TaxTMI 
TaxTMI 
2023 (2) TMI 1183
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....ed 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-assessment not granted. 3. The assessee vide letter dated 9th June 2022 has raised additional grounds that the impugned tr....
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.... (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 144C(15)(b)(i) since, there would be no variation to the returned income in consequence of Order passed u/s. 92CA(3) of the Act; b. No draft Assessment Order was required to be passed in the case of Appellant; c. Accordingly, the Fin....
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.... 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 barred by limitation under section 92CA(3A) r.w.s. 153(1) of the Act and therefore the said order is to be quashed. The relevant extracts of the decision are reproduced below:- "29. The provisions of Section 144C prescribe mandatory time limits both pre and post the stage of passing of a transfer pricing order. Assessments involvin....
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.... 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, which he has done. He further submitted that the time limit prescribed in section 92CA(3A) is that AO should have passed order 60 days from the period of limitation as per section 153 and the phrase "may be made in time before 60 days prior to the date on which period of limitation referred to section 153......." The word "may be‟ means that the time limit for passin....
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....hat 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‟ and consequently the AO was required to pass final assessment order and not the draft assessment order, accordingly the whole assessment order passed by AO is bad in law and is barred by period of limitation. Therefore, the entire corporate grounds also cannot be sustained. In support, he relied on the judgment of ITAT, Mumbai Bench in the case of Fedex Express Transportation and Supply Cha....
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....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 of the Act refers to a "person‟ in whose case variation is proposed by the order of TPO. The word "person‟ has been defined in Sec. 2(31) of the Act to mean, inter-alia, a "company‟, which in turn has been defined in Sec. 2(17) of the Act. Broadly speaking, a "company‟ is understood to mean an "Indian company or any institution, association or body corporate registered/incorporated/declared‟. It is also notable t....
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.... 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 section 92CA provides a time limit for passing of the order by the TPO u/s 92CA (3) in the following manner:- "(3A) Where a reference was made under sub-section (l) before the 1st day of June, 2007 but the order under sub-section (3) has not been made by the Transfer Pricing Officer before the said date, or a reference under sub-section (l) 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 ....
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....n 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 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 under Section 153. xxxx 26. Further, the general interpretation by resorting to the meaning conveyed under the General Clauses Act cannot be adopted while interpreting 92CA (3A), because, the context an....
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.... 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 defective phrasing of an Act, we cannot add or mend and, by construction make up deficiencies which are left there". In case of an ordinary word there should be no attempt to substitute or paraphrase of general application. Attention should be confined to what is necessary for deciding the particular case. This principle is too well settled and reference to a few decisions of this Court would suffice. (See : Gwalior 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 [19....
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.... 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. SubSection (5) of Section 144C of the Act provides that if any objections are raised by the assessee before the Dispute Resolution Panel, the Panel is empowered to issue such direction as it thinks fit for the guidance of the Assessing Officer after considering various details provided in Clauses (A) to (G) thereof. Sub-Section (13) of Section 144C of the Act provides that upon receipt of directions issued under sub-section (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 a....
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....he 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 learned Judge in paragraphs 22 to 29 of the order dated 07.09.2020, the order of the TPO or the failure to pass an order before 60 days will have an impact in the order to be passed by the Assessing Officer, for which an outer time limit has been prescribed under Sections 144C and 153 and is hence mandatory. What is also not to be forgotten, considering the scheme of the Act, the interrelatability and inter-dependency of the provisions to conclude the assessment, is the consequence or the effect that follows, if an order is not passed in time. When an order is passed in time, the procedures under 144C and 92CA(4) are to be followed. When th....
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....adras 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 consequently, the same has to be treated as bad in law and is hereby quashed. Thus, in such a situation it has to be reckoned, as if there is no TPO order and consequently, the entire transfer pricing adjustment proposed by the TPO on the international transaction becomes non-est and liable to be quashed. 13. Thus, if we apply the aforesaid decision which is based on the judgment of Hon'ble Madras High Court in the case of Pfizer Healthcare India Pvt. Ltd. vs. JCIT (supra), we find that the order of TPO was passed u/s 92CA (3) on 30.01.2013 is clearly barred by limitation as the same could have been passed on or before 29.01.2013. Thus, the TPO order dated 30.01.2013 is quashed as barred by limitation. 14. Now coming to the second is....
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....warded 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 use of the word "means" indicates that the definition "eligible assessee" for the purposes of Section 144C(15)(b) is a hard and fast definition and can only be applicable in the above two categories. Ostensibly, the expression 'eligible assessee' has a restrictive meaning as it covers only the two types of persons mentioned above. 33. Further, considering the express language employed in defining the term "eligible assessee‟ under section 144C(15)(b) and section 144C(1) in forwarding a draft assessment order to such an "eligible assessee‟ only, is plain, clean and unambiguous; the said statute must be interpreted strictly without there being any role of "equity or intendment‟ in such interpretation. 34. In the present case, the assessee is an Indian company and, thus, a resident in India und....
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.... 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 same, the Ld. AO was ostensibly required to pass the final assessment order u/s 143(3) of the Act on that day. Having said that, the draft assessment order passed by the Ld. AO under the provisions of law is also illegal and void ab initio which deserves to be quashed. 36. It is a well-settled proposition now that a draft order passed in case of an "ineligible assessee‟ vitiates the entire exercise of assessment and all subsequent proceedings are liable to be quashed has been held in the following cases: (i) Honda Cars India Ltd. v. Dy. CIT [2016] 67 taxmann.com 29/240 Taxman 707/382 ITR 88 (Delhi); (ii) Pankaj Extrusion Ltd. v. Asstt. CIT [2011] 10 taxmann.com17/198 Taxman 6 (Guj.) (iii) FedEx Express Transportation and Supply Chain Services (India) (P.) Ltd. v. DCIT [2019] 108 taxmann.com 542 (Mumbai - Trib.) In case of FedEx ....
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.... 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 rendering the final assessment order "without jurisdiction, null and void and unenforceable." In that case, the consequent demand notice was also set aside. The decision of the Andhra Pradesh High Court was affirmed by the Supreme Court by the dismissal of the Revenue's SLP (C) [CC No. 16694/2013] on 27th September, 2013. 40. The various judgments which have been cited before us that 144C(1) will not apply and there is no variation in the return of income which cannot be disputed. Thus in our view, Ld. AO to acquire a legal and valid jurisdiction for the purpose of forwarding a draft assessment order at the first instance under section 144C(1) of the Act, it is necessary that the assessee must be an "eligible assessee‟ within the restrictive and strict four corners of how the said expression has been defined under section 144C(15)(b) of the Act. Here, once it is held that there is no legal or valid transfer pricing o....
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....f 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 of the Act is liable to be quashed as being barred by limitation. 45. In a recent decision of the Hon'ble Madras High Court in case of Virtusa Consulting Services Put. Ltd [TS-474-HC2022(MAD)] dated 9 June 2022, it has been held in context of period of limitation under section 153 of the Act as under: "17. Further, it is to be noted that the different timelines to be adhered by the TPO, Assessing Officer to pass a draft order, assessee to file their objections, DRP to issue directions and the assessing officer to pass final order, would commence only on a reference to the TPO and not otherwise. At this juncture, it is not to be forgotten that the period of 33 months is to pass the final order of assessment after the directions from the DRP. In this case, we find from the undisputed dates and events that not only was the reference to the TPO made after the period of expiry of the period of limitation to pass assessment orders, but also that the assessi....