TaxTMI 
TaxTMI 
2025 (12) TMI 1275
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....ns dated 29 June 2022 by Dispute Resolution Panel, Bangalore (DRP") u/s. 144C(5) of the Act and read with order dated 11 July 2022 issued by Transfer Pricing Officer (TPO) u/s. 92CA of the Act, in so far as it is prejudicial to the Appellant, is contrary to law, facts and circumstances of the case. Transfer Pricing Adjustment 2. That on the facts and circumstances of the case and in law, the TPO/AO/DRP erred in determination of Arm's Length Price ("ALP") in respect of international loans to overseas Associated Enterprises by: • Directing the Ld. A.O/TPO to adopt the LIBOR rate applicable for the year under consideration+200 basis points to arrive at ALP instead of only LIBOR. • Not appreciating the fact that Reddy Antilles NV is an associated enterprise and interest free loan has been advanced by the Appellant to pursue long term business opportunities in the region. 3. That on the facts and circumstances of the case and in law, the TPO/AO/DRP erred in determination of Arm's Length Price ("ALP") in respect of Marketing support services paid to M/s OOO Dr. Reddy's Laboratories Limited, Russia, by i. Rejecting ....
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....me. vi. Introducing an arbitrary limit of 60 days for receivables in order to determine the delay in collection of receivables by the Appellant. vii. Arbitrarily levying interest rate at domestic rate whereas receivables are denominated in foreign currency. viii. Not appreciating the fact that Appellant has outstanding payables to A.Es on which no interest has been charged by A.Es. ix. Not appreciating the fact that the arm's length price determination for the said consequential receivables is subsumed within the arm's length price. determination of the principal international transaction/s itself i.e., sale of goods. 5. That on the facts and circumstances of the case and in law, the TPO/AO/DRP erred in determination of Arm's Length Price ("ALP"):- in respect of mark-up on R&D charges paid by Appellant by :- i. Rejecting the TNMM as most appropriate method and aggregation approach adopted by the Appellant. ii. violating the provisions contained in the Rules. iii. Incorrectly concluding that benefits have not been received by the Appellant which commensurate with payments made by the Appellant. ....
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....nc. USA towards Support services is not taxable in India under the provisions of tax treaty between India and USA, as Dr. Reddy's Laboratories USA is not making available any technical knowledge or skill to the Appellant. 8.1. That on the facts and circumstances of the case and in law, the Ld. AO/DRP erred in disallowing weighted deduction of 200% under section 35(2AB) of the Act on account of clinical trial expenses incurred stating that the same was not being approved by Department of Scientific Institute and Research (DSIR) in Form 3CL. 8.2. The Ld. AO/DRP has erred in not appreciating that the explanation 1 to Section 35(2AB) specifically includes clinical trial expenses within its ambit and disallowing weighted deduction on clinical trial expenses for the assessment year under consideration. 8.3. The Ld. AO/DRP has erred in not appreciating the submissions of appellant that in a similar fact pattern in previous assessment years the claim of the Appellant on account of clinical trial expenses was allowed either by AO or Hon'ble Tribunal. 8.4. Without prejudice to above, that on the facts and circumstances of the case and in law, the L....
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....35 (Madras). The common additional grounds raised by the assessee reads as under: "ADDITIONAL GROUNDS OF APPEAL 1. The Document Identification Number (DIN) quoted on the directions of learned Dispute Resolution Panel (DRP) dated 21.06.2022 under section 144C(5) of the Act being handwritten, and not verifiable on the income-tax portal, the directions issued by the learned DRP are non-est and bad in law. 2. The learned Assessment Unit (AU) erred in passing the assessment order under section 143(3) read with section 144C(13) read with section 144B, beyond the limitation period under section 153. The assessment order so passed is bad in law, void ab initio and liable to be quashed. 3. The learned AO and DRP have erred in not appreciating that the Appellant considered the payments for marketing support services and the R&D services as operating expenses while adopting TNMM at the entity level which has not been disturbed by the Transfer Pricing Officer (TPO). Having accepted the margins as at arm's length price (ALP) at the entity level, the said exercise subsumes marketing support and R&D services payment, thereby precluding a separate evaluation....
