Transfer Pricing Assessment Quashed: Limitation Barred TP Order Deemed Illegal

The Tribunal found that the Transfer Pricing (TP) order dated 01.11.2019 was barred by limitation, rendering it illegal. Consequently, the assessment order based on the TP adjustments was also deemed without jurisdiction and quashed. The appellant's appeal was allowed, with the Tribunal not delving into the merits of the TP adjustments due to the critical legal issue of limitation. The decision was pronounced on 18.05.2022.

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Issues Involved:
1. General ground regarding Transfer Pricing (TP) adjustments.
2. Validity of the Transfer Pricing order passed by the TPO being barred by limitation.
3. Adjustment for provision of engineering and related services.
4. Adjustment for provision of IT Support and related services.
5. Adjustment for provision of facilitation support services (Marketing support services).

Issue-wise Detailed Analysis:

1. General Ground:
The assessee contested the TP adjustments of Rs. 20,07,54,216 made by the AO based on the directions of the DRP. The appellant sought for the deletion of these adjustments.

2. Validity of the Transfer Pricing Order:
The appellant argued that the TP order dated 01 November 2019 was beyond the time limit prescribed under section 92CA(3A) read with section 153 of the Income-tax Act, 1961, making the TP order illegal, null, and void. Consequently, the draft assessment order dated 05 December 2019 and the final assessment order dated 30 March 2021 were also claimed to be without jurisdiction and barred by limitation.

The Tribunal examined the statutory provisions and the factual timeline. It was noted that the TPO was required to pass the order within 60 days prior to the date on which the period of limitation referred to in section 153 expires. The Tribunal referred to the decision of the Hon'ble Madras High Court in the case of M/s. Pfizer Healthcare India Pvt. Ltd., which held that for computing the period of 60 days, the last date as per section 153 should be excluded. Consequently, the period of 60 days expired on 31.10.2019, and the TP order passed on 01.11.2019 was beyond the prescribed period, thus barred by limitation.

3. Adjustment for Provision of Engineering and Related Services:
The assessee argued that the AO/DRP/TPO erred in making an adjustment for engineering and related services by disregarding the TP Study and the aggregation approach adopted by the assessee. The Tribunal did not delve into the merits of this ground due to the legal findings on the limitation issue.

4. Adjustment for Provision of IT Support and Related Services:
The assessee contended that the AO/DRP/TPO erred in making adjustments for IT support services by disregarding the TP Study, rejecting the search process, and including/excluding certain companies without cogent reasons. Similar to the previous issue, the Tribunal did not address the merits due to the limitation finding.

5. Adjustment for Provision of Facilitation Support Services (Marketing Support Services):
The assessee challenged the adjustments made for marketing support services on similar grounds as the IT support services, including disregarding the TP Study and cherry-picking comparable companies. The Tribunal, consistent with its approach, did not examine the merits.

Conclusion:
The Tribunal concluded that the TP order dated 01.11.2019 was barred by limitation and thus illegal, null, and void. Consequently, the assessment order passed by the AO, based on the TP adjustments, was also without jurisdiction and quashed. The appeal filed by the assessee was allowed, and the Tribunal did not find it necessary to address the grounds on merit due to the decisive legal issue on limitation. The order was pronounced in the open court on 18.05.2022.

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