TaxTMI 
TaxTMI 
2021 (9) TMI 1399
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....ssee in its revised return of income filed dated 31.03.2015. Ground No.1 - Transfer Pricing Adjustments a. Based on the facts and circumstances of the case and in law, the learned Transfer Pricing Officer (hereinafter referred to as 'TPO') and the learned AO, under the directions issued by the Hon'ble DRP, erred in making a disallowance of Rs. 45,35,45,982 to the Appellant's total income based on the provisions of Chapter X of the Act. b. Based on the facts and circumstances of the case and in law, the TPO erred and the Hon'ble DRP further erred in not considering the observation of the Hon'ble Supreme Court in the case of CIT v Glaxo SmithKline Asia (P) Ltd. (236 CTR 113) and the rationale, as provided in the Memorandum to the Finance Act 2012, behind bringing the specified domestic transaction within the ambit of transfer pricing regulations i.e. to curb tax arbitrage opportunities to taxpayers by shifting of income to nil or low tax paying entities such as over invoicing in a tax holiday undertaking or an undertaking having carry forward losses of past years. a. Based on the facts and circumstances of the case and in law, the TPO erred and the Ho....
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....ng/confirming the action of the learned TPO in disregarding the corroborative benchmarking analysis submitted by Appellant wherein these same bonds were sold by the Appellant on the same day to unrelated parties. 4) On the facts and in the circumstances of the case and in law, the Hon'ble DRP erred in upholding/confirming the action of the learned TPO of selecting AE's purchase from unrelated parties on a different date as comparable transactions for the purpose of benchmarking without appreciating differences in prices on account of various factors such as the timing of the trade, interest rate movements, etc. 5) Without prejudice, the learned AO/TPO erred in not considering the mean of consolidated comparables uncontrolled transaction i.e. comparables considered by the Appellant and the TPO. 6) On the facts and in the circumstances of the case and in law, the TPO erred and the Hon'ble DRP further erred in denying the benefit of 3 percent variation as per the proviso to the Section 92C(2) of the Act. Ground No.3 - Adjustment in respect of interest paid on Structured Loan Interest on Structured Loan 7) On the facts and in the circumstances of the case and in ....
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....f the case and in law, the learned TPO erred and the Hon'ble DRP further erred in upholding/confirming the action of the TPO of arbitrarily disregarding the evidence furnished to demonstrate the role played/information provided by the AE (which is not available in public domain) to the credit rating agencies. d. Based on the facts and circumstances of the case and in law, the TPO erred and the Hon'ble DRP further erred in not appreciating the explicit support provided by the AE in respect of rating support services transaction and drawing erroneous analogy from the OECD - guidelines/Base Erosion and Profit Shifting ('BEPS') Action Plan. e. Based on the facts and circumstances of the case and in law, the learned TPO erred and the Hon'ble DRP further erred in rejecting the credit rating of the Appellant on a standalone basis certified by an Independent Government Certified Valuer without pointing out any deficiency or insufficiency in the same. f. Based on the facts and circumstances of the case and in law, the learned TPO erred and the Hon'ble DRP further erred in not appreciating/ overlooking the benefit which got accrued to the Appellant on account of....
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....t TDS claim of Rs.54,67,28,068 as per revised tax return filed by the Appellant, resulting into short TDS credit of Rs.7,04,39,392. b. Consequentially, the AO also erred in charging interest u/s 234B and u/s 234C of the Art. The AO erred in initiating the penalty proceedings u/s 271(l)(c) of the I.T. Act. The Appellant prays that the adjustment in relation to the corporate tax and transfer pricing matters made by the learned AO/ TPO and upheld by the Hon'ble DRP be deleted. The Appellants pray that the AO be directed suitably in the matter. The Appellants crave leave to add to, alter, amend, vary, omit or substitute the aforesaid grounds of appeal or add a new ground or grounds of appeal at any time before or at the time of hearing of the appeal as they may be advised." 3. Assessee has filed following additional grounds :- "1. The Appellant submits that the Transfer Pricing Order dated 01/11/2016 passed u/s 92CA(3A) of the Act is barred by limitation as per section 153 r.w.s. 92CA(3A) of the Act. Hence, the same deserves to be quashed. 2. The Appellant submits that section 92BA (i) of the Income Tax Act, 1961 (Act) has been omitted by Finance Act 2017. w.e.f 01.04.....
