TaxTMI 
TaxTMI 
2024 (12) TMI 629
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....f the Act beyond the mandatory prescribed time limit as per Section 92CA(3A) r.w.s. 153(4) of the Act, thereby making the transfer pricing order barred by limitation and invalid in law. In short, the order passed by the Ld. TPO under Section 92CA(3) of the Act is barred by limitation and thus bad in law, without jurisdiction and therefore, liable to be quashed. Consequently, the entire transfer pricing adjustment proposed by the Learned TPO in individual transaction becomes non-est and to be quashed. Further that, as TPO's order is non-est in the eyes of law, then the assessee could no longer be treated as eligible assessee and the draft assessment order also could not have been passed and finally the Assessment Officer as not provided with the extended period of limitation for passing assessment order under Section 153 of the Act the assessment order dated 30.09.2021 is beyond prescribed period of limitation under Section 153 of the Act and thus liable to be quashed. 3. The brief facts leading to the case is this that the assessee, one of the leading pharmaceutical companies in India, engaged in manufacturing pharmaceutical products, such as, cardiovascular, gastrointestinal, p....
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....nternational transactions of sale with Zydus USA Rs. 49,62,01,570/- Benchmarking of margins Rs. 60,08,488/- purchase of fixed assets Rs. 7,64,781/- Segmental profitability of AE Rs. 1,67,22,377/- Sale of shares of ZAHL Rs. 51,30,000/- 6. The same was added to the total income of the assessee. 7. The draft order under Section 144C of the Act was passed in this case by the ACIT, Circle-1(1)(2) on 12.12.2019. The Ld. AO proposed the following addition: A. Income from House Property [as per Return of Income] Rs. 10,34,525/- B. Business Income [as per Return of income] Rs. 14,81,24,50,439/- Add: Additions / disallowances as discussed above 1. Transfer pricing Rs. 89,20,39,641 (as per Para No. 3.1) 2. Product Registration Expenses (-) depreciation on the above Rs. 20,08,34,851 (as per Para No. 4.7) 3. Trade Mark Registration fee & Patent Fee Rs. 14,14,36,698 (as per Para No. 5.6) 4. Research & Development Rs. 109,74,61,000 (as per Para No. 6.7) 5. Disallowance u/s. 14A Rs. 8,05,91,640 of the Act Rs. 2,41,23,63,830/- (as pe....
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....djustments on account of segmental profitability of AE Rs. 1,67,22,377/ (as per para no. 17) 8. TP adjustments on account of sale of shares of ZAHL Rs. 51,30,000/- (as per para no. 18) 9. Product Registration Expenses (-) depreciation on the above Rs. 20,08,34,851 (as per Para No.7) 10. Trade Mark Registration fee & Patent Fee (as per Para No. 8) Rs. 14,14,36,698 11. Research & Development Rs. 109,74,61,000 (as per Para No. 9) 12. Disallowance u/s. 14A of the Act Rs. 8,05,91,640/- Rs. 234,23,50,734/- (as per Para No. 10) Assessed Business Income Rs. 17,15,48,01,173/- C. Capital Gain - [as per Return of income] Rs. 11,37,32,825/- D. Income from other sources [as per Return of income] Rs. 80,07,21,966/- Assessed Income Rs. 18,07,02,90,489/- Brought forward losses of Rs. 2,41,44,65,028/- for A.Y. 2013-14 Adjusted fully by the Dept. Rs. Nil while passing order for A.Y. 2015-16 Gross Total Income Rs. 18,07,02,90,489/- Chapter VI-A Rs. 2,39,90,500/- Total Income Rs. 18,04,62,99,989 /- Rounded ....
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....ecord including the order passed by the authorities below. 12. The transfer pricing order dated 1st November, 2019 passed by the TPO is beyond the time limit prescribed under Section 92CA(3A) r.w.s. 153(4) of the Act i.e. 31st October, 2019 in view of the following facts as tabulated hereunder : Event Particulars Date End of the Assessment Year for AY 2016-17 31 March 2017 Time limit for completion of assessment where no reference is made to a TPO 21 months from end of the AY - Section 153(1) of the Act 31 December 2018 Time limit for completion of assessment in case reference is made to TPO 12 months in addition to the time limit prescribed under Section 153(1) - Section 153(4) of the Act 31 December 2019 Time limit for issuance of TP order under Sect/o 92CA(3A) of the Act Any time before 60 days prior to the due date for completion of assessment under Section 153 of the Act - Section 92CA(3A) of the Act 31 October 2019 Impugned order barred by limitation Learned TPO cannot issue any order after 31.10.2019 1 November 2019 13. The case of the assessee submitted before DRP as narrated by the Learned AR, crux whereof ....
