TaxTMI 
TaxTMI 
2024 (2) TMI 861
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.... international transaction of provision of software development services and that: * the Hon'ble DRP erred in upholding the decision of the Ld. AO/TPO in rejecting the TP documentation maintained by the Appellant; * the Hon'ble DRP erred in upholding the decision of the Ld. AO/ TPO in concluding that the Appellant is a full- fledged risk bearing service provider instead of a limited risk service provider; * the Ld. AO/TPO erred in including companies in the comparability analysis which are different from the Appellant in functions, assets and risks; and * the Ld. AO/ TPO erred in excluding companies similar to the Appellant in functions, assets and risks while performing comparability analysis. * the Hon'ble DRP erred in upholding the Ld.AO/TPO's approach of treating the foreign exchange gain as non- operating in case of the Appellant as well as in case of the comparable companies and directed the TPO to re- compute the margins, thereby increasing the adjustment by INR 1,49,22,85,387 (base amount of INR 1,20,15,18,025 plus revised arm's length mark-up of 24.20%). The Appellant prays that the aforesaid adjustment be deleted. 2. On the facts a....
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....lementation IT support and maintenance function in the capacity of a limited risk service provider: operating costs plus 13.6% mark-up; * confirming the observation of the Ld. AO/TPO in relation to the Appellant's characterisation and upholding that all the significant business risks associated with the service contract with SCB India (including market risk and service liability risk) are borne by the Appellant instead of the Appellant's aforementioned AE; * erroneously applying the set of uncontrolled comparables engaged in provision of IT services and using Operating Profit/ Operating Revenue as the profit level indicator to determine the revised ALP * Without prejudice to the above, we also place reliance in the contentions mentioned in Ground No. 1. The Appellant prays that the aforesaid adjustment be deleted. On the facts and in the circumstances of the case and in law, the 4. Hon'ble DRP erred in confirming the action of Ld. AO of disallowing the claim of INR 2,55.15,475 on account of depreciation on goodwill transferred from Atos IT Solutions and Services Private Limited ('Atos IT'), on the alleged ground that the goodwill recognised in the....
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.... 9. On the facts and in the circumstances of the case and in law, the Ld. AO erred in not granting credit of taxes deducted at source amounting to INR 74,539. The Appellant prays that Ld. AO be directed to grant credit of foreign taxes amounting to INR 74,539. 10. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in proposing to initiate penalty proceedings under section 271(1)(c) of the Act without appreciating that none of the provisions of section 271(1)(c) of the Act gets attracted in the facts of the Appellant's case." 3. Further, assessee has raised following additional grounds: - "Ground No. 11: On the facts and in the circumstances of the case and in law, the order dated on November 2019 passed by the Transfer Pricing Officer (TPO) under section 92CA of the Act is beyond the time limit prescribed under section 92CA(3A) r.w.s 153 of the Income-tax Act, 1961 ('Act'), thus making the transfer pricing order illegal, bad in law, null and void and liable to be quashed. Ground No. 12: On the facts and in the circumstances of the case and in law, the transfer pricing order being illegal and void on account of being ba....
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....he assessee. Copy of the order is placed on record. 5. On the other hand, Ld. DR relied on the orders of the lower authorities. 6. Considered the rival submissions and material placed on record, we observe that similar issues were considered and adjudicated by the Coordinate Bench in assessee's own case for the A.Y. 2012-13 and decided the issues in favour of the assessee. While holding so the Coordinate Bench held as under: - "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 objec....
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....sessee for AY 2012-13 was 31st March 2016. If the time limit provided in section 192CA(3A) r.w.s. 153(1) 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 f....
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.... or superfluous. In matters of interpretation one should not 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 M....
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....ontention that has been raised by the learned 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....
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....stice 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 learned Ju....
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....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 break- up 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 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, ....
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....gories 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 under section 6 of the Act. Thus, the second condition under section 144C (15)(b)(ii) of the Act for qualifying as an 'eligible assessee' is not applicable. As regards the first condition under section 144....
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....ove, 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 Express, the relevant portion of which has been reproduced in the foregoing paras, wherein the Tribunal has expressed the provision and finally deleted the corporate grounds also. We accordingly fo....
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....essment 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 order under section 92CA(3) of the Act, there remains no variation arising as a consequence thereto and the case of the assessee, being an Indian company, falls outside the definition of 'elig....