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....eference made u/s 92CA(1) of the Act to TPO] [21 Months from the end of assessment year in which income was first assessable [section 153(1)] + 12 Months [section 153(4) i.e. 9 months in 2014 + 12 months in 2015 + 12 months of 2016] 10 29/9/2017 DRP passed direction u/s 144C(5) of the Act 11 30/9/2017 Time limit for passing order u/s 144C(5) of the Act [i.e. nine months from the end of the month in which draft order is forwarded to assessee i.e. 30.12.2016] 12 28/11/2017 Order u/s 143(3) r.w.s 144C of the Act passed 13 30/11/2017 Time limit for passing order u/s 143(3) r.w.s. 144C of the Act expires [i.e. one month from the end of the month in which order of DRP is received by the AO - it is presumed that DRP order is received by AO in October, 2017] 6. Furthermore in support of the aforesaid provision of additional ground learned Counsel of the assessee placed reliance on the following case laws : * Pfizer Healthcare India (P) Ltd. Ors. Vs. JCIT & Anr. (320 CTR 812)(Mad) * M/s. Louis Dreyfus Commodities India Pvt. Ltd. Vs. DCIT (ITA No. 2381/Del/2014) 7. Furthermore learned Counsel of the assessee has also filed written submission on merits of the grounds relati....
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....t is Caa-C whereas its rating based on consolidated financial statement of EFSL is A1+ for short term and AA-/Stable for long term. There is a difference between corporate guarantee and rating support. Corporate guarantee assures the banks/financial institutions that in case of default by the borrower, the guarantor will repay the money whereas in case of rating support, the borrower get the money at considerable cheaper rate which is additional benefit in case of rating support fees; hence, the person giving the rating support needs to be compensated more. Thus, rating support fees paid @ 0.75% may be allowed. Bank guarantee is required for obtaining loan from banks whereas the credit rating is used for various other ways of borrowing also i.e. issuing commercial papers, debentures, financial instruments, structured products etc. For example, in order to issue commercial paper, the credit rating of issuer should be A2 as stipulated by Reserve Bank of India (RBI) which was possible for the assessee only on the basis of obtaining the credit rating on the basis of consolidated financial statements of EFSL. The assessee has raised Rs. 2,072 Crores by commercial papers which were....
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.... The interest has been paid on the basis of fluctuation in NIFTY which itself is a comparable uncontrollable price. Such products issued by the assessee are governed by Circular dated bearing No Cir IMD/DF/17/2011. The assessee submits that such products are derivative product and does not offer assured interest and thus rate and tenure of each product is agreed keeping in mind the probability of paying, fair pricing model and policy, risk reward relationship etc. Therefore, the interest paid on the basis of fluctuation in NIFTY is a comparable and adjustment made by the TPO and confirmed by the DRP may be deleted. Your Honour would appreciate that similar issue came up for consideration in case of J.P. Morgan Securities India Pvt. Ltd. vs. Addl. CIT [ITA 1759/Mum/2019]. In said case, the assessee issued nifty linked debentures. On balance sheet date, on the basis of increase in nifty, the assessee made the provision of interest which has been disallowed by the AO and confirmed by the DRP. Hon'ble ITAT allowed the claim of the assessee. Copy of decision is enclosed herewith for your honours ready reference. The assessee's case is similar to the J.P. Morgan (supra)....
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....per unit Total Purchase amount Average ALP Difference in ALP and Actual price % of difference As compared to actual price 27 Feb 13 80 10,11,897 8,09,51,760 10,11,564 333 0.033 27 Feb 13 90 10,13,828 9,12,44,520 10,11,564 2,264 0.223 From the above, it can be seen that difference is not even 1% of actual price. Therefore, the adjustment made may be deleted considering section 92C(2) of the Act as the variation does not exceed 3%. 8. We have heard both the parties and perused the records. Brief facts of the case are that ECL Finance Limited (ECL Finance) is registered with the Reserve Bank of India (RBI) as a Non-banking financial company and primarily engaged in the business of financing and corporate lending against security of shares, stock, bonds, debenture or other similar instrument on short, medium and long term basis. Besides, the Company also trades in securities. During the Assessment Year 2013-14 ('AY 2013-14'), ECLF had entered into the following international transaction and specified domestic transactions with its AEs. Sr. No. Nature of Transaction Amount Method Specified Domestic Transactions 1 Interest on Demand Loans Paid 34,90....
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....016, 60 days expires on 1.11.2016 [i.e. 60 days = 30 days of December, 2016 and 30 days of November, 2016]. Thus, last date of passing order is 31/10/2016 7 1/11/ 2016 TPO passed order u/s 92CA(3) of the Act 8 30/12/2016 Draft order passed by AO 9 31/12/2016 Time Limit u/s 153(4) of the Act for passing order expires [if reference made u/s 92CA(1) of the Act to TPO] [21 Months from the end of assessment year in which income was first assessable {section 153(1)} + 12 Months [section 153(4) i.e. 9 months in 2014 + 12 months in 2015 + 12 months of 2016] 10 29/9/2017 DRP passed direction u/s 144C(5) of the Act 11 30/9/2017 Time limit for passing order u/s 144C(5) of the Act [i.e. nine months from the end of the month in which draft order is forwarded to assessee i.e. 30.12.2016] 12 28/11/2017 Order u/s 143(3) r.w.s 144C of the Act passed 13 30/11/2017 Time limit for passing order u/s 143(3) r.w.s. 144C of the Act expires [i.e. one month from the end of the month in which order of DRP is received by the AO - it is presumed that DRP order is received by AO in October, 2017] 11. Now it is the contention of the assessee that time limit for passing of the order under s....