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....on filed by M/S. Pfizer Healthcare India Pvt Ltd (WP/32699/2019). 10.1.13. In the given Writ Petition, the Petitioner had challenged the order of the Transfer Pricing Order dated 1 November 2019 as the same was passed beyond the period of limitation stipulated under Section 92CA(3A) of the Act. 10.1.14. In the interim order dated 21 November 2019, Madras HC had ordered that Assessing Officer can carry out assessment proceedings without giving effect to such orders (TP orders) and until further orders from court. 10.1.15. Recently, the High Court has decided the matter and passed the final order. The High Court has observed that the Transfer Pricing Order passed on 1 November is barred by the limitation under Section 92CA(3A) of the Act, since it was not passed before 60 days prior to the date on which the period of limitation referred to in Section 153 of the Act expires. Accordingly, the High Court has quashed the TP Order based on the above ground. The copy of final order is awaited. 10.1.16. We have attached the following for your reference: a. Case status as is reflected on the official e-courts website. (CNR No. TCMAUT2030002019) as....
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.... Act. The relevant provisions of Section 153(1) of the Act are extracted hereunder: "(1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of twenty one months from the end of the assessment year in which the income was first assessable. (2) .......... (3) .......... (4) Notwithstanding anything contained in sub-sections (1), (2) and (3), where a reference under sub-section (1) of section 92CA is made during the course of the proceeding for the assessment or reassessment, the period available for completion of assessment or reassessment, as the case maybe, under the said sub-sections (1), (2) and (3) shall be extended by twelve months. Section 153 of the Act does not permit passing any order after the expiry of 33 months from the end of the assessment year i.e. AY 2016-17 in the present case. Therefore, the time limit for completing assessment in the present case under Section 153(1) r.ws 153(4) of the Act expires on 31 December 2019, The time limit for issuing TP order under sub-section (3A) of Section 92CA of the Act falls any time before 60 days prior to the date on which the time limit....
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.... 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 am 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(3A) states 'before 60 days prior to the date on which the period of limitation referred to Section 153 expires'. Excluding 31.12.2019, the period of 60 days would expire on 01.11.2019 and the transfer pricing orders thus ought to have been passed on 31.10.2019 or any date prior thereto. Incidentally, the Board, in the Central Action Plan also indicates the date by which the Transfer Pricing orders are to be passed as 31.10.2019. The impugned orders are thus, held to be barred by limitation." 18. Being aggrieved by and/or dissatisfied with the said order dated 07.09.2020 passed by the Single Bench in WP No.32699 of 2019 etc. along with assessee's matters, appeals were preferred before the Division Bench by the Revenue Department, which were ultimately d....
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....iencies 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 [1992 Supp (1) SCC 323 : 1992 SCC (L&S) 248 : (1992) 19 ATC 219 : AIR 1992 SC 96] , Institute of Chartered Accountants of India v. Price Waterhouse[(1997) 6 SCC 312] and Harbhajan Singh v. Press Council of India [(2002) 3 SCC 722 : JT (2002) 3 SC 21] .)" 29. The language employed is simple. 31.12.2019 is the last date for the assessing officer to pass his order under Section 153. The TPO has to pass his 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 bef....
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....f 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 WA No. 1120 of 2021 etc., batch 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 are filed by the Assessee either before the DRP or the assessing officer to the determination by the TPO, section 92CA(4) would come into operation. Therefore, it is very clear that once a reference is made, it would have an impact on the assessment unless a decision on merits is taken by DRP rejecting or varying the determination 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 als....
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....aragraphs 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 the determination is not in time, it cannot be relied upon by the assessing officer while concluding the assessment proceedings. 39. Upon consideration of the judgments and the scheme of the Act, we are of the opinion that the word "may" used therein has to be construed 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 clarif....
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....confirmed the same by holding that the last date for the Transfer Pricing Officer to pass the order was on 31.10.2019 and since the order was passed on 01.11.2019, the said order is barred by limitation. 4. Learned Standing Counsels appearing for the respondents would not dispute the judgment dated 31.03.2022, passed in the aforementioned Writ Appeals by the Division Bench of this Court, involving a similar issue. They would however submit that as against the Division Bench judgment dated 31.03.2022, Special Leave Petitions have been filed with condone delay petitions. He would submit that in respect of some of the condone delay petitions, the Hon'ble Supreme Court has ordered notice and in one of them, namely, S.L.P. (Civil) Diary No.32770 of 2022, condone delay petition was allowed and the delay was condoned and notice has been issued to the respondents in the said S.L.P. 5. Admittedly, no stay has been granted by the Hon'ble Supreme Court and in one of the S.L.Ps, namely, S.L.P. (Civil) Diary No.32770 of 2022, delay has been condoned and in other S.L.Ps, notice has been issued to the respondents in the condone delay petitions. Since the Division Bench o....
