TaxTMI 
TaxTMI 
2022 (4) TMI 808
X X X X Extracts X X X X
X X X X Extracts X X X X
....l Nos. 1139, 1120 and 2039 of 2021, Mr. R. Sandeep Bagmar in Writ Appeal Nos. 2036 & 2066 of 2021, Mr. Ajay Vohra, Sr.counsel for Mr. R. Sivaraman in Writ Appeal Nos. 1148 and 1149/2021, Mr. R. Sivaraman in Writ Appeal No. 2043/2021, Mr. N.V. Balaji in Writ Appeal No. 1115 of 2021, Mr.Sumit Mangal in Writ Appeal No.2035 of 2021 COMMON JUDGMENT R. MAHADEVAN, J. I. Introduction. These intra-court appeals arise from a common order dated 07.09.2020 passed by the learned Judge in W.P.No.32699 of 2019 etc. batch. 2. The respondents in these writ appeals filed the aforesaid WP No.32699 of 2019 etc. batch, questioning the validity of the orders dated 01.11.2019 passed by the first appellant herein under Section 92CA (3) of The Income Tax Act, 1961 (hereinafter referred to as The Act) on the ground of limitation as contemplated under Section 153 of the Act. The learned Judge allowed the writ petitions, which has given rise to the filing of the present intra-court appeals by the appellants herein. II. Facts. 3. At the outset, in order to understand the issue involved herein, the pleadings projected by the parties in one of the writ petitions, viz., WP.No.32699 of 2019, w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....passed by the first appellant is beyond the time limit stipulated under Section 92CA(3A) read with Section 153 (1) of the Act. 4.3. Elaborating further, it was contended that the time limit for passing a Transfer Pricing Order is governed by sub-section 3A of Section 92CA. As per Section 92CA (3A), a Transfer Pricing Order has to be passed 60 days prior to the date on which the time limit provided under Section 153 of the Act expires. The word "prior to" mentioned in the Section indicates that it is referable to the date preceding 31.12.2019 i.e., 30.12.2019. 4.4. It was also submitted that after the reference was made by the second appellant on 13.03.2018, the office of the first appellant initiated the Transfer Pricing proceedings on 10.12.2018 and took nearly 19 months time for completion of the assessment under Section 92CA of the Act. The show cause notice dated 19.10.2019 was issued with only two weeks to complete the proceedings and the second show cause notice dated 26.10.2019 was issued, when five days were left for passing the order of assessment. In fact, the issuance of show cause notices itself was to comply with an empty formality, when the writ petitioner has a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....raft proposal till the passing of final order by the Assessing Officer will take one year time and only in the event of the writ petitioner being aggrieved by the final order passed by the Assessing Officer, they can approach the legal forum to ventilate their grievance. Thus, according to the appellants, the writ petition itself is not maintainable in law. 5.2. As regards the plea of limitation raised by the writ petitioner, it was submitted that the interpretation to Section 92CA (3) is depended on the interpretation to Section 153 of the Act. The order passed under Section 92CA(3) is a process initiated before passing the final order of assessment and as long as the order of assessment is passed in accordance with the period stipulated under Section 153 of the Act, an order under Section 92CA(3) will not be construed as a final order. As such, the assertion of the writ petitioner that the first appellant has to pass the order before 31.10.2019 as per Section 92CA(3) of the Act is untenable. 5.3. By referring to Section 153 (1) and (4) of the Act, the appellants pointed out before the learned Judge that when a reference is made under Section 92CA (1), the assessing officer ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the word "may" is used in Section 92CA(3) of the Act and therefore, even if the order was passed after the period of 60 days, as contemplated under Section 153, still, it would be treated as having been passed within the time limit. 5.5. The counter affidavit also proceeds to state that the appellants can continue with the proceedings in respect of other issues involved in the assessment during the pendency of the proceedings relating to Arm's length Price determination. The incorporation of the order to be passed by the TPO is a mere formality and the assessee and the Assessing Officer had ample time to continue with the assessment order on other issues. After the receipt of the order passed by the TPO, the income of the assessee will be computed and it has nothing to do with the other issues. 5.6. It was further stated that sub-section 3A to Section 92CA3 was introduced by the Finance Act, 2007 from 01.06.2007 making it mandatory on the part of the Assessing Officer to comply with the Arm's length computation made by the TPO. Prior to this amendment, it was not mandatory for the Assessing Officer to wait for or accept the arm's length computation. Thus, the wor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sed as 31.10.2019. The impugned orders are thus, held to be barred by limitation." 