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....17-2018 on 30.07.2022 is beyond the limitation and, therefore, the same is invalid and liable to be quashed on this ground alone. He has pointed-out that time limit for passing the final assessment order was available up-to 31.12.2019. However, since there was a reference made u/sec. 92CA of the Act, therefore, a further period of 12 months was available to the Assessing Officer to pass the assessment order i.e., up-to 31.12.2020. Even by taking the benefit of time extension under Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) [in short "TOLA"] Act, 2020, the limitation was further extended up-to 30.09.2021, however, the impugned order was passed on 30.07.2022. Therefore, in view of judgment of Hon'ble Madras High Court in the case of CIT vs., vs., Roca Bathroom Products (P.) Ltd., [2022] 445 ITR 537 (Madras) as well as the Judgment of Hon'ble Bombay High Court in the case of Shelf Drilling Ron Tappmeyer Ltd., vs., ACIT, International Taxation [2023] 457 ITR 161 (Bombay), the assessment order passed by Assessing Officer is invalid and liable to be quashed. Thus, the Learned Counsel for the Assessee has submitted that the overall limitation for passing the ....
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....he Assessing Officer for going to challenge the order of the Assessing Officer under regular appeal before the learned CIT(A). Therefore, once the assessee decided to go for the objections before the DRP, the limitation for completing the assessment is applicable as provided u/sec. 144C(13) of the Act. Thus, the learned DR has submitted that once the Final Assessment Order is passed within the period of 30 days from the receipt of the DRP directions, then, it is well within the period of limitation provided u/sec. 144C(13) of the Act. The learned DR has further submitted that this issue is pending adjudication before the Hon'ble Supreme Court. Earlier the Division Bench of the Hon'ble Supreme Court has given divergent decisions and, therefore, now this controversy has to be resolved by a Larger Bench of Hon'ble Supreme Court. Thus, the learned DR has submitted that till the dispute is resolved by the Larger Bench of the Supreme Court, this issue may be kept open. She has further submitted that the limitation was also extended by the Hon'ble Supreme Court in case of suo motu Cognizance for Extension of Limitation reported in Re 441 ITR 722 (SC) and, therefore, as per the Judgment of....
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....of the legal opinion received in the matter. The following is observed as per the legal opinion:- (i) The extension granted by Hon'ble Supreme Court order applies only to quasi-judicial and judicial matters relating to petitions/ applications/suits/appeals/all other proceedings. All other proceedings should be understood in the nature of the earlier used expressions but can only with reference to judicial and quasi- judicial proceedings. Hon'ble Supreme Court has stepped into to grant extensions only with reference to judicial and quasi-judicial proceedings in the nature of appeals/suits/petitions etc. and has not extended it to every action or proceeding under the CGST Act. (ii) For the purpose of counting the period(s) of limitation for filing of appeals before any appellate authority under the GST Law, the limitation stands extended till further orders as ordered by the Hon'ble Supreme Court in Suo Motu Writ Petition (Civil) 3 of 2020 vide order dated 27th April 2021. Thus, as on date, the Orders of the Hon'ble Supreme Court apply to appeals, reviews, revisions etc., and not to original adjudication. (iii) Various Orders and extensions pass....
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....payers/ tax authorities against anv quasi- judicial order:- Wherever any appeal is required to filed before Joint Additional Commissioner (Appeals), Commissioner (Appeals), Appellate Authority for Advance Ruling. Tribunal and various courts against any quasi-judicial order or where a proceeding for revision or rectification of any order is required to be undertaken, the time line for the same would stand extended as per the Hon'ble Supreme Court's order. 5. In other words, the extension of timelines granted by Hon'ble Supreme Court vide its Order dated 27.04.2021 is applicable in respect of any appeal which is required to be filed before Joint Additional Commissioner (Appeals), Commissioner (Appeals), Appellate Authority for Advance Ruling, Tribunal and various courts against any quasi-judicial order or where proceeding for revision or rectification of any order is required to be undertaken, and is not applicable to any other proceedings under GST Laws." 8. Accordingly, we do not find any merits in the arguments of the learned DR that the limitation for passing the assessment order was extended by the Hon'ble Supreme Court. We further note that even the Hon'....
