TaxTMI 
TaxTMI 
2025 (2) TMI 499
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..... Brief undisputed facts are as under :- (i) The respondent-assessee filed its return of income for the assessment year 2010-11 on 13 October 2010. On 6 September 2012, a reference was made under Section 92CA of the Act to the Transfer Pricing Officer (TPO), who vide order dated 28 January 2014 proposed an adjustment of Rs.108.36 crore to be made to the arm's length price of the international transactions. Pursuant to the said TPO's order, a draft assessment order was framed on 28 March 2014. (ii) The appellant objected to the above draft assessment order by filing objections with the Dispute Resolution Panel (DRP) in terms of Section 144C of the Act. On 19 December 2014, the DRP gave its direction and held that share application money was in the nature of interest-free loan and directed the TPO/Assessing Officer (AO) to consider the SBI PLR of FY 2009-10 for evaluating the interest that should be charged on the loan transaction. (iii) The directions of the DRP were received by the AO on 23 December 2014. The said directions were forwarded by the AO to the TPO on 5 January 2015. The TPO carried out the mandate of the DRP and redetermined the adjustments to be made to Rs. 4....
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....me limit provided under Section 144C (13) of the Act for passing the order is mandatory. 8. Mr. Pardiwalla in support of his submissions relied upon the decisions in the cases of Vodafone Idea Ltd. Vs. Central Processing Centre (2023) 156 taxmann.com 258 (Bombay), Louis Dreyfus Company India (P.) Ltd. Vs. Deputy Commissioner of Income Tax (2024) 159 taxmann.com 244 (Delhi), K.M. Sharma Vs. Income-tax Officer (2002) 122 taxmann.com 426 (SC) and Renaissance Services BV Vs. Deputy Commissioner of Income-tax (International Tax) (2022) 139 taxmann.com 450 (Bombay) and defended the order of the Tribunal. 9. We have heard Mr. Sharma, learned counsel for the appellantrevenue and Mr. Pardiwalla, learned Senior Counsel for the respondentassessee. Analysis and Conclusions :- 10. The issue which arises for our consideration is on the interpretation of Section 144C (13) of the Act as to whether the time limit provided under this sub-section for completing the assessment as per the directions of the DRP is mandatory or directory and consequences thereto. For deciding this issue, it is necessary to analyse the provisions of Section 144C of the Act. 11. Section 144C as it stood at the releva....
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.... further enquiry to be made by any income-tax authority and report the result of the same to it. 8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. (11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively. (12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. (13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with th....
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....n the income arises as a consequence of the order of the TPO passed under Section 92CA (3) and (ii) foreign company. Therefore, it is necessary to examine certain provisions of Section 92CA (3) of the Act. 14. Section 92CA provides for reference to the TPO where an assessee has entered into an international transaction and the AO considers it necessary to refer the computation of the arm's length price in relation to the said international transaction. The TPO has to give an opportunity of hearing to the assessee and after considering various information, documents and response sought determine the arm's length price in relation to the international transaction and a copy of such order determining the arm's length price is sent to the AO and to the assessee. Section 92CA (3A) provides that if a reference is made after 1 June 2007, an order determining the arm's length price by the TPO should be made before sixty days prior to the date on which the period of limitation referred to Section 153 or 153B for making the order of assessment expires. This takes us to Section 153 of the Act. 15. Section 153 (1), for completing the assessment, at the relevant time provided time limit of tw....
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....irection under sub-section (5) for further enquiry and passing of the assessment order. 21. Section 144C (10) provides that every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. 22. Section 144C (12) is couched in negative and it provides that no direction under sub-section (5) of Section 144C shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. Section 144C (13) thereafter provides that upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in Section 153, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. 23. Section 144C (13) of the Act overrides the time limit provided under Section 153 which means that on receipt of the directions from the DRP and by adding one month from the end of the month in which such directions are received, the Assessing Officer has to pass an order on or before expiry of end of the month in ....
