TaxTMI 
TaxTMI 
2021 (9) TMI 1399
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....,290 as against Rs. 1,94,95,27,610 declared by the assessee 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. Bas....
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....ding cogent reason. 3) 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 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. Groun....
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....law, the TPO erred in rejecting the detailed functional, asset and risk analysis carried out by the Appellant in respect of rating support services availed from the AE. c. Based on the facts and circumstances of 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....
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.....T. Rules. d. In the alternative and without prejudice to the above, disallowance u/s 14A of the Act is excessive and unreasonable. Ground No.8 - Short credit of TDS a. Based on the facts and circumstances of the case and in law, the AO erred in allowing TDS credit of Rs.47,62,88,676 as against 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 :- ....
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.... period of limitation stated in section 153 expires -i.e. 31.12.2016] Excluding 31.12.2016, 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 or....
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....solution Panel (DRP). DRP accepted the contention of the assessee that it has received the benefit of consolidated financial statement of EFSL; however, it allowed relief to the assessee to extent of 0.5% on Rs. 2,572 Crores being the amount of loan from Banks for which explicit corporate guarantee was given by EFSL. Being aggrieved, the assessee has filed present appeal before Your Honours. Submissions of the assessee are as under: - The rating of the assessee on the basis of its standalone financial statement 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....
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....n considered as comparable. TPO restricted the interest claim to Rs. 8.41 Crores being determined at average annualized rate of 16.06% on NLD issued or redeemed by the assessee. The adjustment has been made on the ground that assessee has paid the interest @ 43.36% which on annualized basis works out to be 16.06%. Debenture has been issued for short period and also there is no comparable uncontrolled transaction. The action of the TPO has been upheld by the DRP. Submissions of the assessee are as under: The debentures issued in present case are linked to NIFTY. 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 co....
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.... that the price at which assessee bought bonds is lesser than the last traded price; hence, the adjustment made by the TPO may be deleted. The assessee also submits that the difference in the price could be for the reason of timing of trade, market outlook, interest rate movement, negotiation between parties etc. The said bonds have been sold on same day to two unrelated parties. The average sale price of 5 transaction is coming to Rs. 10,11,564/-. Therefore, such sale sell price should be taken as ALP under CUP as it is the price of the Bond received from Non AE and that too on same day. If the above average price is taken as ALP then the difference in ALP and actual price is calculated as follows: Deal Date Qty Rate 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 se....
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....onal Thermal Power Company Ltd. Vs. CIT (229 ITR 383 ). We may firstly gainfully refer again to chart pertaining to this issue submitted by the assessee herein above. Sr. No Dates Particulars 1 29/11/2013 Return of income filed u/s 139(1) of the Act 2 5/9/2014 Notice u/s 143(2) of the Act issued 3 31/3/2015 Revised return of income filed u/s 139(4) of the Act 4 19/1/2016 Reference u/s 92CA(1) of the Act made to Transfer Pricing Officer (TPO) 5 31/12/ 2015 Time Limit u/s 153(1) of the Act for passing order expires (if no reference made to TPO) [21 Months from the end of assessment year in which income was first assessable i.e. 9 months in 2014 + 12 months in 2015] 6 31/10/2016 Time limit for passing order u/s 92CA(3) expires as per section 92CA(3A) of the Act [i.e. 60 days prior to the date on which period of limitation stated in section 153 expires -i.e. 31.12.2016] Excluding 31.12.2016, 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 Dr....
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....payer, we would advert to the provisions contained under section 92CA(3) read with section 153 of the Act. 16. Undisputedly, sub-section (3A) to section 92CA has been inserted w.e.f. 01.06.2007 providing time limit for the Transfer Pricing Officer to pass the order i.e. within a period of 60 days prior to the date of completion of assessment as per section 153. So, u/s 92CA (3A) read with section 153, TPO was required to pass the order within the period of 60 days prior to the date on which the period of limitation referred to in section 153 expires i.e. 21 months. 17. In the instant case, undisputedly assessment order was passed on 31.03.2013 and the TPO was required to pass the order within 60 days prior to the date on which period of limitation referred to in section 153 expires. 18. Now, the question arises as to how the period of 60 days prior to the date of TP order i.e. 31.03.2013 is to be computed. 19. Hon'ble Madras High Court in case of M/s. Pfizer Healthcare India Pvt. Ltd. (supra) 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 j....