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....sment relating to the assessment year commencing on the 1st day of April, 2022, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "twelve months" had been substituted: (1A) xxxx xxxxx (1B) xxxxx xxxxx (2) xxxxx xxxxx (3) xxxxx xxxxx (3A) xxxxx xxxxx (4) Notwithstanding anything contained in sub-sections (1), (1A), (2) (3) and (3A), 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 may be, under the said sub-sections (1), (1A), (2), (3) and (3A) shall be extended by twelve months. (5) Where effect to an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 is to be given by the Assessing Officer [or the Transfer Pricing Officer, as the case may be], wholly or partly, otherwise than by making a fresh assessment or reassessment [or fresh order under section 92CA, as the case may be], such effect shall be given within a period of three months from th....
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....d to complete the assessment by 31.12.2023. The Assessing Officer has passed the Final Assessment Order on 18.10.2024 in pursuance to the Directions dated 24.09.2024 of the DRP. This controversy of the limitation applicable u/sec. 153 or u/sec. 144C(13) was considered by the Hon'ble Madras High Court in the case of CIT vs., Roca Bathroom Products (P.) Ltd., (supra) and held in Paras-18 to 28 as under: "18. The main contentions of the Department, through their counsel are that Section 144C is a code in itself and hence on remand by the ITAT, the power of DRP to take up the dispute on additions by IPO, is not circumscribed by Section 153 and that in the absence of any express time limits contemplated under the Act, the time limits under Section 153 for reassessment cannot be read into Section 144C more particularly when the provisions of Section 153 are excluded by the non-obstante clause in section 144C(13) and hence the proceedings are not barred by limitation. Per contra, it has been contended by the learned senior counsels appearing for the respondent(s)/assessees that the outer time limit under Section 153 is applicable to every proceedings on remand and the department ....
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....unsel for the appellants revenue that the time period of 33 months, provided initially is for the draft order and not for the final order. A careful perusal of the timeline would indicate that the time limit is for the final assessment and not for the draft order. The anomaly in the argument is that in the present cases, no fresh draft order was passed, but the DRP had Issued the notices. If the contention of the appellants/revenue was to hold some water, they must have passed the draft assessment order immediately on receipt of the order from the Tribunal, but instead, notice was issued by the DRP. In any case, it is a far cry for the revenue as because no order has been passed for more than 5 years. 21. As held above, the assessment has to be concluded within 21 months when there is no reference and when there is a reference, it has to be concluded within 33 months. In the additional 12 months, the draft order is to he passed, the objections have to be filed, the DRP has to issue the directions and the final order is to be passed. The provisions under section 1440 and section 153 are not mutually exclusive as both contain provisions relating to Section 92CA and are inter....
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....any inconsistency either within a section or between two different sections or provisions of the same statute. 15. On a conspectus of the case-law indicated above, the following principles are clearly discernible: 1) It is the duty of the courts to avoid a head-on clash between two sections of the Act and to construe the provisions which appear to be in conflict with each other in such a manner as to harmonise them. 2) The provisions of one section of a statute cannot be used to defeat the other provisions unless the court, in spite of its efforts, finds it impossible to effect reconciliation between them. 3) It has to be borne in mind by all the courts all the time that when there are two conflicting provisions in an Act, which cannot be reconciled with each other, they should be so interpreted that, if possible, effect should be given to both. This is the essence of the rule of "harmonious construction". 4) The courts have also to keep in mind that an interpretation which reduces one of the provisions as a "dead letter" or "useless lumber" is not harmonious construction. 5) To harmonise is not to destroy any statutory provisio....