7. Aggrieved by the aforesaid common order passed by the learned Judge in the batch of writ petitions, the appellants / Revenue are before this court with these intra-court appeals. III. Contentions. 8.1.1. Mrs. Hema Muralikrishnan, learned Senior Standing Counsel appearing for the appellants in WA.Nos.1115, 1120, 1139, 1148 and 1149 of 2021 would contend that the learned Judge ought not to have entertained the writ petitions filed by the respective respondent herein especially when there is an alternative remedy of appeal available as against the orders dated 01.11.2019 passed by the first appellant. When an in-built statutory remedy is available, the learned Judge ought to have relegated the respondents herein to approach the appellate authority. To buttress this submission, the learned counsel placed reliance on the decision of this Court in the case of Intimate Fashions (India) Pvt Ltd. [(2010) 321 ITR 265 (Madras)] as well as the decision of the Delhi High Court in the case of Messe Dusseldorf India (P) Ltd. [(2010) 320 ITR 565 (Delhi)]. In those cases, it was held that there is an alte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arned Judge. 8.2. Mr.A.P.Srinivas, learned senior standing counsel appearing for the appellants in other writ appeals submitted that Section 144C of the Act comes to play only after the transfer pricing officer's order is received by the Assessing Officer and upon receipt of the order only, the assessing officer is bound to pass a draft assessment order. It is further submitted that the assessment order comprises of both international transaction comprising of computation of Arms length price and non-international transaction and therefore, there cannot be an interpretation that merely because the alleged delay of one day beyond the time line with regard to the TPO issue, the right of assessment is lost; on the other hand, the interpretation ought to have been taken to advance the cause of justice in order to protect the right of assessment; and hence, the outer limitation as provided in section 153 alone is the criteria and the in between time limits with regard to TPO is not limitation in stricto sensu as stated in section 153. Thus, according to the learned counsel, pursuant to the order dated 01.11.2019, which was impugned in the writ petitions, there is no demand for ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....egislature uses the word "may" out of deference to the high status of the authority on whom the power and the obligation are intended to be conferred and imposed. In the present case, it is in the context which is decisive. The whole purpose of R.4 (2) would be frustrated if the word "may" in the said rule receives the same construction as in sub-r.(1). It is because in regard to gazetted government servants, the discretion had already been given to the Governor to refer their cases to the Tribunal that the rule-making authority wanted to make a special provision in respect of them as distinguished from other government servants falling under R.4(1) and R.4(2) has been prescribed, otherwise R.4(2) would be wholly redundant. In other words, the plain and unambiguous object of enacting R. 4(2) is to provide an option to the gazetted government servants to request the Governor that their cases should be tried by a Tribunal and not otherwise. The rule-making authority presumably thought that having regard to the status of the gazetted government servants, it would be legitimate to give such an option to them. Therefore, we feel no difficulty in accepting the view taken by the High Cour....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ating its wings in a luminous void in vain"...." (c)In Mohan Singh and others v. International Airport Authority of India and others [(1997) 9 Supreme Court Cases 132], it was held as follows: "17. The distinction of mandatory compliance or directory effect of the language depends upon the language couched in the statute under consideration and its object, purpose and effect. The distinction reflected in the use of the word "shall" or "may" depends on conferment of power. In the present context, "may" does not always mean may. May is a must for enabling compliance of provision but there are cases in which, for various reasons, as soon as a person who is within the statute is entrusted with power, it becomes duty to exercise. Where the language of statute creates a duty, the special remedy is prescribed for non-performance of the duty. In "Craies on Statute Law" (7th Edn.), it is stated that the Court will, as a general rule, presume that the appropriate remedy by common law or mandamus for action was intended to apply. General rule of law is that where a general obligation is created by statute and statutory remedy is provided for violation, statutory remedy is mandator....
