AI Drafter 
TaxTMI 
TaxTMI 
2023 (2) TMI 1112
X X X X Extracts X X X X
X X X X Extracts X X X X
....Denial of claim of depreciation on goodwill 2,92,19,122/- 3 Ground No. 5- Disallowance under section 4o(a) of the Act 'on account of non-deduction of TDS on software purchase 16,65,932/- 4 Ground No. 6- Disallowance under section 40(3) of the Act on account of non-deduction of TDS on foreign parties: a) Communication Charges-24,28,156/- b) Subscription Fees-29,O3,666/- c) Training Fees-3,28,829/- d) Consultancy Fees- 7,85,256/- 64,45,907/- 5 Ground No. 7- Delay in payment of employee's ESIC and PF contribution 1,74,35,513/- 6 Ground. No. 8 - Non granting of credit of self assessment 9,11,44,000/- 7 Ground No. 8 - Short credit of tax deducted at source 5,61,53,656/- 3. The summary of additions challenged in this appeal are as under:- Sr. No. Particulars Amount in Rs. Transfer pricing adjustments 1. Rendering of software development services 68,37,05,578 2. Intra-group services 10,51,45,309 Sub- total (A) 78,88,50,887 Corporate tax additions 3. Grant of lesser deduction under section 10AA of the Act in respect of remaini....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e tax during the year under consideration should be allowed as deductible business expenditure while computing the total taxable income. 5. Additional Ground No. 4 has not been pressed; therefore, it is dismissed as not pressed. 6. In sum and substance vide Additional Ground Nos. 1 to 3, assessee has challenged; i) The period of limitation for passing the transfer pricing order by the TPO. ii) In absence of the TPO order, the entire proceeding initiating by the AO u/s 144C is bad in law. iii) In absence of valid TPO order, the AO is required to complete the assessment within the due date as prescribed u/s 153 of the Act and since no final assessment has been passed within the time limit, the assessment order is barred by limitation. 7. Since the additional grounds goes to the very root of the issues involved challenging the limitation and jurisdiction of passing the order of TPO as well as assessment order and are borne out from the records, therefore the same are being admitted for adjudication. 8. The facts in brief qua the limited purpose of adjudication of legal issues raised in aforesaid additional grounds are that, assessee is a wholly o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; Less Deduction Deduction u/s 10A A 12,65,12,187 Total Income 215,99,87,708 Rounded off u/s 288A 215,99,87,710 11. Before us ld. Counsel for the assessee, Mr. Dhanesh Bafana submitted that the order of TPO is time barred in terms of section 92CA(3) of the Act and consequently, the passing of draft assessment order and the entire proceeding initiated u/s 144C is bad in law, because in absence of valid TPO order, the AO is required to complete the assessment within the due date as prescribed u/s 153 of the Act and since no final assessment has been passed within the time limit, therefore, the assessment order is barred by limitation. 12. Following chronology of events are relevant for the purpose of adjudication of the aforesaid additional grounds:- Sr. No. Particulars Relevant Dates A Assessment Year 2012-13 B Period of limitation for making an order of assessment as per Section 153 of the Act 24 months from the end of Assessment Year i.e. 31/03/2015 C Extension of period of limitation in case reference is made under section 92CA of the Act ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....end to the framing of assessments and the DRP has been constituted for redressal of disputes involving TP issues, in a timely fashion. In this scheme of things, I am unable to accept the submission that the period of 60 days stipulated for passing of an order of transfer pricing, is only directory or a rough and ready guideline. This argument is rejected. 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 a m 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....provided in section 153 has to be taken into consideration while interpreting the word 'may be' as provided in sub section 3A of section 92CA. Here in this case, AO had 60 days for passing of the order after the TPO has passed the order from 31st January 2016. 19. Regarding the judgment of Hon'ble Madras High Court in the case of M/s. Pfizer Healthcare India Private Limited (supra), he submitted that though this issue has been decided in favor of the assessee that the 60 days have to be counted from one day prior to the date on which the period of limitation referred to section 153 expire, i.e., 60 days have to be calculated from 30th March and not from 31st March. However, overall provision of section 92CA (3A) r.w.s. 153 has to be given a harmonious construction and the word 'may be' has to be interpreted as 'so far as may be', because in terms of section 92CA (4), AO has no option but to adopt the adjustment made by the TPO and there is no application of mind by the AO once the TPO has given his order. The reference to the TPO and determination of arm's length price is part of the overall process of assessment and determination of income for which the time limit has been pres....