2024 (12) TMI 629
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.... time limit as per Section 92CA(3A) r.w.s. 153(4) of the Act, thereby making the transfer pricing order barred by limitation and invalid in law. In short, the order passed by the Ld. TPO under Section 92CA(3) of the Act is barred by limitation and thus bad in law, without jurisdiction and therefore, liable to be quashed. Consequently, the entire transfer pricing adjustment proposed by the Learned TPO in individual transaction becomes non-est and to be quashed. Further that, as TPO's order is non-est in the eyes of law, then the assessee could no longer be treated as eligible assessee and the draft assessment order also could not have been passed and finally the Assessment Officer as not provided with the extended period of limitation for passing assessment order under Section 153 of the Act the assessment order dated 30.09.2021 is beyond prescribed period of limitation under Section 153 of the Act and thus liable to be quashed. 3. The brief facts leading to the case is this that the assessee, one of the leading pharmaceutical companies in India, engaged in manufacturing pharmaceutical products, such as, cardiovascular, gastrointestinal, pain management, biological, anti-infective,....
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....1,570/- Benchmarking of margins Rs. 60,08,488/- purchase of fixed assets Rs. 7,64,781/- Segmental profitability of AE Rs. 1,67,22,377/- Sale of shares of ZAHL Rs. 51,30,000/- 6. The same was added to the total income of the assessee. 7. The draft order under Section 144C of the Act was passed in this case by the ACIT, Circle-1(1)(2) on 12.12.2019. The Ld. AO proposed the following addition: A. Income from House Property [as per Return of Income] Rs. 10,34,525/- B. Business Income [as per Return of income] Rs. 14,81,24,50,439/- Add: Additions / disallowances as discussed above 1. Transfer pricing Rs. 89,20,39,641 (as per Para No. 3.1) 2. Product Registration Expenses (-) depreciation on the above Rs. 20,08,34,851 (as per Para No. 4.7) 3. Trade Mark Registration fee & Patent Fee Rs. 14,14,36,698 (as per Para No. 5.6) 4. Research & Development Rs. 109,74,61,000 (as per Para No. 6.7) 5. Disallowance u/s. 14A Rs. 8,05,91,640 of the Act Rs. 2,41,23,63,830/- (as per Para No. 8.5) Assessed Business Income Rs. 17,22,48,14,269/- C. Capital Gain - [as per Return of income] Rs. 11,37,32,825/- D. Income from other sources [as per Re....
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....ent Rs. 109,74,61,000 (as per Para No. 9) 12. Disallowance u/s. 14A of the Act Rs. 8,05,91,640/- Rs. 234,23,50,734/- (as per Para No. 10) Assessed Business Income Rs. 17,15,48,01,173/- C. Capital Gain - [as per Return of income] Rs. 11,37,32,825/- D. Income from other sources [as per Return of income] Rs. 80,07,21,966/- Assessed Income Rs. 18,07,02,90,489/- Brought forward losses of Rs. 2,41,44,65,028/- for A.Y. 2013-14 Adjusted fully by the Dept. Rs. Nil while passing order for A.Y. 2015-16 Gross Total Income Rs. 18,07,02,90,489/- Chapter VI-A Rs. 2,39,90,500/- Total Income Rs. 18,04,62,99,989 /- Rounded off Rs. 18,04,62,99,990 /- U/s. 288A MAT Calculation u/s. 115JB: Book profit as per Return of Income Rs. 2003,62,62,535 Add: Disallowance u/s 14A - as discussed Rs. 8,07,84,146 Book Profit u/s. 115JB Rs. 2011,70,46,681 Tax @ 18.5% Rs. 372,16,53,636 9. Ultimately, the assessment order was passed determining the total income of the assessee at Rs. 18,04,62,99,990/- under Section 143C(B) r.w.s. 144C(5) of the Act under the normal provision of the IT Act and book profit at Rs. 20,11,70,46,681/- unde....