X X X X Extracts X X X X
X X X X Extracts X X X X
....deposited if it was refused to have been received or to grant receipt for the same. If that be the position, if such protection has been given to the tenant, the said procedure has to be strictly followed in the matter of taking steps in the event of refusal of the landlord to receive the rent or to grant receipt to the tenant. It is well settled that whether the word "may" shall be used as "shall", would depend upon the intention of the Legislature. It is not to be taken that once the word "may" is used by the Legislature in Section 27 of the Act, would not (sic) mean that the intention of the Legislature was only to show that the provisions under Section 27 of the Act was directory but not mandatory. 29. In other words, taking into consideration the object of the Act and the intention of the Legislature and in view of the discussions made herein earlier, we are of the view that the word "may" occurring in Section 27 of the Act must be construed as a mandatory provision and not a directory provision as the word "may", in our view, was used by the Legislature to mean that the procedure given in those provisions must be strictly followed as the special protection has been g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the Act, it was rightly quashed by the learned Judge. In this context, the learned senior counsel placed reliance on the following decisions: (a)In R. Rudraiah and another v. State of Karnataka and others [(1998) 3 Supreme Court Cases 23], the following observations have been made by the Hon'ble Supreme Court: "16. It is obvious that by deleting the provisions relating to the power to condone the delay for sufficient cause, the legislature had clearly intended to do away with the said power of condonation of the Tribunal. It was in fact so held by a learned Single Judge of the Karnataka High Court in Virupaxappa Basappa v. Land Tribunal [1980 (2) Kart L.J.428]. This view, in our opinion, is quite correct. If therefore the legislature wanted to make a deliberate departure and introduced an amendment to take away the power of condonation of delay, it is difficult to accept the contention that Section 48-A is capable of more than one interpretation - one leading to injustice and another permitting avoidance of such injustice to tenants and that the Court should opt for a liberal interpretation. Another reason for rejecting the appellant's contention is that we h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n an application by the assessee under Section 146; or (ii) the original assessment is set aside or cancelled in appeal by the Appellate Assistant Commissioner or the Appellate Tribunal or in revision by the Commissioner. For this sub-section (2A) has been inserted in section 153. Under this sub-section the fresh assessment in the cases mentioned at (i) may be made at any time before the expiry of two years from the end of the financial year in which the original assessment was cancelled by the Income-tax Officer under section 146. In the cases mentioned at (ii) the fresh assessment may be made at any time before the expiry of two years from the end of the financial year in which the order of the Appellate Assistant Commissioner or the Appellate Tribunal is received by the Commissioner or, as the case may be, the order in revision is passed by the Commissioner. Such fresh assessments may be completed within the above-mentioned time limit even if the time limit specified in sub-section (1) or sub-section (2) of section 153 for the completion of assessment or reassessment has expired. Under the existing provisions of Section 153 (3), such fresh assessments are not subject to any time....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sub-section (2A)." This meant that Section 153 (3) would thereafter apply only to such cases where Section 153 (2A) did not apply. In other words, in all instances of an Assessing officer having to pass a fresh assessment order upon remand where Section 153 (2A) would apply, the Assessing Officer would be bound to follow the time- limit imposed by sub-section (2A). Where the Assessing Officer was only giving effect to an appellate order, then Section 153 (3) (ii) of the Act would apply." Stating so, the learned senior counsel submitted that the order of the learned Judge does not call for any interference at the hands of this court. 9.2. Mr.R.Sivaraman, learned counsel appearing for the respondent in WA.No.2043 of 2021 has adopted the arguments of the learned senior counsel Mr.Ajay Vohra. 9.3. Repudiating the contentions raised on the side of the appellants, Mr.S.P.Chidambaram, learned counsel appearing for the respondents in W.A.Nos.1120, 1139 and 2039 of 2021, submitted that section 92CA of the Act was inserted by Finance Act, 2002, which did not contain sub section (3A). Later on, by Finance Act, 2007, sub section (3A) was introduced. While inserting the sub section in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ovember. In relation to section 92CA, it is submitted by the learned counsel that prior to the amendment, the TPO was not issuing the transfer pricing orders within the timeline which posed greater hardships to the assessing officer to complete the assessment proceedings; in order to make it mandatory for the transfer pricing officer to abide by the timeline, a strict timeline has been given to pass the transfer pricing order; and therefore, the Finance Act, 2007 inserted sub section (3A) carrying the time limit of sixty days for passing of the order by the TPO before the expiry of time limit for completion of assessment by the Assessing officer under section 153. Thus, according to the learned counsel, the exclusion of start date and inclusion of end date for computing the period of limitation by referring to General Clauses Act and Limitation Act, is incorrect and unsustainable and hence, the orders passed by the appellants are barred by limitation and are invalid. 