2023 (9) TMI 1109 - AT - Income Tax

Court sets aside transfer pricing adjustment as Order passed beyond time limit deemed illegal, quashed

The court ruled in favor of the appellant, setting aside the transfer pricing adjustment made by the Transfer Pricing Officer and Assessing Officer under ... Validity of order passed u/s 92CA(3) r.w.s. 153 - period of limitation - how the period of 60 days prior to the date of transfer pricing order i.e. 01.11.2019 is to be computed - HELD THAT:- As following the order passed in case of M/s. Pfizer Healthcare India Pvt. Ltd. [2022 (4) TMI 808 - MADRAS HIGH COURT] and ECL Finance Ltd. [2021 (9) TMI 1399 - ITAT MUMBAI] and Louis Dreyfus Commodities India Pvt. Ltd. [2021 (3) TMI 563 - ITAT DELHI] on the identical issue, we are of the considered view that as per limitation prescribed under section 153 of the Act that assessment order was required to be passed within a period of 21 months from the end of assessment year i.e. A.Y. 2016-17 and a further period of 12 months is to be added in case reference is made under section 92CA of the Act to the Ld. TPO, meaning thereby the period of 60 days expires to pass the transfer pricing order on 31.10.2019 whereas the transfer pricing order has been passed in this case on 01.11.2019 i.e. beyond the period of 60 days, hence barred by limitation. Since the order passed by the Ld. TPO is held to be barred by limitation the same is illegal, null and void ab-initio, hence quashed. Issues involved:The issues involved in the judgment are related to transfer pricing adjustment under Chapter X of the Income-tax Act, 1961, specifically addressing the legality and jurisdiction of the Transfer Pricing Officer (TPO) and Assessing Officer (AO) in making adjustments, computation of arms length price (ALP) of international transactions, and the application of prescribed methods under section 92C(1) of the Act.Transfer Pricing Adjustment:The appellant sought to set aside the order passed by the Commissioner of Income Tax, Dispute Resolution Panel-1, Mumbai, regarding the adjustment made by the TPO and AO in the amount of Rs. 14,163,877 under Chapter X of the Income-tax Act. The grounds included the TPO exceeding jurisdiction by passing the Transfer Pricing Order beyond the prescribed time limit, and the computation of transfer pricing addition without applying prescribed methods as provided under section 92C(1) of the Act.Jurisdictional Issue - Time Limit for TP Order:The primary legal issue addressed was whether the Transfer Pricing Order passed by the TPO was beyond the time limit prescribed under section 92CA(3A) read with section 153 of the Act. The appellant contended that the TP order was illegal, null, and void ab-initio due to being barred by limitation, while the Revenue argued that the order was passed within the prescribed time limit.Computation of Time Limit for TP Order:The judgment referred to the provisions under section 92CA(3) read with section 153 of the Act, highlighting the requirement for the TPO to pass the order within 60 days prior to the date on which the period of limitation referred to in section 153 expires. The court considered the computation of the 60-day period, excluding the last date as per section 153, based on precedents such as the case of M/s. Pfizer Healthcare India Pvt. Ltd. The decision emphasized that the Transfer Pricing Order should have been passed on 31.10.2019 or any date prior thereto to comply with the prescribed time limit.Judgment Outcome:The judgment concluded that the Transfer Pricing Order passed on 01.11.2019 was barred by limitation, following the legal precedent set by the Madras High Court and previous Tribunal decisions. Consequently, the TPO's order was deemed illegal, null, and void ab-initio, leading to the quashing of the assessment order passed by the AO. As a result, the appeal filed by the assessee was allowed based on the jurisdictional issue, without delving into the merits of the transfer pricing adjustment.Order pronounced in the open court on 31.05.2023.