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.... reference is made to TPO 12 months in addition to the time limit prescribed under Section 153(1) - Section 153(4) of the Act 31 December 2019 Time limit for issuance of TP order under Sect/o 92CA(3A) of the Act Any time before 60 days prior to the due date for completion of assessment under Section 153 of the Act - Section 92CA(3A) of the Act 31 October 2019 Impugned order barred by limitation Learned TPO cannot issue any order after 31.10.2019 1 November 2019 13. The case of the assessee submitted before DRP as narrated by the Learned AR, crux whereof is as follows: 10.1.9 "The Assessee wishes to submit that there are several provisions in the Act wherein the words 'on or before' have been employed (For example Section 211, Section 92E, Section 92D, Section 43CA). Had the intent of the legislature been to include the sixtieth day while computing the period of limitation, it would have expressly mentioned 'on or before'. In the absence of any such specific words it may riot be apposite to read the term 'before' in Section 92CA(3A) of the Act as 'on or before'. Therefore, the 60th day, counting backwards from 30 December 2019, i.e., 30 days in the....
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....r Pricing Order passed on 1 November is barred by the limitation under Section 92CA(3A) of the Act, since it was not passed before 60 days prior to the date on which the period of limitation referred to in Section 153 of the Act expires. Accordingly, the High Court has quashed the TP Order based on the above ground. The copy of final order is awaited. 10.1.16. We have attached the following for your reference: a. Case status as is reflected on the official e-courts website. (CNR No. TCMAUT2030002019) as Exhibit 1. b. Copy of interim order passed by the Hon'ble Madras High court dated 21 November 2019 as Exhibit 2. 10.1.17. Given the relief provided by the High Court, the Assessee request your Honors to grant appropriate relief and oblige for the objection raised by the Assessee. 10.1.18. In view of the above, since in the case of the Assessee, the learned TPO has passed the order on 01 November 2019, therefore, the TP order was not passed before the period of 60 days prior to the date on which, the period of limitation for passing the assessment under Section 153 of the Act expires. Prayer Based on the above, the Assessee humbly submits that the order passe....
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....t permit passing any order after the expiry of 33 months from the end of the assessment year i.e. AY 2016-17 in the present case. Therefore, the time limit for completing assessment in the present case under Section 153(1) r.ws 153(4) of the Act expires on 31 December 2019, The time limit for issuing TP order under sub-section (3A) of Section 92CA of the Act falls any time before 60 days prior to the date on which the time limit under Section 153 of the Act expires, i.e. before 60 days prior to 31 December 2019. Based on the above, 60th day, working backwards from 30 December 2019, i.e. 30 days in the month of December and 30 days in the month of November falls on 01 November 2019 In the light of the above, the time limit for issuing the TP order falls at any time before 01 November 2019 i.e., on or before 31 October 2019." 16. It appears from the above that the limitation period prescribed under the provision of Section 92CA(3A) of the Act is mandatory; the TPO has no authority to breach such statutory provision and to pass order beyond the prescribed time as mentioned hereinabove. Further that the word 'may' though have been used by legislature under Section 92CA(3A) of t....
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....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." 18. Being aggrieved by and/or dissatisfied with the said order dated 07.09.2020 passed by the Single Bench in WP No.32699 of 2019 etc. along with assessee's matters, appeals were preferred before the Division Bench by the Revenue Department, which were ultimately dismissed on 31st March, 2020 with the following observation upholding the order passed by the Learned Single Bench: "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 calculating the 60 days, 31.12.2019 must be excluded. The usage of the word "prior" is not without significance. It is not open to this court to just consider the word "to" by ignoring "prior". The word "prior" in the present context, not only denotes the flow of direction, but also actual date from which the period of 60 days is to be calculated. It is settled law that while interpreting a statute, it is not for the courts to treat any word(s) as redundant or superfluous and ignore the same. In this connection, it is pertine....
