AI Drafter 
TaxTMI 
TaxTMI 
2020 (6) TMI 153
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.... year 2000. PwC India is a member of PwC International Limited, UK, a company incorporated in UK and limited by guarantee. PwC International Limited, UK is akin to association of which the PwC entities across various countries in the world are members. By virtue of being a member of the association, namely, PWC International Limited, UK, PwC India is entitled to use the name of 'PricewaterhouseCoopers' under a royalty free non-exclusive license granted by the said UK company/ association. It is independently involved in the business of management consultancy services and business advisory services. The company has been rendering services to both overseas and domestic clients since April 2000. PwC India owns only routine intangibles as it acts as a management consultant in exchange for a service fee. 1.2.2. PricewaterhouseCoopers Lanka (P) Ltd. PricewaterhouseCoopers Lanka (Pvt) Limited (PWC Lanka) is the Technology Advisory arm of PwC in Sri Lanka and employs over 30 professionals. PwC Lanka provides services to government, large multinational organisations, as well as to small private sector companies. PricewaterhouseCoopers Sri Lanka is an IS....
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....a as of March 31, 2011 and are pertinent to the financial year ended March 31, 2011. On a going forward basis, the results would need to be altered so as to incorporate latest financial results and any changes in the functions performed, risks assumed and the level of tangible and intangible assets owned and employed by PwC India and its associated enterprise. Also, we recommend that PwC India reviews and updates its transfer pricing arrangements to reflect changes in the market or changes in the nature of its intra-group transaction. 2.1. The issue of determination of Arm's Length Price (ALP) was referred by the Assessing Officer to the Transfer Pricing Officer (TPO). The TPO passed an order u/s 92CA(3) of the Act on 27/01/2015. At para 6 of this order, the ALP of the international transaction has been determined as follows:- " 5.3. Final List of Comparable : Sl. No. Name of comparable company Operating Revenue Total Cost Operating Profit PLI OP/TC 1. 8K Miles software services limited 1.12 0.79 0.33 41.77% 2. Aurum Soft systems limited 1.48 1.24 0.24 19.35% 3. Lucid Software Limited 3.01 2.12 ....
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....e notice states as follows:- "........, has been determined to be payable by you u/s 144C of the I.T. Act 1961." He also issued a notice u/s 274 r.w.s. 271 of the Act, dt. 27/11/2015. 2.1.2. The assessee replied on 23/12/2015, stating that the said notice issued u/s 274/271 of the Act, received along with the order passed u/s 144C of the Act, is bad in law, as the order passed u/s 144C of the Act, is barred by limitation. The assessee filed a letter before the Assessing Officer i.e., DCIT Circle-2(2), Kolkata on 21/12/2015, wherein, the following contention were raised:- a) Issuance of notice u/s 156 of the Act, is not in conformity of the provisions of Section 144C of the Act and hence no demand can be created on the proposed variation of income. b) That the Assessing Officer has passed an assessment order u/s 144C of the Act and that in accordance to Section 144C(2) of the Act, the assessee has the option to accept the variation to income or to file objections before the DRP. c) That the passing of such order u/s 144C of the Act is beyond jurisdiction and barred by limitation. d) As there was exchange of information under t....
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....got matured/ reversed during the AY under consideration. 2.2. On the facts and in law and in the circumstances of the case, the Ld. AO erred in making the disallowance of foreign exchange loss on maturity of MTM contracts amounting to Rs. 3,45,06,888 without appreciating that the claim of such loss on provision basis was disallowed in AY 2008-09 and confirmed by the Ld. Commissioner of Income Tax (Appeals)['Ld. CIT (Appeals)']. 2.3. On the facts and in law and in the circumstances of the case, the Ld. AO erred in making disallowance of foreign exchange loss on maturity of MTM contracts amounting to Rs. 3,45,06,888 without appreciating that the Ld. CIT (Appeals) in his order passed for AY 2008-09 has directed the Ld. AO to allow the claim of such loss on maturity of MTM contracts. 2.4. On the facts and in law and in the circumstances of the case, the Ld. AO erred in making disallowance of foreign exchange loss on maturity of MTM contracts amounting to Rs. 3,45,06,888 without appreciating that the Hon'ble DRP has directed to allow the claim of such loss on maturity of MTM contracts and that all the necessary docum....
