TMI Blog2023 (2) TMI 1183X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, the impugned final assessment orders dated 26.02.2014 is barred by limitation and is hereby quashed. - SHRI AMIT SHUKLA, JM AND SHRI S. RIFAUR RAHMAN, AM For the Appellant : Shri Percy Pardiwala/ Shri Ketan Ved /Shri Ninad Patade, Ld. ARs For the Respondent : Ms. Vatsalaa Jha, Ld. DR ORDER Per Amit Shukla, Judicial Member: The aforesaid appeal has been filed by assessee against the order dated 26.02.2014 passed u/s 143(3) r.w.s. 144C(13) in pursuance of the direction given by Ld. DRP on 30.12.2013 for AY 2009-10. 2. In various grounds of appeal, the assessee has challenged various transfer pricing adjustment as well as various corporate grounds which are as under:- Transfer Pricing Grounds 1. Imputing interest on delayed receipt from debtors 2. Imputing interest on the share application money paid to the subsidiaries by the Appellant. 3. Imputing guarantee commission with respect to the corporate guarantees provided by the Appellant to its Associated Enterprises Corporate Tax Grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following chronologies of events are relevant, which are as under:- Sr. No. Particulars Relevant date/period Assessment Year involved 2009-10 1. Period of limitation for making an order of assessment as per section 153 of the Act. Two years from the end of the Assessment Year 2. Extension of period of limitation in case reference is made u/s. 92CA of the Act. 12 months 3 Assessment proceedings should be completed on / or before 31.03.2013 4 Date prior to the date on which period of limitation expires (stated in Sr. No. 3 above) 30.03.2013 5 60 day period expires on March = 30 days (excluding 31.03.2013) February = 28 days January = 2 days 30.01.2013 6. Transfer pricing order u/s 92CA(3) of the Act ought to be passed on /or before 29.01.2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the returned income stands quashed and ought to be deleted. 9. On the other hand, Ld. DR relied on the orders passed by the revenue authorities and submitted that merely because transfer pricing order is delayed by a day, that does not mean TP adjustments should be quashed or the entire assessment order. 10. We have heard the rival submissions and also perused the relevant findings given the impugned order as well as material placed on record on the aforesaid legal issue. The facts in brief are that assessee is engaged in the business of manufacturing and trading of pharmaceuticals. Since there is international transaction with AE, the reference was made by the AO in respect to the transaction in Form 3CEB to the Addl. Commissioner of Income Tax (TP-II(4) vide letter dated 23.06.2011. The TPO vide his order dated 30.01.2013 had made TP adjustment of Rs. 65,78,98,712/- on account of following adjustments:- Sr. No. Nature Para No. of TPO Amount 1) Interest on delayed export receivable Para 7.4 Rs. 1,40,01,089/- 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below:- 29. The provisions of Section 144C prescribe mandatory time limits both pre and post the stage of passing of a transfer pricing order. Assessments involving transfer pricing issues are different and distinct from regular assessments and the intention of Legislature is to fast track such assessments. Bearing in mind the specialized nature of such assessments, a separate set of Officers attend to the framing of assessments and the DRP has been constituted for redressal of disputes involving TP issues, in a timely fashion. In this scheme of things, I am unable to accept the submission that the period of 60 days stipulated for passing of an order of transfer pricing, is only directory or a rough and ready guideline. This argument is rejected. 30. Now, coming to the question of how the 60 day period is to be computed, the critical question would be whether the period of 60 days would be computed including the 31st of December or excluding it. Section 153 states that no order of assessment shall be made at any time after the expiry of 21 months from the end of the assessment year in which the income was first assessable. The submission of the revenue is to the effect that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be made in time before 60 days prior to the date on which period of limitation referred to section 153 . The word may be‟ means that the time limit for passing of the order by the TPO u/s 92CA(3) should be adhered in consonance with overall time limit provided in section 153 and AO should have 60 days for passing the draft assessment order or the final assessment order as the case may be. The limitation provided in section 153 has to be taken into consideration while interpreting the word may be‟ as provided in sub section 3A of section 92CA. Here in this case, AO had 60 days for passing of the order after the TPO has passed the order from 31st January 2016. 