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.... with the TPO for passing order u/s 92CA(3). 5.28. Turning to the facts of the instant case, we find that the AO passed the final assessment order on 29.1.2015, which is well within a period of one month from the end of the month in which direction was received from the DRP on 24.12.2014. As such, we hold that the final assessment order passed by the AO is within the time prescribed u/s 144C(13). Further since the draft order has also been passed within a reasonable time, the same is also not barred by limitation. The contention of the Id. AR that the draft order passed in this case was barred by limitation, is there/ore, found to be without any substance and hence repelled. B. Time limit for passing of order by the TPO 6.1. The Id. AR also challenged the passing of the order by the TPO. It was submitted that the TPO passed order on 31.5.2014, which was time barred and, hence, the same should be annulled leading to the quashing of the final assessment order. In the opposition, the Id. DR supported the Revenue's stand. 6.2. We have heard the rival submissions and perused the relevant material on record. It has been noticed above that the provi....
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....rily the use of the word "shall" signifies mandatory compliance, the word 'may' signifies directory compliance. But at times, the word "may" can also be read as "shall1 and vice versa. In fact, all depends upon the context and the background of the provision in which such a word is used. 6.6. Section 127 deals with the power to transfer cases. Subsection (1) of this provision provides that: "The Director General or Chief Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him'. Dispute arose in Sahara Hospitality Ltd. vs. CIT (2013) 352 ITR 38 (Bom) as to whether or not giving the assessee a reasonable opportunity of being heard before the transfer of case by the Chief Commissioner, in the backdrop of the use of the word "may" in the provision, be considered as mandatory. The Hon....
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....r was must if the given contingencies did not exist. In this regard, the Hon'ble High Court observed that : There is no doubt about the fact that the use of expression "may" and "shall" to some extent serves an indicia to the intention of the legislature and helps in deciding as to whether the given requirement is directory or mandatory in character, but the use of expression "may" or "shall" is never considered decisive in that regard'. It was thus held that the moment the estimated value exceeded the returned value of the asset by more than what is envisaged by r. 3B, then the WTO had no option, but to make a reference and he is not to wait for a request from the assessee to make a reference. Similar view has been expressed by the Hon'ble Delhi High Court in Sharbati Devi Jhalani vs. CWT & Ors. (1986) 159 ITR 549 (Del). It is vivid from the above discussion that the use of word 'may' or 'shall' in a provision is not conclusive of its mandatory or directory nature. One needs to go through the text of the provision and the context in which such a word has been used. 6.8. Reverting to section 92CA, we find that the Finance Act, 2007 inserted sub-sect....
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....with the third proviso and clause (viii) of the Explanation to the section, comes at 7th June, 2014. Period of 60 days prior to such time limit coming as per section 153, available with the TPO for passing his order, comes to an end on 8th April, 2014. As against this, the order was actually passed by the TPO on 31st May, 2014. Thus, the order passed by the TPO is patently time barred. C. Consequences of valid draft order and TPO's time barred 7. The Id. AR argued that since the draft order as well as the order of the TPO were time barred, the final assessment order passed by the AO was liable to be set aside. We have held above that the draft order was passed within time and only the order of the TPO is time-barred. When an order is passed without jurisdiction or beyond the permissible time, it is considered as null and void. The effect of passing a null and void order is that it is considered as non est, meaning thereby, that it entails all the consequences of not having been passed at all and is ignored for all practical purposes. The Hon'ble Madras High Court in Vijay Television (P.) Ltd. vs. DRP (2014) 369 ITR 113 (Mad) considered a case in which the ....
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....quired to be passed before 60 days prior to the date on which limitation referred to in section 153 expires, which actually expires on 20.01.2013. 25. Computation of period of 60 days given by the taxpayer extracted in the preceding para no.20 cannot be faulted with on any ground because from 31.03.2013, the date of passing order of the AO, 60 days was to be computed by excluding the date of order i.e. 31.03.2013. So, while excluding the date 31.03.2013, the day of passing the order, the order was required to be passed by the TPO by 29.01.2013 whereas the impugned order has been passed on 31.01.2013 which is barred by limitation. 26. In view of what has been discussed above and following the decision rendered by Hon'ble Madras High Court and the order passed by the coordinate Bench of the Tribunal in cases of M/s. Pfizer Healthcare India Pvt. Ltd. and Honda Trading Corporation (supra) respectively and mandate of section 92CA (3) read with section 153 of the Act, impugned order passed by the Id. TPO is barred by limitation which was required to be passed by 29.01.2013 and as such is hereby quashed. 27. Consequent additions made on account of transfer p....