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.... the prejudice of the assessee. Providing time limit to complete the assessment is one such inbuilt safeguard and more so in the context of Section 144C which has been inserted for expeditious disposal of the dispute between the assessee and revenue. The assessment order is accompanied by a notice of demand under Section 156 of the Act and order without notice of demand or the notice of demand without order does not subserve the purpose of the assessment. 27. The object of completing the assessment in time is to ensure timely recovery of tax due from the assessee and such tax is to be collected immediately on the passing of the assessment order and raising demand notice. Making of the assessment order resulting in the demand notice is a condition precedent for the tax arrears to be recovered by various proceedings prescribed under the Act. In our view, if the time limit provided under Section 144C (13) is not strictly complied with, then it would not only be contrary to the intention of the legislature in inserting Section 144C but also it would result into delay in recovery of tax by the revenue. Therefore, it is by adopting the balancing approach that Section 144C provides for e....
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....ded under Section 144C (13) has to be held as invalid. 31. The fixation of periods of limitation to some extent may be arbitrary and may frequently result in hardships, but in construing such provisions and more particularly fiscal statutes, equitable considerations are out of place and the strict grammatical meaning of the words is the only safeguard. It is settled position that the Court cannot take any extraneous consideration, such as, hardship or any equitable consideration in construing the provisions relating to the limitation. In construing the limitation provisions, equitable considerations are out of place and the limitation provision is to be construed as per the plain language of the statute. The Court should not be concerned with the result, however injurious it may be in giving effect to the plain language used nor is it the duty of the Court, not to give effect to it merely because it would lead to hardship. The Court cannot on equitable grounds extend the time allowed by the law of limitation or postpone its operation or introduce an exception not recognised by the statute of limitation. Therefore, the contentions of the appellant-revenue on consequences of assessm....
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....014. However, since the final assessment order was passed on 27 February 2015 which is beyond the expiry of one month from the end of the month in which the directions were received, in our view, the assessment order dated 27 February 2015 passed under Section 143 (3) read with Section 144C (13) of the Act is beyond the limitation period provided and, therefore, the assessment order is bad in law. 37. We may observe, although not argued by any of the parties, that the period provided under Section 144C (13) cannot be counted from the end of the month in which the TPO's order dated 27 January 2015 were received. We say so for more than one reason. Firstly, since the TPO's order is pursuant to the DRP's direction which was received much before 31 January 2015 and there is no justification for the AO not to have passed the assessment order before 31 January 2015. Secondly, the date of TPO's order pursuant to the DRP's directions cannot be counted as a starting date since sub-section (13) of Section 144C provides for the starting period to commence for the purpose of completion of the assessment as the end of the month in which the directions of the DRP were received by the AO. If the....
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....ther, observed that once the statute has prescribed the limitation period for passing the final order, it is expected that the internal procedure of the department to mold itself to give meaning to and act in aid of the provision. The Co-ordinate bench further came to the conclusion that failure on the part of the department to follow the procedure under Section 144C of the Act is not merely a procedural irregularity but is an illegality and vitiates the entire proceeding. In our view, the ratio of the decision of the Co-ordinate bench in the case of Vodafone Idea Limited (Supra) squarely applies to the interpretation of whether the provision of Section 144C (13) is mandatory or directory and, therefore, it is to be held that Section 144C (13) of the Act time limit is mandatory. 40. Mr. Pardiwalla, learned senior counsel for the respondent-assessee is justified in placing reliance on the decision of the Delhi High Court in the case of Louis Dreyfus Company India (P.) Ltd. (supra). The facts of the present case before us are very close and similar to the facts before the Delhi High Court. Before the Delhi High Court, the TPO proposed adjustments of Rs. 25.82 crore which found its p....
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.... made available to the AO. However, the AO admitted in the assessment order that the objections were available on the portal. The Court observed that the AO cannot be faulted for passing the impugned order but however, since the objections were filed with the DRP and the Officer was bound to comply with the directions of the DRP, the assessment order was set aside. We fail to understand as to how this decision can be of any assistance to the appellant-revenue. The facts and the issue before the Co-ordinate Bench was different than what we are called upon to adjudicate. Therefore, reliance placed on the decision in the case of APM Terminals India Private Limited (supra) by the appellant-revenue is misconceived. 43. Similarly, on very similar facts as that in the case of APM Terminals India Private Limited (supra), the decision relied upon by the appellant-revenue in the case of Sulzer Pumps India Private Limited (supra) is also not applicable to the facts before us. 44. Learned counsel for the appellant-revenue has placed for our consideration the decision of the Bangalore Bench of the Tribunal in the case of M/s. Himalaya Drug Company Vs. Dy. Commissioner of Income Tax, Circle (1....