19. Regarding the judgment of Hon‟ble Madras High Court in the case of M/s. Pfizer Healthcare India Private Limited (supra), he submitted that though this issue has been decided in favor of the assessee that the 60 days have to be counted from one day prior to the date on which the period of limitation referred to section 153 expire, i.e., 60 days have to be calculated from 30th March and not from 31st March. However, overall provision of section 92CA (3A) r.w.s. 153 has to be given a harmonious const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire corporate grounds also cannot be sustained. In support, he relied on the judgment of ITAT, Mumbai Bench in the case of Fedex Express Transportation and Supply Chain Services (India) Pvt. Ltd. vs. DCIT (2019) 108 taxman.com 542 (Mum-Trib) and drew our attention para 19 of the said order which reads as under:- 19. Before we proceed further, it would be appropriate to briefly touch upon the scheme of reference to Dispute Resolution Panel contained in Sec. 144C of the Act. Prior to the introduction of Sec. 144C of the Act by the Finance (no.2) Act, 2009 with retrospective effect from 01.04.2009, if assessee was aggrieved by any of the additions/disallowances made by the Assessing Officer, an appeal would lie to the Commissioner (Appeals) under Section 246A of the Act. However, a new scheme of dispute resolution was brought into the Act by insertion of Sec. 144C of the Act in the context of eligible assessee‟ prescribed therein. Sec. 144C of the Act contains 15 subsections and provides for a mechanism for dispute resolution, powers of Dispute Resolution Panel, definition of Dispute Resolution Panel, eligible assessee, etc. In terms of the schematic arrangement presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking, a company‟ is understood to mean an Indian company or any institution, association or body corporate registered/incorporated/declared‟. It is also notable that the expression Indian company‟ has also been defined in Sec. 2(26) of the Act to mean a company which is formed and registered under the Companies Act, 1956‟. Therefore, on a conjoint reading of the above provisions, it is justifiably canvassed by the assessee before us that qua the instant case, the eligible assessee‟ under Section 144C of the Act has necessarily to be a person‟ which is an Indian company formed and registered under the Companies Act, 1956 in whose case the transfer pricing order has been passed proposing a variation. Notably, in the instant case, the erstwhile entity, FEIPL, was an Indian company, but it ceased to exist on 01.10.2013 pursuant to the scheme of amalgamation sanctioned by the Hon'ble Bombay High Court vide order dated 05.07.2013, i.e. before the date of passing of the transfer pricing order by the TPO under Section 92CA(3) of the Act in the name of FEIPL. Thus, as on the date of passing of order by the TPO on 30.01.2015, FEIPL did not exist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer before the said date, or a reference under sub-section (l) 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: 24. Ergo, the TPO can pass an order u/s 92CA of the Act at any time before 60 days prior to the date on which period of limitation referred to u/s 153 expires. Thus 60 days have to be counted prior to the date of last date of limitation u/s 153. 25. Section 153 of the Act as applicable for the AY 2012-13 reads as under:- '153. (i) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of (a) two years from the end of the assessment year in which the income was first assessable; or (b) one year from the end of the financial year in which a return or a revised return relating to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, is filed under sub-section (4) or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 153. xxxx 26. Further, the general interpretation by resorting to the meaning conveyed under the General Clauses Act cannot be adopted while interpreting 92CA (3A), because, the context and the language employed therein are completely different and it is pertinent to note that the words from and to have not been used. Even the employment of the General Clauses Act will not aid the Revenue, the reason of which will be disclosed a little later in this judgment. But, right now, it is relevant to consider the scope of the word to . 27. The word to is used as a preposition or as an adverb. In popular sense, it is used to express the direction in which a person, thing, or time travels. The flow of direction is to be gauged from the preceding word or words used, like prior to or upto . Keeping the same in mind, if we look at the wording of Section 92CA (3A), we cannot accept the contention of the Revenue that the time to be reckoned is from 31.12.2019 and not 30.12.2019 as has been rightly done by the learned Judge. 