TaxTMI 
TaxTMI 
2023 (2) TMI 1183
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....porate Tax Grounds 4. Disallowance of the deduction claimed u/s 10B of the Income Tax Act, 1961 (the Act) 5. Non-granting of incremental deduction u/s. 10B on account of disallowance u/s. 43B of the Act. 6. Weighted deduction u/s. 35(2AB) of the Act granted on net expenditure incurred. 7. Disallowance of the rental expenditure u/s. 40A(2)(b) of the Act. 8. Disallowance of FCCB premium. 9. Disallowance of FCCB issue expenses. 10. Disallowance u/s. 14A of the Act. 11. Income received on assignment of commercial contracts taxed as business profits. 12. Adjustment made to 'book profits' computed in terms of section 115JB of the Act by: * considering the net profit amount as 'Profit before Tax and Exceptional Items' instead of 'Profit before Tax' * not reducing the amount of unabsorbed depreciation from the book profits * increasing the book profits by the amount of disallowance made u/s. 14A. 13. Levy of the interest u/s. 234B of the Act. 14. Levy of the interest u/s. 234D of the Act. 15. Credit for TDS considered short by Rs. 45,06,609/- 16. Credit for tax paid on self-assess....
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....limitation and in support of it, placed reliance the following decisions, which are as under:- a. Decision of the Mumbai Bench of the Tribunal in the case of IPF India Property Cyprus (No. 1 ) Ltd. v/s. DCIT reported in [2020] 115 taxmann.com 78; b. Decision of the Mumbai Bench of the Tribunal in the case of Precilion Holdings Ltd. v/s. ACIT [ITA No. 7412/Mum/2018]; c. Decision of the Mumbai Bench of the Tribunal in the case of Mausami SA Investments LLC v/s. ACIT [ITA No. 7026/Mum/2018] 7. Apart from that, it has also been submitted that in the following decisions, held that in case of an 'eligible assessee' a final assessment order passed by the AO without passing a draft assessment order is bad in law, which are as under:- International Air Transport Association v/s. DCIT [2016] 241 Taxman 249 (Bombay HC); Dimension Data Asia Pacific Pte. Ltd. v/s. DCIT [2018] 257 Taxman 442 (Bombay HC); and PCIT v/s. Andrew Telecommunications Pvt. Ltd. [ITA No. 144 of 2017](Bombay HC at Goa] 8. In sum and substance, the assessee has submitted as under:- a. The Appellant is not an 'eligible assessee' in terms of section....
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.... have been passed on 29.01.2013, i.e., the period of 60 days prior to the date of limitation of section 153, i.e. 31st March 2013, starts with 30.03.2013 as per the following calculation:- 60 day period expires on March = 30 days (excluding 31.03.2013) February = 28 days January = 2 days Thus, the date on which transfer pricing has been passed was 29.01.2013, whereas the transfer pricing order u/s 92CA (3) has been passed on 30.01.2013. 12. In the recent judgment, the similar issues have come up before us in the case of Atos India Pvt. Ltd. vs. DCIT (ITA No. 1795/Mum/2017 dated 23.02.2023), wherein the whole arguments of both the parties have been made and dealt in on similar issues, which are as under:- 14. He further submitted that the Hon‟ble Madras High Court in the case of M/s. Pfizer Healthcare India Private Limited vs. JCIT/ Dy. CIT (Writ Petition No.32699 of 2019) [2021] 124 taxmann.com 536 (Madras)/[2021] 433 ITR 28 (Madras) has allowed the writ petition filed and has accepted the Assessee's contention that the order of the TPO passed during the 60 days period prior to the due date of completion of assessment is ....
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....er submitted that in absence of TPO order, i.e., if it is barred by limitation, then the entire proceedings initiated by the AO u/s 144C also becomes bad in law, because the assessee would no longer qualify as an "eligible assessee‟ as defined u/s 144C of the Act. Accordingly, passing a draft assessment order by invocation of provisions of section 144C of the Act will not be mandated under the Act. 17. His next line of argument is that, in absence of valid TPO order, AO was required to complete the assessment within the due date u/s 153, i.e. He should pass the final assessment order by 31st March 2016 and instead, he has passed the draft assessment order on 29th March 2016 and the final assessment order on 31st March 2017, which is beyond the period of limitation. 18. On the other hand, Ld. DR submitted that AO has made reference to the TPO u/s 92CA(1) for determination of arm‟s length price on the international transactions entered by the assessee with its AE‟s. The TPO proposed adjustment vide his order dated 31st January 2016 and therefore, in accordance with provision of section 144C(1), the AO was required to pass the draft assessment order....