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....on. 8. The Ld. TPO and the Ld. AO/ Hon'ble DRP have erred in application of entity level Transactional Net Margin Method ("TNMM") considering Appellant as the tested party (Appellant having a turnover of Rs. 1,013.1 Crs. vis-a-vis Rs. 16.53 Crs. of related party sales transaction being tested). 9. Without prejudice to above grounds, even if TNMM is selected as the MAM, profit of the Appellant from the transaction with PwC DA, i.e., segment profitability, should be tested and not the entity level margin of the Appellant. 10. Without prejudice to the above grounds, the comparable companies selected by the Ld. TPO and Ld. AO are not comparable to the Appellant. Specific Grounds in relation to international transaction with PricewaterhouseCoopers Lanka Private Limited ('PwC Lanka') 11. The Ld. TPO and the Ld. AO/ Hon'ble DRP have erred in clubbing two different transaction, i.e., transactions with PwC Lanka and with PwC DA, of the Appellant for the purpose of bench marking. 12. The Ld. TPO and the Ld. AO/ Hon'ble DRP have erred in taking the entity level margin of the Appellant....
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.... Act and is bad in law and void-ab-initio. It is further submitted even Assessing Officer had not directed the assesse to make objection to Hon'ble DRP in the said order. 1.3 The Appellant respectfully submits that the provisions of section 144C (1) being non-obstante clause directs that at first instance the assessing officer could only propose variation in the income or loss of the eligible assesse which is prejudicial to the interest of such assesse. The provisions of section 144C(1) does not direct the assessing officer to create the tax demand on proposed variation and further demand the same within 30 days as provided under section 156 of the Act. 1.4 Therefore, the issuance of notice under section 156 of the Act signed with the aforesaid Order is not in conformity with the provisions of section 144C of the Act. 1.5 Further, not only the notice under section 156 was issued calling upon the Appellant to pay the tax amount but a notice initiating penalty proceedings under section 271 of the Act was also issued along with the said order giving an opportunity of hearing to the Appellant on 28 December 2015, which clearly brings out the intention of ....
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....tracted for ready reference:- 22 October 2018 To The Assistant Registrar Income tax Appellate Tribunal "C" Bench 225/C, A. J. C. Bose Road Kolkata - 700 020 Appellant: PricewaterhouseCoopers Private Limited ('the Company') PAN: AABCP9181H Ref.: ITA No: 2298/Kol/2016 for Assessment Year ('AY') 2011-12 Reg.: Application for Additional grounds of appeal taken in captioned appeal filed on 5 December 2016 , under Rule 11 of Income Tax (Appellate Tribunal) Rules, 1963 ('ITAT Rules') Dear Sir, By way of this application, the appellant seeks leave of the Honble Tribunal to raise additional/modified grounds of appeal in addition to the grounds of appeal taken in appeal memo filed on 5 December 2016 and vide letter dated 27 August 2018 in the captioned appeal. The Appellant wishes to submit an additional ground of appeal for kind consideration of the Hon'ble Bench and the same is attached as Annexure - 1 to this application. 1. Corporate tax 1.1 The appellant in the present case has raised the Ground No. 3 in connection with the granting o....
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....ng a tax liability of USD 7,46,174. The above tax liability has also been confirmed by the IRS vide Form 4549 dated 7 June 2018. Accordingly, the Appellant, adhering to statutory compliances in all segments wherein it operates, did not exercise its appeal rights or contest the tax liability in the US Tax Court and discharged the above liability vide Draft dated 11 September 2018. 1.5 As mentioned above, determined and offered to corporate tax in USA is also included in the total income in the return of income filed in India and tax on the is paid in India under the provisions of the Aet- Hence, income is doubly taxed, once in USA as a source country and again in India as a resident country. Hence, the Appellant is eligible to claim foreign tax credit of taxes paid in USA against the tax liability determined in India. 1.6 It is further submitted that at the time of filing of income-tax return in India for AY 2011-12, Appellant had not claimed foreign tax credit on account of taxes paid in USA as no tax was paid in USA at that time and also the tax return was not filed in USA. Hence, the Appellant, now after payment of taxes in USA is seeking to raise an Additional ....