28. The word date in section 92CA(3A) would indicate 31.12.2019. But the preceding words prior to would indicate that for the purpose of calculati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions of this Court would suffice. (See : Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd. v. Custodian of Vested Forests [1990 Supp SCC 785 : AIR 1990 SC 1747] , Union of India v. Deoki Nandan Aggarwal [1992 Supp (1) SCC 323 : 1992 SCC (L S) 248 : (1992) 19 ATC 219 : AIR 1992 SC 96] , Institute of Chartered Accountants of India v. Price Waterhouse[(1997) 6 SCC 312] and Harbhajan Singh v. Press Council of India [(2002) 3 SCC 722 : JT (2002) 3 SC 21] .) 29. The language employed is simple. 31.12.2019 is the last date for the assessing officer to pass his order under Section 153. The TPO has to pass order before 60 days prior to the last date. The 60 days is to be calculated excluding the last date because of the use of the words prior to and the TPO has to pass order before the 60th day. In the present case, the word before used before 60 days would indicate that an order has to be passed before 1/11/2019 i.e on or before 31.10.2019 as rightly held by the Learned Judge. 30. Even considering for the purpose of alternate interpretation, the scope of Section 9 of the General Clauses Act, it is to be noted that an inverted calculation of the period of limitation takes place here. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issued under sub-section (5) of Section 144C of the Act, the Assessing Officer shall in conformity with the directions complete the assessment proceedings. It goes without saying that if no objections are filed by the Assessee either before the DRP or the assessing officer to the determination by the TPO, section 92CA(4) would come into operation. Therefore, it is very clear that once a reference is made, it would have an impact on the assessment unless a decision on merits is taken by DRP rejecting or varying the determination by the TPO. 33. It would only be apropos to note that as per 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 is the time frame mandatory, but also that the TPO has to pass an order within 60 days. 34. 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. 35. Also, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns to conclude the assessment, is the consequence or the effect that follows, if an order is not passed in time. When an order is passed in time, the procedures under 144C and 92CA(4) are to be followed. When the determination is not in time, it cannot be relied upon by the assessing officer while concluding the assessment proceedings. 39. Upon consideration of the judgments and the scheme of the Act, we are of the opinion that the word may used therein has to be construed as shall and the time period fixed therein has to be scrupulously followed. The word may is used there to imply that an order can be passed any day before 60 days and it is not that the order must be made on the day before the 60th day. The impact of the proviso to the sub-section clarifies the mandatory nature of the time schedule. The word may cannot be interpreted to say that the legislature never wanted the authority to pass an order within 60 days and it gave a discretion. Therefore, the learned Judge rightly held the orders impugned in the writ petitions as barred by limitation, as the Board, in the Central Action Plan, has specified 31.10.2019 as the date on which orders are to be passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3). The TPO order admittedly has been passed after the limitation has expired and consequently, the same has to be treated as bad in law and is hereby quashed. Thus, in such a situation it has to be reckoned, as if there is no TPO order and consequently, the entire transfer pricing adjustment proposed by the TPO on the international transaction becomes non-est and liable to be quashed. 13. Thus, if we apply the aforesaid decision which is based on the judgment of Hon ble Madras High Court in the case of Pfizer Healthcare India Pvt. Ltd. vs. JCIT (supra), we find that the order of TPO was passed u/s 92CA (3) on 30.01.2013 is clearly barred by limitation as the same could have been passed on or before 29.01.2013. Thus, the TPO order dated 30.01.2013 is quashed as barred by limitation. 14. Now coming to the second issue that once the TP order is held to be nullity or quashed on the ground of barred by limitation, then could AO have passed the draft assessment order treating it to be as eligible assessee. The similar issue has also been considered in the case of Atos India Pvt. Ltd. (supra) wherein it has been observed and analysed as under:- 30. Now another issue which crops ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word means indicates that the definition eligible assessee for the purposes of Section 144C(15)(b) is a hard and fast definition and can only be applicable in the above two categories. Ostensibly, the expression 'eligible assessee' has a restrictive meaning as it covers only the two types of persons mentioned above. 