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....which crops up, is, whether, once the TPO order is held to be nullity or quashed on the ground of being barred by limitation, then could AO have passed the draft order treating it to be as "eligible assessee". Section 144C was brought on the statute as special scheme of assessment and to provide alternative dispute resolution scheme to certain categories of "eligible assessee". Section 144C provides that the AO has to pass and forward a draft assessment order in the case of "ligible assessee" if he proposes to make any variation which is prejudicial to the interest of such assessee, Sub-section 15 has defined "eligible assessee" for the purpose of section 144C. The relevant provisions 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. . . . ....
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....der of the Ld. TPO under section 92CA(3) of the Act. In the instant case, it will be apparent that there is no transfer pricing variation arising as a consequence of the order of the Ld. TPO once the said transfer pricing order is held to be time-barred, non-est and void-ab-inito from the very date of its existence and inception. The entire premise to adopt the special procedure under section 144C of the Act and treat the appellant an "eligible assessee" rests on the fact that the order passed under section 92CA(3) of the Act has resulted in transfer pricing variations prejudicial to the interest of the appellant. However, once the transfer pricing order under section 92CA(3) of the Act, per-se, becomes a nullity, there 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 i....
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....here a draft assessment order was required to be passed on an "eligible assessee" as per section 144C(1) of the Act but the same was not so passed, in the following decisions as well, the entire assessment proceedings have been held to be invalid and liable to be quashed: (i) Vijay Television (P.) Ltd. v. DRP [2014] 46 taxmann.com 100/225 Taxman 35/369 ITR 113 (Madras) affirmed by the Division Bench of the Hon'ble Madras HC in [2018] 95 taxmann.com 101 (Madras); (ii) International Air Transport Association v. Dy. CIT [2016] 68 taxmann.com 246 (Bombay); (iii) Zuari Cements Ltd. v. ACIT [Writ Petition No. 5557 of 2012, dated 21-2- 2013] (Andhra Pradesh)- Revenue's SLP dismissed by the Hon'ble Apex Court in CC No. 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.....
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....quire a "legal or a valid" jurisdiction under section 144C(1) r.w.s. 144C(15)(b) of the Act to pass or forward a draft assessment order to the appellant who is otherwise an "ineligible assessee". The action of the Ld. AO in passing the impugned draft assessment order in instant case results in non- compliance of section 144C of the Act which vitiates the entire assessment exercise. 41. The issue being fairly settled and the intent of legislature in strictly interpreting the provision of section 144C of the Act being repeatedly held so, the act of the Ld. AO in proceeding to pass a draft assessment order on the basis of an order by the Ld. TPO which is barred by limitation and thus bad in law/ non-est, results in an incurable illegality which is liable 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 assessm....
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.... end on 31.12.2009, even considering the extension by twelve months. In the present case, the order of the DRP itself is only 24.09.2010 much beyond the permissible period." 46. Thus taking into the provisions of law and the judgment referred to above, we hold that the final assessment order passed on 31 January 2017 is beyond the prescribed period of limitation under section 153 of the Act expiring on 31 March 2016, thus, barred by limitation and is hereby quashed. 24. We also find that this Tribunal in assessee's own case for A.Y.2009-10 in ITA No.1576/Mum/2015 and ITA No.2340/Mum/2015 had also quashed the assessment after observing and holding as under:- 23. A perusal of the above additional grounds of appeal reveal that the assessee has challenged validity of the assessment order passed u/s 143(3) r.w.s. 144(13) of the Act and the validity of the order passed by TPO u/s. 92CA(3) of the Act. The issue raised by the assessee in the aforesaid additional grounds goes to the root of validity of assessment. It is no more resintegra that the assessee can raise legal ground at any stage, even during the appellate proceedings, if the facts are already on recor....