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....r the assessing officer to pass his order under Section 153. The TPO has to pass his 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. If the last date is taken to be the first date from which the period of 60 days is to be calculated, reading down the provision with the use of the word "from", which denotes the starting point or period of direction in general parlance, would mean that 60 days "from the last date". Even going by Section 9 of the General Clauses Act, when the word "from" is used, then, that date is to be excluded, implying here that 31.12.2019 must be excluded. After excluding 31.12.2019, if the period of 60 days is calculated,....
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....s 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 if a reference is pending, the department gets another 12 months. Once reference is made and after availing the benefit of the extended period to pass orders, the department cannot claim that the time limits are not mandatory. Hence, the contention raised in this regard is rejected. 36. As rightly pointed out by Mr. Ajay Vohra, learned senior counsel for the respondents in WA.Nos.1148 and 1149/2021, the word "may" has to be sometimes read as "shall" a....
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....erein 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 TPO, reiterating the time limit to be mandatory. V. Conclusion. 40. Ergo, we find no reasons to interfere with the order of the Learned Judge, which is impugned herein and accordingly, dismiss these intra-court appeals, but without costs. Consequently, connected miscellaneous petitions are closed." 19. The assessee further relied upon the judgment passed in the matter of M/s. Sensiple Software Solutions Private Limited vs. ACIT & Anr. in Writ Petit....
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....mittedly, no stay has been granted by the Hon'ble Supreme Court and in one of the S.L.Ps, namely, S.L.P. (Civil) Diary No.32770 of 2022, delay has been condoned and in other S.L.Ps, notice has been issued to the respondents in the condone delay petitions. Since the Division Bench of this Court has already considered the very same issue, that has been raised in this writ petition, the benefit granted to those petitioners must also ensure to the benefit of this writ petitioner also. Accordingly, the impugned order dated 01.11.2019 is hereby quashed on the ground that the same is barred by limitation and it has been passed beyond the time limit fixed under Section 92CA(3A) of the Income Tax Act. Consequently, connected W.M.P. stands closed. No costs." 20. We have further considered the judgment passed by the ITAT, Mumbai Benches in the case of M/s. Shell India Markets Pvt. Ltd. vs. ACIT, wherein the similar issue cropped up, were settled in favour of the assessee following the judgment passed by the Hon'ble Madras High Court in the case of Pfizer Healthcare India Pvt. Ltd. (supra). The relevant observation whereof is as follows: "22. Thus, following the principle of ratio laid....
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....ent (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 which is prejudicial to the interest of such assessee. . . . (15) For the purposes of this section,- (a) "Dispute Resolution Panel" means... (b) "eligible assessee" means,- (i) any person in whose case the variation referred to in subsection (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) any non-resident not being a company, or any foreign company." 31. The aforesaid section envisages that, AO in the first instance has to forward a draft of the proposed order of assessment to the "eligible assessee", if he proposes to make any variation which is prejudicial to the interest of such assessee. The draft assessment order is to be forwarded to an "eligible assessee", which means that, for this section to apply a person has to be an "eligible assessee" Here, the draft assessment order is to be forwarded only to an "eligible assessee" and not to every assessee under the Act. 32. Thus, under the aforesaid provision, ....
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....d at all and is ignored for all practical purposes. Thus, in absence of any transfer pricing order being passed at all and any variations arising there from, the entailing consequence in instant case is that the appellant cannot be said to be an "eligible assessee" under section 144C(15)(b)(ii) of the Act. 35. Accordingly, once the assessee becomes an "ineligible assessee", the very foundation for proceeding to pass the draft assessment order does not survive, meaning thereby, that the draft assessment order passed in the instant case becomes legally invalid and hence, all consequential proceedings on the basis of the said order fail. In the instant case, a reference was made by the Ld. AO to the Ld. TPO as per the provisions of section 92CA(1) of the Act and accordingly the timelines prescribed u/s 153 of the Act remain extended by a year in view of the 3rd proviso of section 153 of the Act. Accordingly, the time limit to complete assessment proceedings u/s 143(3) of the Act in the instant case expired on 31 March 2016. As on the date of passing draft assessment order u/s 144C(1) of the Act i.e. on 29 March 2016, the Ld. AO had already received the order passed by the Ld. TPO d....