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....see is that, once the TPO‟s order is barred by limitation, then the assessee is no longer "eligible assessee‟. Ld. DR submitted that when the reference was made to the TPO in section 92CA and TPO had proposed adjustment, then assessee was clearly an "eligible assessee‟ and therefore, AO was justified in passing a draft assessment order u/s 144C(1). He further submitted that even for the technical reason delay of one day in passing the TPO order is declared as time barred, then it does not mean that assessee does not qualify as "eligible assessee‟ and in TPO‟s order there was a clear cut variation as consequence of the order of TPO. Here in this case, TPO had proposed TP adjustment of more than Rs. 78.88 crores and therefore, assessee was clearly "eligible assessee‟ u/s 144C(1) r.w.s. Clause (b) of Sub-section (15) of section 144C. At the most, only the TP addition may not be considered but other corporate addition will be sustained and same has to be decided on merits. 21. Ld. Counsel for the assessee by way of rejoinder submitted that once there is no TP adjustment, there is no question of assessee being treated as "eligible assessee....
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....e proposed order of assessment only to an "eligible assessee‟, and not to every assessee under the Act. The meaning of the expression "eligible assessee‟ can be found in clause (b) to sub-section 15 of Sec. 144C of the Act, which reads as under :- "(15) For the purposes of this section, - (a) ..... (b) "eligible assessee" means, - (i) any person in whose case the variation referred to in subsection (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) any foreign company." Ostensibly, the expression "eligible assessee‟ has a restrictive meaning as it covers only two types of persons. Firstly, any person in whose name the TPO has proposed variation in the order passed under Section 92CA(3); and, secondly, any foreign company. In the instant case, FEIPL, the entity in whose name the draft assessment order has been passed, was not a foreign company and, therefore, it can be understood to be an "eligible assessee‟ only if it falls within Sec. 144C(15)(b)(i) of the Act. Notably, sub-clause (i) of clause (b) of sub-section 15 of Sec. 144C....
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....f assessment could have been passed by the Assessing Officer under Section 144C(1) of the Act, much less in the name of FEIPL. Therefore, the draft assessment order passed in the present case in the name of erstwhile FEIPL is invalid in the eyes of law." DECISION 22. We have heard the rival submissions on the aforesaid legal issue as raised in additional grounds and we have also perused the judgment of Hon‟ble Madras High Court in the case of M/s. Pfizer Healthcare India Private Limited (supra). Here in this case, the reference was made by the AO to the TPO u/s 92CA(1) in August 2014 and TPO had proposed transfer pricing adjustment of more than Rs. 78.88 crores on rendering of software development services and intra group services vide his order 31st January 2016. Thereafter draft assessment order was passed on 29.03.2016 wherein aforesaid TP adjustment was also made and further additions were made on corporate tax issues as enumerated above. After the receiving of draft assessment order, assessee filed objection before the DRP and DRP issued direction on 28.12.2016 and accordingly, final assessment order was passed on 31.01.2017. 23. Sub-section 3A of se....
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....of the Act is juxtaposed, then here in this case, time limit for passing of the TPO order would be on or before 30th January 2016, because, if one day prior to the date of limitation u/s 153 is taken, then 60 days have to counted from 30th March 2016. The 60 days from 30th March would be (30 days of March + 29 days of February being a leap year + 1 day of January). 27. Now whether in these circumstances, the TPO order gets time barred or not, has come up for consideration before Hon‟ble Madras High Court in the case of M/s. Pfizer Healthcare India Private Limited (supra) by the division bench wherein single bench Judge in Writ Appeal No. 1120 of 2001 and others, the Hon‟ble Madras High Court after considering the relevant provision as well as arguments made by both the parties and various judgments had made the following observations:- 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....
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.... concentrate too much on one word and pay too little attention to other words. No provision in the statute and no word in any section can be construed in isolation. Every provision and every word must be looked at generally and in the context in which it is used. It is said that every statute is an edict of the legislature. The elementary principle of interpreting any word while considering a statute is to gather the mens or sententia legis of the legislature. Where the words are clear and there is no obscurity, and there is no ambiguity and the intention of the legislature is clearly conveyed, there is no scope for the court to take upon itself the task of amending or alternating (sic altering) the statutory provisions. Wherever the language is clear the intention of the legislature is to be gathered from the language used. While doing so, what has been said in the statute as also what has not been said has to be noted. The construction which requires for its support addition or substitution of words or which results in rejection of words has to be avoided. As stated by the Privy Council in Crawford v. Spooner [(1846) 6 Moore PC 1 : 4 MIA 179] "we cannot aid the legislature's ....