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....he case of National Thermal Power Co. Ltd. v. Commissioner of Income Tax, [1998] 229 ITR 383 (SC). b) That the order passed by the Assessing Officer on 27/11/2015, is a final assessment order, as a notice of demand u/s 156 of the Act, dt. 27/11/2015, was issued to the assessee and a penalty notice u/s 271(1)(c) of the Act, was also issued to the assessee. He argued, that this order violates the provision of Section 144C of the Act as the Assessing Officer cannot create a tax demand on any proposed variations/additions to the returned income of the year by issuing a demand notice and penalty notice along with the draft assessment order dt. 27/11/2015 and that the mandatory provisions of Section 144C(1) of the Act, were not followed and hence that order is without jurisdiction and, therefore, null and void. c) That the initiation of penalty proceedings u/s 271(1)(c) of the Act and the notice requiring the assessee to respond/appear before the Assessing Officer on 27/11/2015, clearly brings out the intention of the Assessing Officer that he intended to pass a final assessment order on 27/11/2015. For this proposition reliance was placed on the following case....
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....t he will not be pressing all the other issues, excluding those specifically argued before the Bench, which was raised by way of grounds and additional grounds of appeal. Hence all these grounds, not specifically argued are dismissed. He lead no arguments for the admission of additional evidence. Hence, we dismiss the application for admission of additional evidence. 9. The ld. D/R, Shri Vijay Shankar, on the other hand, controverted the submissions of the assessee and submitted that the order passed on 27/11/2015 was only a draft assessment order. His submissions are summarised as follows:- a) The order was passed u/s 144C of the Act, and the heading of the order is "Draft Assessment Order" and in the order it was concluded as "draft assessment order u/s 144C of the Act". Thus, no order whatsoever, was passed u/s 143(3) of the Act which could be said to be an assessment order much less a final assessment order. That no demand was created on the assessee in pursuance of Section 144C of the Act and in fact under the statute no such demand can be created hence, the notice of demand u/s 156 of the Act in Form 7 was also a draft notice and this is clear from para 1 of the n....
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....ollowing case-law:- i. Religare Capital Markets Limited vs. DCIT [ITA No. 1881/Del/2014, Assessment Year 2009-10; ITA No. 1583/Del/2015, Assessment Year 2010-11; ITA No. 753/Del/2016, Assessment Year 2011-12; ITA No. 1763/Del/2017, Assessment Year 2012-13], order dt. 10/10/2019 10. He submitted that the Benches have held that the limitation provided u/s 156 of the Act, does not apply to the draft assessment orders. He relied on the decision of the Delhi Bench of the Tribunal in the case of Honda Trading Corporation, Japan vs. DCIT in ITA No. 1132/Kol/2015, order dt. 15/09/2015 and submitted that the Bench held that there is no time limit prescribed for passing of the draft assessment order and that, such order is required to be passed within reasonable time. Six months period was considered as reasonable time. In the case on hand, the draft assessment order was passed within six months from the date of receipt of information by the ld. Pr. CIT i.e., 18/03/2015. Thus, he submits that this order is not barred by limitation. 11. On merits, the ld. D/R submitted Ground No. 2.1. to 2.4. have to be dismissed as the ld. Counsel for the assessee is not pressing the same. ....
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....rder is passed. The attachment of a Notice of Demand in Form No. 7 cannot be taken as the deciding circumstances, which leads us to a conclusion that the order in question is a Final Assessment Order passed u/s 143(3) of the Act. In fact at para 1 of the Notice of Demand u/s 156 of the Act, the Assessing Officer has clearly stated "........, has been determined to be payable by you u/s 144C of the I.T. Act 1961". Non-striking of para 6 or para 7 in Form No. 7, does not take us to conclusive proof that the order is not a draft assessment order. In fact it is a Draft Notice of Demand attached to the Draft Assessment Order. This notice of demand is non-est in law as no demand can be created by an order passed u/s 144C of the Act. Hence such notice has not bearing on the order. 18. Coming to the notice issued for levy of penalty u/s 274 of the Act, we find that none of the columns in the notice have been struck off by the Assessing Officer. Under such circumstances such a notice is illegal and bad in law. This notice is also non-est in law. This Bench of the Tribunal in the case of Arun Kumar Bose vs. ITO in ITA No. 2044/Kol/2018, Assessment Year: 2008-09, order dt. February 19th, 2....