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntroduction of Sec. 144C of the Act by the Finance (no.2) Act, 2009 with retrospective effect from 01.04.2009, if assessee was aggrieved by any of the additions/disallowances made by the Assessing Officer, an appeal would lie to the Commissioner (Appeals) under Section 246A of the Act. However, a new scheme of dispute resolution was brought into the Act by insertion of Sec. 144C of the Act in the context of "eligible assessee" prescribed therein. Sec. 144C of the Act contains 15 subsections and provides for a mechanism for dispute resolution, powers of Dispute Resolution Panel, definition of Dispute Resolution Panel, eligible assessee, etc. In terms of the schematic arrangement prescribed in Sec. 144C of the Act, firstly a "draft proposed order of assessment" would be passed in the case of an "eligible assessee"; thereafter such "eligible assessee" is permitted within 30 days of receipt of the order, either to file objections before the DRP or accept such draft assessment order and communicate the same to the Assessing Officer. If the assessee opts for filing objections before the DRP, the DRP hears such assessee and gives directions to the Assessing Officer for completion of asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ily to be a "person" which is an Indian company formed and registered under the Companies Act, 1956 in whose case the transfer pricing order has been passed proposing a variation. Notably, in the instant case, the erstwhile entity, FEIPL, was an Indian company, but it ceased to exist on 01.10.2013 pursuant to the scheme of amalgamation sanctioned by the Hon'ble Bombay High Court vide order dated 05.07.2013, i.e. before the date of passing of the transfer pricing order by the TPO under Section 92CA(3) of the Act in the name of FEIPL. Thus, as on the date of passing of order by the TPO on 30.01.2015, FEIPL did not exist as an Indian company under the Companies Act, 1956 as understood by Sec. 2(26) of the Act and consequently, there does not exist any "person" as contemplated under Section 2(31) of the Act. Thus, it is a case where the TPO proposed variation in the case of a non-existent entity, which is not even understood as a "person" under the Act. This also brings out that FEIPL could not be understood as an "eligible assessee" in the eyes of law under Section 144C(15)(b)(i) of the Act; and, in any case, on the date of passing of order by the TPO, the existing entity was FETS....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s have to be counted prior to the date of last date of limitation u/s 153. 25. Section 153 of the Act as applicable for the AY 2012-13 reads as under:- '153. (i) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of- (a) two years from the end of the assessment year in which the income was first assessable; or (b) one year from the end of the financial year in which a return or a revised return relating to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, is filed under sub-section (4) or sub-section (5) of section 139, whichever is later.. Provided also that in case the assessment year in which the income was first assessable is the assessment year commencing on the 1st day of April, 2009 or any subsequent assessment year and during the course of the proceeding for the assessment of total income, a reference under sub-section (1) of section 92CA is made, the provisions of clause (a) shall, notwithstanding anything contained in the first proviso, have effect as if for the words "two years", the words "three years" had been substituted." 26. Thus,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d "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 of the word "prior" is not without significance. It is not open to this court to just consider the word "to" by ignoring "prior". The word "prior" in the present context, not only denotes the flow of direction, but also actual date from which the period of 60 days is to be calculated. It is settled law that while interpreting a statute, it is not for the courts to treat any word(s) as redundant or superfluous and ignore the same. In this connection, it is pertinent to note the judgment of the Ape....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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 from which the period of 60 days is to be calculated, reading down the provision with the use of the word "from", which denotes the starting point or period of direction in general parlance, would mean that 60 days "from the last date". Even going by Section 9 of the General Clauses Act, when the word "from" is used, then, that date is to be excluded, implying here that 31.12.2019 must be excluded. After excluding 31.12.2019, if the period of 60 days is calculated, the 60th day would f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ermination 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 pending, the department gets another 12 months. Once reference is made and after availing the benefit of the extended period to pass orders, the department cannot claim that the time limits are not mandatory. Hence, the contention raised in this regard is rejected. 