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.... barred by period of limitation u/s. 92CA (3). Once we have quashed the assessment order then, all the grounds raised by the Revenue as well as the assessee become infructuous." 22. The assessee before us relied upon another judgement passed by Mumbai benches in the case of Atos India Private Limited on the same issue which was decided in favour of the assessee. However since the ratio of the said judgement has already been relied upon by the Mumbai benches in the case of M/s Shell India markets Private Limited (supra), observation where of has already been narrated hereinabove, the same is not reiterated. 23. The judgment relied upon by the Learned AR in the case of Siemens Ltd vs. DCIT, NFAC, Delhi, reported in (2023) 154 taxman.com 195 passed by the ITAT Mumbai Benches has further been carefully considered by us, wherein TPO's order passed under Section 92CA(3) dated 01.11.2019 was found to be bad in law, void ab initio since the same was passed beyond time limit prescribed under Section 92CA(3) of the Act. Further that, the final assessment order passed on 06.04.2021 as beyond time limit for completing the assessment for the year under consideration in terms of the provis....
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....eyond the time limit prescribed under the Act. The learned AR further submitted that since the TPO's order is barred by limitation and thus is void ab initio, therefore the assessee is not an "eligible assessee" for the purpose of the Act. Accordingly, the impugned final assessment order is also beyond the time period provided under the Act and thus is bad in law and liable to be quashed. 9. On the other hand, the learned Departmental Representative submitted that the orders passed by the lower authorities are within the time limit prescribed under the Act and therefore are validly passed. 10. We have considered the submissions of both sides and perused the material available on record. The assessment year under consideration before us is the assessment year 2015-16. As per the provisions of section 153(1) of the Act, the time limit for completion of the assessment is 21 months from the end of the assessment year. Therefore, in the present case, the due date for completion of the assessment was 31/12/2017. Section 153(4) of the Act further provides that in case of a reference to the TPO under section 92CA(1) of the Act, the period available for completion of the a....
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....effect that limitation expires only on 12 a m of 1-12020. However, this would mean that an order of assessment can be passed at 12 a m on 1-1-2020, 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(3A) states 'before 60 days prior to the date on which the period of limitation referred to section 153 expires'. Excluding 31-12-2019, the period of 60 days would expire on 1-112019 and the transfer pricing orders thus ought to have been passed on 31-10-2019 or any date prior thereto. Incidentally, the Board, in the Central Action Plan also indicates the date by which the Transfer Pricing orders are to be passed as 31-10-2019. The impugned orders are thus, held to be barred by limitation." 12. Therefore, in Pfizer Healthcare India Private Ltd (supra), the Hon'ble Madras High Court held that the TPO should pass the order on or before 31st October in case the limitation period for completing the assessment is expiring on 31st December of the year. We further find that ....
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....e appellant relied upon the judgement passed by the Mumbai benches in assessee's own case, in Zydus Wellness Products Ltd versus DCIT, Mumbai in ITA No. 1488/Mum/2021 for Assessment Year 2016-17 a copy whereof has also been submitted before us by the Learned AR. 25 It appears that while dealing with the issue the judgement passed by the Hon'ble Madras High Court in the case of Pfizer healthcare India Private Limited. (supra) was duly considered by the Mumbai Benches. The relevant observation whereof is as follows: ".........In the present case, undisputedly the order was signed by the Transfer pricing Officer on 01/11/2019, hence, the date of the order is the date on which the competent authority signed the order and not the date mentioned in the cause title of the order. Therefore, to ascertain as to whether the order has been passed within the period of limitation as mandated by the Act, the same has to be examined with reference to date of order i.e. 01/11/2019. 5. The time limit for completion of the assessment has been specified in section 153 of the Act. As per the provisions of sub-section (1) to section 153 of the Act, no assessment order shall be made ....
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....A(3A) of the Act as explained by the Hon'ble Madras High Court are applied to the facts of instant case, the following result emerges: The due date for completion of assessment u/s. 153(1) of the Act was 31/12/2019. The period of 60 days as referred to in section 92CA(3A) of the Act (excluding 31/12/2019 being the last date) for the purpose of limitation as referred to in section 153 of the Act would be, from 01/11/2019 to 30/12/2019. Since the order u/s. 92CA(3) has been passed on 01/11/2019, the complete period of 60 days as mandated under sub-section (3A) of section 92CA of the Act are not available with the Assessing Officer for making the assessment order. Hence, the order u/s. 92CA(3) of the Act is time barred by 1 (one) day. 7. In Transporter Industry International Gmbh (supra), the Co-ordinate Bench under similar set of facts after considering the decision in the case of Pfizer Healthcare India (P) Ltd.(supra) and the decision of Division Bench in the case of DCIT(TP) vs. Saint Gobain India Pvt. Ltd., 444 ITR 636 (Mad) held that the order passed by the TPO on 01/11/2019 is beyond the limitation period prescribed under the Act, hence, bad in law. 8....