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....ct a draft order proposition, file objections before the Dispute Resolution Panel and ensure a speedy disposal thereof. Any lapse in treating an assessee as "eligible assessee" where it is otherwise not one and vice-versa results in fatality, since it becomes a jurisdictional defect and goes on to the roots in deciding the validity of the entire assessment proceedings against the revenue. In this context, on the issue of passing a correct assessment order in first instance (either a draft or a final one), the findings of the Hon'ble Madras High Court in case of ACIT v. Vijay Television (P.) Ltd [2018] 95 taxmann.com 101 (Madras) are extremely critical which reads as follows: "47. The necessity for the Parliament to incorporate Section 144-C is not only to safeguard the Revenue, but also the assessee and any mistake committed by any one of them, the said party is supposed to face the consequences and cannot put the hands of the clock back and start afresh." 39. Further, in case of Zuari Cements Ltd. v. ACIT [Writ Petition No. 5557 of 2012, dated 21-2-2013] (Andhra Pradesh), the Division Bench (DB) of the Andhra Pradesh High Court categorically held that the failure to pass a d....
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....ith the assessment under Section 144C of the Act and pass the consequential final assessment order. The decisions of the Hon'ble jurisdictional High Court in case of International Air Transport Association (supra) and Dimension Data Asia Pacific PTE Ltd. (supra) forties appellant's contentions and the irresistible conclusion that the draft assessment order imbibes a jurisdictional power in terms of Sec. 144C(1) of the Act and creates/ envisages special rights upon the "eligible assessee". If such an order is passed on an assessee who is not an "eligible assessee" as defined in section 144C(15)(b)(i) of the Act, then it would render the entire proceedings pursuant to such order null and void. 43. We find that section 153(1) of the Act, as it stood applicable for the AY 2012-13, provided a time limit of 3 years from the end of AY 2012-13 for completion of assessment under section 143(3) of the Act, i.e., on or before 31 March 2016. 44. In such a case if the Ld. AO invokes the provisions of section 144C of the Act and passes the final assessment order after 31 January 2016 i.e. beyond the period of limitation as stated above, such final assessment order u/s 143(3) r.w.s 144C of ....
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.... proceedings, if the facts are already on record. No fresh documentary evidence is required to be adduced for adjudicating aforementioned additional grounds. Hence, the additional ground No.40 & 41 are admitted for adjudication on merits. 24. The assessee has furnished a table giving relevant dates for calculating limitation for passing order u/s. 92CA(3) of the Act. The same is reproduced herein below: Particulars Ground No.41 Validity of Order passed under section 92CA(3) of the Act Calculation of due date for passing transfer pricing order under section 92CA(3) Asst. Order due date as per section 153 of the Act for AY 2009-10 31 March 2013 Transfer Pricing Order due date: (At least sixty days before the period of limitation referred to in section 153 of the Act) Number of Days in March 2013 30 Number of Days in February 2013 28 Number of days in January 2013 2 Total Number of days 60 Deadline for passing TP Order forAY 2009 10 29 January 2013 Date of TP order passed for A.Y 2009-10 30 January 2013 Delay 1 Day Delay in passing TP Order 25. The assessee has determined the period of limitation for passing the order by TPO in accordance with method elucida....
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....so found to be barred by limitation and thus quashed. While deciding the same, the Learned Bench was pleased to observe as follows: "7. The brief facts of the case pertaining to this issue are: The assessee company is an infrastructure and engineering company belonging to Siemens group based in Germany. For the year under consideration, the assessee filed its original return of income on 30/11/2015, declaring a total income of Rs. 1425.44 crore. The return of income was revised on 31/03/2017, amending the total income to Rs. 1392.55 crore. The return filed by the assessee was selected for scrutiny through CASS, accordingly, statutory notices under section 143(2) as well as section 142(1) of the Act were issued and served on the assessee. The Assessing Officer ("AO") made reference under section 92CA(1) of the Act to the Transfer Pricing Officer ("TPO") for the determination of ALP of the international transactions reported by the assessee in Form 3CEB. The TPO vide order dated 01/11/2019, passed under section 92CA(3) of the Act proposed a total transfer pricing adjustment of Rs. 153.24 crore. In conformity, the AO passed the draft assessment order under section 143(3) read with s....