9.4. Referring to para no.30 of the order impugned herein, Mr.Sandeep Bagmar, learned counsel for the respondents in WA.Nos.2036 and 2066 of 2021 submitted that section 153 states that no order of assessment shall b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t be ignored". Chapter VII of the Central Action Plan for 2018-19 on International taxation and Transfer Pricing mentions about the transfer pricing audit getting time barred on 31.10.2018 and 31.10.2019. Therefore, the order of the learned Judge placing reliance on the Central Action Plan issued by the CBDT for providing guidance to the income tax authorities for efficient and effective tax administration and improving tax compliance, cannot be faulted with. Thus, the learned counsel prayed for dismissal of the writ appeals, as they are not maintainable. 10. By way of reply, the learned senior standing counsel appearing for the writ appeals, reiterated that the orders passed under section 92CA(3) of the Act, which were impugned in the writ petitions, do not have legs to stand to cause any hardship / damage to the respondents, since the first appellant in the said orders, proposed only a transfer pricing adjustment and the assessing officer has to pass draft assessment orders under section 144C(1); and hence, there would not be any demand on account of the draft assessment orders. The learned senior standing counsel further submitted that section 9 of the General Clauses Act, 18....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "8. The petitioner thus shall be entitled to raise all possible objections and along with that furnish necessary evidence as well to rebut the report of the Transfer Pricing Officer as draft assessment order. Since such a remedy is available to the petitioner, it is not necessary to go into this aspect in the present writ petition filed by the petitioner. We expect and hope that the Dispute Resolution Panel shall, positively, deal with the objections filed by the petitioner along with support evidence furnished by him to rebut the basis adopted by the Transfer Pricing Officer (TPO) to arrive at the arm's length price (ALP) and thereafter only it shall pass speaking orders." 12.2. It could be seen that the above decisions do not lay down any ratio and are only cases where the learned Judges refused to exercise the discretionary relief under Article 226 of the Constitution of India. It is settled law that the refusal to exercise the discretionary relief under Article 226 of the Constitution of India is a self-imposed restriction. We feel it unnecessary to refer to the plethora of judgments available on the subject, but necessary to reiterate the circumstances under whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in any previous year, and the Assessing Officer considers it necessary or expedient so to do, he may, with the previous approval of the Principal Commissioner or Commissioner refer the computation of the arm's length price in relation to the said international transaction or specified domestic transaction under Section 92C to the Transfer Pricing Officer (2) Where a reference is made under sub-section (1), the Transfer Pricing Officer shall serve a notice on the assessee requiring him to produce or cause to be produced on a date to be specified therein, any evidence on which the assessee may rely in support of the computation made by him of the arm's length price in relation to the international transaction or specified domestic transaction referred to in sub-section (1). 2A. Where any other international transaction other than an international transaction referred under sub-section (1) comes to the notice of the Transfer Pricing Officer during the course of the proceedings before him, the provisions of this Chapter shall apply, as if such other international transaction is an international transaction referred to him under sub-section (1). 2B. W....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e deemed to have been extended accordingly (4) On receipt of the order under sub-section (3), the Assessing Officer shall proceed to compute the total income of the assessee under subsection (4) of Section 92C in conformity with the arm's length price as so determined by the Transfer Pricing Officer (5) With a view to rectifying any mistake apparent from the record, the Transfer Pricing Officer may amend any order passed by him under subsection (3), and the provisions of section 154 shall, so far as may be, apply accordingly (6) Where any amendments is made by the Transfer Pricing Officer under sub-section (5), he shall send a copy of his order to the Assessing Officer who shall thereafter proceed to amend the order of assessment in conformity with such order of the Transfer Pricing Officer (7) The Transfer Pricing Officer may, for the purpose of determining the arm's length price under this section, exercise all or any of the powers specified