33. Further, considering the express language employed in defining the term eligible assessee‟ under section 144C(15)(b) and section 144C(1) in forwarding a draft assessment order to such an eligible assessee‟ only, is plain, clean and unambiguous; the said statute must be interpreted strictly without there being any role of equity or intendment‟ in such interpretation. 34. In the present case, the assessee is an Indian company and, thus, a resident in India under section 6 of the Act. Thus, the second condition under section 144C (15)(b)(ii) of the Act for qualifying as an eligible assessee‟ is not applicable. As regards the first condition under section 144C(15)(b)(i) of the Act, the same applies where there is a transfer pricing variation arising as a consequence of the order of the Ld. TPO under section 92CA(3) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to pass the final assessment order u/s 143(3) of the Act on that day. Having said that, the draft assessment order passed by the Ld. AO under the provisions of law is also illegal and void ab initio which deserves to be quashed. 36. It is a well-settled proposition now that a draft order passed in case of an ineligible assessee‟ vitiates the entire exercise of assessment and all subsequent proceedings are liable to be quashed has been held in the following cases: (i) Honda Cars India Ltd. v. Dy. CIT [2016] 67 taxmann.com 29/240 Taxman 707/382 ITR 88 (Delhi); (ii) Pankaj Extrusion Ltd. v. Asstt. CIT [2011] 10 taxmann.com17/198 Taxman 6 (Guj.) (iii) FedEx Express Transportation and Supply Chain Services (India) (P.) Ltd. v. DCIT [2019] 108 taxmann.com 542 (Mumbai - Trib.) In case of FedEx Express, the relevant portion of which has been reproduced in the foregoing paras, wherein the Tribunal has expressed the provision and finally deleted the corporate grounds also. We accordingly follow the same reasoning here in this case also. 37. Similarly, in a reverse case scenario, i.e., where a draft assessment order was required to be passed on an 'eligi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the consequent demand notice was also set aside. The decision of the Andhra Pradesh High Court was affirmed by the Supreme Court by the dismissal of the Revenue's SLP (C) [CC No. 16694/2013] on 27th September, 2013. 40. The various judgments which have been cited before us that 144C(1) will not apply and there is no variation in the return of income which cannot be disputed. Thus in our view, Ld. AO to acquire a legal and valid jurisdiction for the purpose of forwarding a draft assessment order at the first instance under section 144C(1) of the Act, it is necessary that the assessee must be an eligible assessee‟ within the restrictive and strict four corners of how the said expression has been defined under section 144C(15)(b) of the Act. Here, once it is held that there is no legal or valid transfer pricing order under section 92CA(3) of the Act, there remains no variation arising as a consequence thereto and the case of the assessee, being an Indian company, falls outside the definition of eligible assessee‟ as defined under section 144C(15)(b) of the Act. Thus, the Ld. AO cannot be said to acquire a legal or a valid‟ jurisdiction under section 144C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of Virtusa Consulting Services Put. Ltd [TS-474-HC2022(MAD)] dated 9 June 2022, it has been held in context of period of limitation under section 153 of the Act as under: 17. Further, it is to be noted that the different timelines to be adhered by the TPO, Assessing Officer to pass a draft order, assessee to file their objections, DRP to issue directions and the assessing officer to pass final order, would commence only on a reference to the TPO and not otherwise. At this juncture, it is not to be forgotten that the period of 33 months is to pass the final order of assessment after the directions from the DRP. In this case, we find from the undisputed dates and events that not only was the reference to the TPO made after the period of expiry of the period of limitation to pass assessment orders, but also that the assessing officer has failed to pass final assessment orders in time. The time to pass the original assessment would end on 31.12.2008 being 21 months from the end of the assessment year 2006-07 i.e., 31.03.2007. Then the last date for the assessing officer to pass the final assessment order would end on 31.12.2009, even considering the extension by twelve mont ..... X X X X Extracts X X X X X X X X Extracts X X X X
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