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....upra) while dealing with the issue held that for computing the period of 60 days, the last date as per section 153 should be excluded. Operative part of the judgment is extracted for ready perusal 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 months from the end of the assessment year in which the income was first assessable. The submission of the revenue is to the effect that limitation expires only on 12 am of 01.01.2020. However, this would mean that an order of assessment can be passed at 12 am on 01.01.2020, whereas, in my view, such an order would be held to be barred by limitation as proceedings for assessment should be completed before 11.59.59 of 31.12.2019. The period of 21 months therefore, expires on 31.12.2019 that must stand excluded since Section 92CA(3A) states 'before 60 days prior to the date on which the period of limitation referred to Section 153 expires'. Excluding 31.12.2019, the period....
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....evant material on record. It has been noticed above that the provisions of section 92CA requiring the passing of the order by the TPO determining the ALP of the international transactions, came into being by the Finance Act, 2002. As per sub-section (3) of section 92C, the TPO is required to pass the order determining the ALP of the international transactions. No time limit was initially given for the passing of order by the TPO. It is only by the Finance Act, 2007, that sub-section (3A) was inserted providing time limit for the passing an order by the TPO. No amendment has been carried out in this provision thereafter. Subsection (3A) of section 92CA containing the relevant time limit for the passing of the order by the TPO, reads as under : - "(3A) Where a reference was made under sub-section (1) before the 1st day of June, 2007 but the order under subsection (3) has not been made by the Transfer Pricing Officer before the said date, or a reference under subsection (1) is made on or after the 1st day of June, 2007, an order under sub-section (3) may be made at any time before sixty days prior to the date on which the period of limitation referred to in section 153, or as the ca....
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....onsidered as mandatory. The Hon'ble Bombay High Court has held that the word "may" in section 127 should be read as "shall" and hence the granting opportunity to the assessee is mandatory. 6.7. Section 16 of the Wealth-tax Act, 1957 deals with the assessment of wealth. Section 16A having marginal note of "Reference to Valuation Officer' provides through sub-section (1) that : "For the purpose of making an assessment (including an assessment in respect of any assessment year commencing before the date of coming into force of this section) under this Act, where under the provisions of section 7 read with the rules made under this Act or, as the case may be, the rules in Schedule HI, the market value of any asset is to be taken into account in such assessment, the Assessing Officer may refer the valuation of any asset to a Valuation Officer - (a) in a case where the value of the asset as returned is in accordance with the estimate made by a registered valuer if the Assessing Officer is of opinion that the value so returned is less than its fair market value; (b) in any other case, if the Assessing Officer is of opinion- (i) that the fair market value or the asset exceeds the....
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....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 AO u/s 153. Despite the use of the word 'may', the time limit for passing the order by the TPO is mandatory, as in the otherwise situation of the TPO having been allowed more time by implication, say of three months or more, could at that time have frustrated the provisions of section 153 for the passing of the assessment order by the AO. Thus we have no hesitation in holding that the use of the word 'in sub-section (3A) of section 92CA is to be construed as 'shall', thereby making this time limit as mandatory and not directory. As such, it is held that the TPO is bound by the given time limit for passing of his order. 6.9. Having held that the word 'may' in section 92CA(3A) should be read as "shall", we once again note that prior to the insertion of section 144C by the Finance Act, 2009, the time limit for completion of assessment was contained in section 153 and accordingly the time limit for the passing of the order by the TPO was also set out accordingly in section 92CA w.r.t. the time limit....
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.... order was directly passed without routing through draft order or DRP. The Hon 'ble Court held it to be a noncurable defect and resultantly the assessment was quashed. It was held that when there is an omission on the part of the AO to follow the mandatory procedure prescribed under the Act, such an omission cannot be termed as a mere procedural irregularity and it cannot be cured. Extantly, we are confronted with a situation in which the draft order has been passed in time but the lapse has come in the passing of the order by the TPO. The consequence of the above scenario is that the passing of a valid and properly timed draft order cannot lead to the setting aside of the final assessment order. However the passing of the time barred order by the TPO, which is again a mandatory procedure prescribed under the Act, would be a non-curable defect, having the consequence as if it was not passed. In such circumstances, though the final assessment order would be saved but the addition on account of transfer pricing adjustment arising from the determination of the ALP of the international transactions by the TPO as emanating from his time barred order, would be unsustainable. We hold ....