in clauses (a) to (d) of sub-section (1) of section 131 or subsection (6) of section 133 or section 133A Explanation:- For the purposes of this section, Transfer Pricing Officer means a Joi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....where a reference under sub-section (1) of section 92CA is made during the course of the proceeding for the assessment or reassessment, the period available for completion of assessment or reassessment, as the case may be, under the said sub-sections (1), (2) and (3) shall be extended by twelve months ......... ....... Provided further that where the period available to the Transfer Pricing Officer is extended to sixty days in accordance with the proviso to subsection (3A) of section 92CA and the period of limitation available to the Assessing Officer for making an order of assessment, reassessment or recomputation, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly." 13.4. Section 9 of the General Clauses Act reads as follows; "9. Commencement and termination of time.-(1) In any Central Act]or Regulation made after the commencement of this Act, it shall be sufficient, for the purpose of excluding the first in a series of days or any other period of time, to use the word "from", and, for the purpose of including the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e) and 2400 to designate the end of a given day (or date)." 16. As per the International Standards Organization, ISO 8601- 1:2019 midnight may only be referred to as "00:00", corresponding to the beginning of a calendar day. The earlier use of reference to 24.00 hours to mark the end of the day, was dropped. 17. In India, the midnight or 00.00 hours has been always used to denote the beginning of the next date. A reference could be made to our Independence day, wherein the stroke of midnight at 00.00 hours on 15.08.1947 is considered as the moment of Independence as per the Indian Independence Act, 1947. 18. Also, it is not out of place to mention here that the new year eve of every year, through out the world is celebrated at 00.00 hours and it is regarded as the beginning of a new day and not as an extension of the previous day. 19. A reference can also be made to various insurance policies, wherein the beginning of the day is reckoned as 00.00 hours and the end of the day at 23:59:59 hours. 20. Even as per the contentions of the appellants, the assessing officer has time upto 23:59:59 hours on 31.12.2019 to pass assessment orders. However, according to them, the t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....night on the expiration of the day preceding its commencement, i.e., the midnight between 25-3-1983 and 26-3-1983. There can be no doubt that if the second expression "in which no award has been made by the said date" was not also present in sub-section (7), then the undoubted result of the first expression would be that an arbitration proceeding in which no award had been made up to the midnight between 25-3-1983 and 26-3-1983 would be a pending arbitration proceeding which automatically stood transferred to the Arbitration Tribunal. The question, therefore, is whether the further words used in the second expression in sub-section (7) must lead to a different conclusion. The construction of the first expression being unambiguous, the second expression must be construed harmoniously unless that is not a permissible construction of the expression "by the said date". 7.It does appear to us that the second expression, namely, "in which no award has been made by the said date" was further used in sub-section (7) ex abundante cautela to clarify the meaning of pending proceedings by indicating that only those arbitration proceedings in which the award also had been made "by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re the date of commencement of the Act, namely, 26-3-1983. This would be the harmonious construction of the two expressions in the provision. 10.Obviously, an award made on 26-3-1983 cannot be said to be an award made before 26-3-1983 and, therefore, the award in the present case having been made on 26-3-1983 and not before 26-3-1983, the date of commencement of the Act, the arbitrator had no jurisdiction to make the award as it was a pending arbitration proceeding which automatically stood transferred to the Arbitration Tribunal." 22. From Section 153, the regular time for passing the assessment order ends on 31.12.2018 and with extension on the matter being referred to TPO, the time limit to pass assessment order would lapse on 31.12.2019. What is not to be forgotten, while interpreting a taxing statute, is the explicit and clear language used by the parliament while enacting the law. If the language employed in any statute is clear and unambiguous from its plain and natural meaning, external aid for interpretation are unnecessary. In the present case, we are called upon to adjudicate the period of limitation applicable to TPO under Section 92CA(3A) and incidentally u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 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 calculating the 60 days, 31.12.2019 must be excluded. The usage o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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. If the last date is taken to be the first date fr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion (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 if a reference is pendi....