer' provides through sub-section (1) that : `For the purpose of making an assessment (including an assessment in respect of any assessment year commencing before the date of coming into force of this section) under this Act, where under the provisions of section 7 read with the rules 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vivid from the above discussion that the use of word `may' or `shall' in a provision is not conclusive of its mandatory or directory nature. One needs to go through the text of the provision and the context in which such a word has been used. 6.8. Reverting to section 92CA, we find that the Finance Act, 2007 inserted sub-section (3A) carrying the time limit of sixty days for passing of the order by the TPO before the expiry of time limit for completion of assessment by the AO u/s 153. Despite the use of the word `may', the time limit for passing the order by the TPO is mandatory, as in the otherwise situation of the TPO having been allowed more time by implication, say of three months or more, could at that time have frustrated the provisions of section 153 for the passing of the assessment order by the AO. Thus we have no hesitation in holding that the use of the word `may' in sub-section (3A) of section 92CA is to be construed as `shall', thereby making this time 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(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The effect of passing a null and void order is that it is considered as non est, meaning thereby, that it entails all the consequences of not having been passed at all and is ignored for all practical purposes. The Hon'ble Madras High Court in Vijay Television (P.) Ltd. vs. DRP (2014) 369 ITR 113 (Mad) considered a case in which the assessment order was directly passed without routing through draft order or DRP. The Hon'ble Court held it to be a non- curable defect and resultantly the assessment was quashed. It was held that when there is an omission on the part of the AO to follow the mandatory procedure prescribed under the Act, such an omission cannot be termed as a mere procedural irregularity and it cannot be cured. Extantly, we are confronted with a situation in which the draft order has been passed in time but the lapse has come in the passing of the order by the TPO. The consequence of the above scenario is that the passing of a valid and properly timed draft order cannot lead to the setting aside of the final 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 non-cu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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