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....earned senior standing counsel for the appellants is that the usage of the word "may" in Section 92CA (3A) indicates that the time fixed is only directory, a guideline, not mandatory and is for the sake of internal proceedings. 32. Let us now examine the relevant procedures relating to Transfer Pricing. After an international transaction is noticed subject to satisfaction of section 92B, a reference is made to the TPO under sub-Section (1) of Section 92CA of the Act. The TPO after considering the documents submitted by the assessee is to pass an order under Section 92CA (3) of the Act. As per Section 92CA (3A), the order has to be passed before the expiry of 60 days prior to the date on which the period of limitation under Section 153 expires. As per 92CA(4), the assessing officer has to pass an order in conformity with the order of the TPO. After receipt of the order from the TPO determining ALP, the assessing officer is to forward a draft assessment order to the assessee, who has an option either to file his acceptance of the variation of the assessment or file his objection to any such variation with the Dispute Resolution Panel and also the Assessing Officer. SubSectio....
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....e G.P.Singh on the interpretation of statutes, Principles of Statutory Interpretation (1st Edn., Lexis Nexis 2015), which is quoted below for ready reference: "The intention of the legislature thus assimilates two aspects: In one aspect it carries the concept of "meaning" i.e. what the words mean and in another aspect, it conveys the concept of "purpose and object" or the "reason and spirit" pervading through the statute. The process of construction, therefore, combines both literal and purposive approaches. In other words the legislative intention i.e. the true or legal meaning of an enactment is derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed. This formulation later received the approval of the Supreme Court and was called the "cardinal principle of construction". 38. In case of assessments involving transfer pricing, fixing of time limits at various stages sets forth that the object of the provisions is to facilitate faster assessment involving such determination. In the present case, as rightly held by the lea....
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.....12.2019 31.3.2016 E A date prior to the date on which period of limitation expires 30.12.2019 30.3.2016 F Sixty day period expires on 01.11.2019 31.1.2016 G Transfer Pricing Officer's order to be passed any time on / before this date 31.10.2019 30.1.2016 H Date on which Transfer Pricing Officer's order is passed 01.11.2019 31.01.2016 Note 1. Calculation of breakup of sixty days. December: 30 days (excluding 31.12.2019) November: 30 days March: 30 days (excluding 31.03.2016) February: 29 days January: 1 day 29. Thus, if we follow the principle and ratio laid down by the Hon‟ble Madras High Court, then the time limit for passing the TPO order in the case of assessee would expire on mid-night of 30th January 2016 i.e. (00:00 Hrs of 30th January 2016). Here in this case, the order of TPO has been passed on 31st January 2016 and accordingly, the TPO order is clearly barred by limitation by one day by virtue of time limit provided under section 92CA(3). The TPO order admittedly has been passed after the limitation has expired and ....
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.... (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 to be forwarded to an "eligible assessee", which means that, for this section to apply a person has to be an "eligible assessee" Here, the draft assessment order is to be forwarded only to an "eligible assessee" and not to every assessee under the Act. 32. Thus, under the aforesaid provision, the expression "eligible assessee" is followed by an expression "means" and there are two categories referred therein (i) any person in whose case the variation arises as a consequence of TPO‟s order and (ii) any NR or Foreign company. The....
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....t 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. Accordingly, the time limit to complete assessment proceedings u/s 143(3) of the Act in the instant case expired on 31 March 2016. As on the date of passing draft assessment order u/s 144C(1) of the Act i.e. on 29 March 2016, the Ld. AO had already received the order passed by the Ld. TPO dated 31 January 2016, which as discussed above, is time barred, illegal and void ab initio, thereby making the Appellant not an eligible assessee u/s 144C(15) of the Act. In view of the sa....
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....y 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 said party is supposed to face the consequences and cannot put the hands of the clock back and start afresh." 39. Further, in case of Zuari Cements Ltd. v. ACIT [Writ Petition No. 5557 of 2012, dated 21-2-2013] (Andhra Pradesh), the Division Bench (DB) of the Andhra Pradesh High Court categorically held that the failure to pass a draft assessment order under Section 144C (1) of the Act would result in rend....
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....4C 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 completion of assessment under section 143(3) of the Act, i.e., on or before 31 March 2016. 44. In such a case if the Ld. AO invokes the provisions of section 144C of the Act and passes the final assessment order after 31 January 2016 i.e. beyond the period of limitation as stated above, such final assessment order u/s 143(3) r.w.s 144C ....