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....t be disputed that the reference under section 92CA(1) of the Act was made by the AO on 19/09/2017, for the determination of ALP of all the international transactions reported by the assessee. Thus, the aforesaid time period for completion of the assessment was extended to 31/12/2018. We further find that in the present case, the assessee had entered into an Advance Pricing Agreement ("APA") with CBDT on 08/06/2017, in respect of its healthcare sector for a period of 4 years commencing from the previous year 2013-14 to the previous year 2016- 17. Thus, the year under consideration, i.e. 2015-16 forms part of the period for which the aforesaid APA was signed. We further find that as per section 92CD(5)(b) of the Act in the case of APA, the period of limitation as provided under section 153 of the Act for completion of the assessment is further extended by a period of 12 months. Accordingly, in view of the above, the period of limitation for completion of the assessment, in the present case, was extended to 31/12/2019. Further, the provisions of 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 ....
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....) affirmed the decision rendered in Pfizer Healthcare India Private Ltd (supra). Since, in the present case, the due date for completing the assessment proceedings was 31/12/2019, therefore, in view of the aforesaid decisions, the due date for passing the order under section 92CA(3) of the Act was 31/10/2019. However, as noted above, the TPO passed the order under section 92CA(3) of the Act on 01/11/2019. Thus, respectfully following the aforesaid judicial pronouncements, we are of the view that the TPO has passed the order beyond the time limit prescribed under section 92CA(3A) of the Act, and accordingly, the same is barred by limitation and is quashed being void ab initio. 13. We find that the coordinate bench of the Tribunal in Mondelez India Foods (P.) Ltd. v. Addl. CIT [IT Appeal No. 1492 (Mum.) of 2015, dated 14/11/2023, held that once the order of the TPO is beyond the period of limitation and thus is not a valid order, there is no "eligible assessee" in terms of the definition provided in sub-section (15) to section 144C of the Act. Further, it was held that if there is no eligible assessee, no reference to DRP could have been made. Therefore, in view of the above, in t....
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....ncome was first assessable. Sub-section (4) to section 153 of the Act extends the period of limitation for passing the assessment order by 12 months, where reference u/s. 92CA(1) of the Act is made to the TPO. Section 92CA(3A) of the Act specifies time limit for passing an order by the TPO, where a reference is made u/s. 92CA(1) of the Act. Sub-section (3A) to section 92CA mandates that 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 for making the order of assessment or reassessment as the case may be, expires. The Hon'ble Madras High Court in the case of Pfizer Healthcare India (P) Ltd. (supra) has explained the manner of computation of limitation for passing of the order u/s. 92CA(3) of the Act. The relevant extract of the observations by the Hon'ble High Court reads as under: "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 mont....
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....arious Benches of the Tribunal, we have no hesitation in holding that the order passed by the TPO in the present case is barred by limitation. 9. Since, there is no valid order u/s. 92CA(3) of the Act, the extended period of limitation for passing of the assessment order as provided u/s. 153(4) of the Act would not be available to the Assessing Officer. Consequently, the final assessment order dated 30/06/2021 is also time barred. In the result, the assessee succeeds on the legal issue raised in ground No.1 of the appeal. 10. As we have decided the jurisdictional issue in favour of the assessee, the other grounds raised by the assessee challenging additions on merit have become academic, hence, not deliberated upon." 26. After careful reading of the above judgement it appears that the issue in regard to the maintainability of the Transfer Pricing Officer's order dated 01.11.2019 has been decided in favour of the assessee holding the same barred by limitation since the said order was passed beyond the time-limit prescribed under Section 92CA(3A) of the Act read with Section 153 of the Act. The impugned order therein was found to have been passed violating the mandates prescr....