36. As rightly pointed out by Mr.Ajay Vohra, learned senior counsel for the respondents in WA.Nos.1148 and 1149/2021, the word "may" has to be sometimes read as "shall" and vice versa depending upon the context in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....strued as "shall" and the time period fixed therein has to be scrupulously followed. The word "may" is used there to imply that an order can be passed any day before 60 days and it is not that the order must be made on the day before the 60th day. The impact of the proviso to the sub-section clarifies the mandatory nature of the time schedule. The word "may" cannot be interpreted to say that the legislature never wanted the authority to pass an order within 60 days and it gave a discretion. Therefore, the learned Judge rightly held the orders impugned in the writ petitions as barred by limitation, as the Board, in the Central Action Plan, has specified 31.10.2019 as the date on which orders are to be passed by the TPO, reiterating the time limit to be mandatory. 28. Now if we compare the case of Pfizer Healthcare India Pvt. Ltd. and assessee on the relevant dates then following picture emerges:- Sr. No. Particulars Relevant Dates Pfizer Healthcare India Pvt. Ltd. (Madras High Court) Appellant A Assessment Year 2016-17 2012-13 B Period of limitation for making an order of assessment as per Section 153 of the Act 21 months from the end of Assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rovisions of section 144C(1) and sub section 15 reads as under:- 144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation which is prejudicial to the interest of such assessee. . . . (15) For the purposes of this section,- (a) "Dispute Resolution Panel" means... (b) "eligible assessee" means,- (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) any non-resident not being a company, or any foreign company." 31. The aforesaid section envisages that, AO in the first instance has to forward a draft of the proposed order of assessment to the "eligible assessee", if he proposes to make any variation which is prejudicial to the interest of such assessee. The draft assessment order is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....here remains no transfer pricing variation arising/ resulting or remaining as a consequence thereto. The effect of passing a null and void transfer pricing order here is that it has to be 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. Thus, in absence of any transfer pricing order being passed at all and any variations arising there from, the entailing consequence in instant case is that the appellant cannot be said to be an 'eligible assessee' under section 144C(15)(b)(ii) of the Act. 35. Accordingly, once the assessee becomes an 'ineligible assessee', the very foundation for proceeding to pass the draft assessment order does not survive, meaning thereby, that the draft assessment order passed in the instant case becomes legally invalid and hence, all consequential proceedings on the basis of the said order fail. In the instant case, a reference was made by the Ld. AO to the Ld. TPO as per the provisions of section 92CA(1) of the Act and accordingly the timelines prescribed u/s 153 of the Act remain extended by a year in view of the 3rd proviso of section 153 of the Act. Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 16694/2013 on 27th September 2013 38. What culminates from the aforesaid two sets of parallel decisions is that the provisions of section 144C of the Act are specific and provides for a special code which must be strictly followed since it impacts the rights of an assessee substantively, i.e., the ability to accept or object a draft order proposition, file objections before the Dispute Resolution Panel and ensure a speedy disposal thereof. Any lapse in treating an assessee as 'eligible assessee' where it is otherwise not one and vice-versa results in fatality, since it becomes a jurisdictional defect and goes on to the roots in deciding the validity of the entire assessment proceedings against the revenue. In this context, on the issue of passing a correct assessment order in first instance (either a draft or a final one), the findings of the Hon"ble Madras High Court in case of ACIT v. Vijay Television (P.) Ltd [2018] 95 taxmann.com 101 (Madras) are extremely critical which reads as follows: "47. The necessity for the Parliament to incorporate Section 144-C is not only to safeguard the Revenue, but also the assessee and any mistake committed by any one of them, the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to be held as null and void, and thus, consequentially holding the final assessment order to be bad in law as well. 42. Thus, despite the fact that the reference made to the Ld. TPO is valid, in absence of a legally valid transfer pricing order and a valid draft assessment order, the Ld. AO cannot assume jurisdiction to proceed with the assessment under Section 144C of the Act and pass the consequential final assessment order. The decisions of the Hon'ble jurisdictional High Court in case of International Air Transport Association (supra) and Dimension Data Asia Pacific PTE Ltd. (supra) forties appellant's contentions and the irresistible conclusion that the draft assessment order imbibes a jurisdictional power in terms of Sec. 144C(1) of the Act and creates/ envisages special rights upon the 'eligible assessee'. If such an order is passed on an assessee who is not an 'eligible assessee' as defined in section 144C(15)(b)(i) of the Act, then it would render the entire proceedings pursuant to such order null and void. 43. We find that section 153(1) of the Act, as it stood applicable for the AY 2012-13, provided a time limit of 3 years from the end of AY 2012-13 for com....