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....annot be sustained. The plea of the ld. Counsel for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled." Mr. Chowdhury in course of argument has urged us to remand the matter before the assessing officer. According to him, this was a technical flaw, which the Revenue must be given a chance to cure. The reason why the penalty order was not sustained by the Tribunal appears from the passages of the decision of the Tribunal quoted earlier in this judgement. We find that there was no specific charge against the assessee in the notice. Revenue has missed out their opportunity to subject the assessee to the penalty proceeding by not issuing a proper notice. No specific case has been made out by the Revenue as to why the matter should be remanded except that the assessee had not participated properly in the assessment proceedings but for that reason best judgment assessment has been made and the income, which had escaped assessment has been added to the income of the assessee.....
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....hat case, was a valid show-cause notice for levy of penalty or not. We do not deal with each of the case law cited by the ld. Counsel for the assessee, as in our view, it is not necessary as the facts of this case on hand are clear and cannot lead to any other conclusion. 20. We, however, find force in the arguments of the ld. CIT D/R that the, assessee understood this order dt. 27/11/2015 as a draft assessment order and filed objections with the Hon'ble DRP. If it was the belief of the assessee that this is a final assessment order, then he would have filed an appeal before the ld. CIT(A) and not before the Hon'ble DRP. If the contentions of the assessee is accepted then the appeal is not maintainable before us for the reason that no objection is maintainable before the DRP on a final assessment order. If the contentions of the assessee is that the order is passed other than u/s 143(3)/144C of the Act, then the appeal lies with the ld. CIT(A) and not with the ITAT. In such a case this appeal has to be dismissed as not maintainable. Thus, we dismiss these grounds of the assessee and hold that the order passed on 27/11/2015 is a draft assessment order passed u/s 144C of the Act. ....
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....rocess before the ld. DRP is a correcting mechanism in the nature of a second look at the proposed assessment order by high functionaries of the revenue keeping in mind the interest of the Assessee. 12. The ld. Authorized Representative further stated that as the coordinate bench has held that the draft order is actually different in ambit from the assessment order and thus it is not appreciated that the draft assessment order is a proposed order of assessment and does not have any independent existence in law. It is not accompanied by notice of demand, not appealable and cannot be the basis of initiation of penalty. He therefore, submitted that draft order of assessment cannot be equated with the assessment completed in pursuance of direction of DRP u/s 143(3) read with section 144C(13) of the Act. The argument of the ld. AR though looks attractive but on careful examination of the same we are not impressed. The provisions of the income tax act 1961 sets out a special scheme for the assessment of an entity engaged in international transaction under Chapter X of the income tax act in terms of section 144C (1) to section 144C (14) of the income tax act. Therefore it is appa....
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....see or draft order is accepted by the assessee. Therefore, the learned assessing officer cannot make any upward adjustment to the income of the assessee after passing of the draft assessment order. He also cannot initiate any further penalties which are attached to the assessment order if same are not initiated in the draft order. The rights of the variation to the income of the assessee are solely rest with the dispute resolution panel. Therefore the dispute resolution panel has a correcting power to the draft assessment order. AO does not have any power to do so. Therefore it is apparent that on the plain reading of the above provisions for all practical purposes the role of the assessing officer comes to an and the movement he passes the draft order. He is only authorized to pass the final assessment order which is according to the directions of the learned dispute resolution panel. The above provisions also contained the separate time limits and it has its own timelines which binds the revenue as well as the assessee. The honourable Madras High Court in 398 ITR 645 (2017) CIT vs Sanmina SCI India private limited in para number 7 has held that it is a self-contained code in itse....
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....ang/2012 dated 8/5/2019 and Acer India Pvt Ltd V DCIT 502/bang/ 2017 dated 10/5/2019 which has also taken similar view against the assessee holding that if the assessment orders are passed within the timelines provided under section 144C of the income tax act, irrespective of the timelines prescribed under section 153 of the income tax act, they are passed within the timelines provided under the law and are not time barred. 17. In view of the above reasons we dismiss the additional ground raised by the assessee. We direct the registry to post the hearing of the appeal on other grounds before the regular bench in due course. 22. Respectfully following the same, we dismiss this ground of the assessee. 23. We now take up the grounds on merits. 24. Ground Nos. 2.1. to 2.4., are dismissed as not pressed. 25. Regarding Ground No. 3 on the issue of grant of relief u/s 19 of the Act, in respect of credit of tax withheld in foreign countries, we agree with the submissions of the ld. D/R that the matter cannot be remanded to the file of the Assessing Officer. The assessee has not furnished any details in support of his claim either before the Assessing Officer or the DRP....