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....en there is choice between two interpretations, we would avoid a "construction" which would reduce the legislation to futility, and should rather accept the "construction" based on the view that draftsmen would legislate only for the purpose of bringing about an effective result. We must strive as far as possible to give meaningful life to enactment or rule and avoid cadaveric consequences [See Principles of Statutory Interpretation by Justice G.P. Singh, 14th Edn., p. 50.]" 23. Further, similar non-obstante clause is also used in section 144C(4) with a same limited purpose to imply, even though there might be a larger time limit under Section 153, once the order of TPO is accepted or not objected to, causing a deeming fiction of acceptance, the final order is to be passed immediately. The object is to conclude the proceedings as expeditiously as possible and the authority need not wait for the last date to pass the orders. The limitation prescribed under the statute is for the assessing officer and therefore, it is his duty to pass order in time irrespective of whether the directions are received from DRP or not. As held by us above, the DRP will have no authority to issu....
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....spect of reasonableness in time in passing orders when no time is provided would be superfluous in view of our decision in earlier paragraphs. It is necessary to decide on the issue as in this case, the revenue has taken more than 5 years in one appeal and 4 years in other appeals, which is unacceptable as rightly held by the learned judge. We are not alone on this issue and are fortified by the following judgments of the Hon'ble Supreme Court in this regard. (i) Bharat Steel Tubes Ltd. v. State of Haryana 1988 taxmann.com 761 "15. Before we part with the case, we would like to indicate that assessment of tax should be completed with expedition. It involves the revenue to the State. In the case of a registered dealer who collects sales tax on behalf of the State, there is no justification for him to withhold the payment of the is so collected. If a timely assessment is completed, the dues of the State can be conveniently ascertained and collected. Delay in completion of assessment often creates problems. The assessee would be required to keep up all the evidence in support of his transactions. Where evidence is necessary, with the lapse of time, there is scope....
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....n of the question will depend upon the facts of each case." (iii) State of Punjab v. Bhatinda District Co-op. Milk P. Union Ltd. [2007] 11 SCC 363: 17. A bare reading of Section 21 of the Act would reveal that although no period of limitation has been prescribed therefor, the same would not mean that the suo motu power can be exercised at any time. 18. It is trite that if no period of limitation has been prescribed, statutory authority must exercise its jurisdiction within a reasonable period. What, however, shall be the reasonable period would depend upon the nature of the statute, rights and liabilities thereunder and other relevant factors. 19. Revisional jurisdiction, in our opinion, should ordinarily be exercised within a period of three years having regard to the purport in terms of the said Act. In any event, the same should not exceed the period of five years. The view of the High Court, thus, cannot be said to be unreasonable. Reasonable period, keeping in view the discussions made herein before, must be found out from the statutory scheme. As indicated hereinbefore, maximum period of limitation provided for in sub-section (6) of Section....
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....e, we conclude as under : a) The provisions of Sections 144C and 153 are not mutually exclusive, but are rather mutually inclusive. The period of limitation prescribed under Section 153(2A) or 153(3) is applicable, when the matters are remanded back irrespective of whether it is to the Assessing Officer or TPO or the DRP, the duty is on the assessing officer to pass orders. b) Even in case of remand, the TPO or the DRP have to follow the time limits as provided under the Act. The entire proceedings including the hearing and directions have to be issued by the DRP within 9 months as contemplated under section 144C(12) of the Income-tax Act. c) Irrespective of whether the DRP concludes the proceedings and issues directions or not, within 9 months, the Assessing officer is to pass orders within the stipulated time, d) In matter involving transfer pricing, upon remand to DRP, the Assessing officer is to pass a denova draft order and the entire proceedings as in the original assessment, would have to be completed within 12 months, as the very purpose of extension is to ensure that orders are passed within the extended period, as otherwise the extensio....
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....pose is to fast-track a special type of assessment. That cannot be considered to mean that overall time limits prescribed have been given a go by in the process. 24. We find it difficult to accept the submissions of Mr. Suresh Kumar because it would in fact mean that. notwithstanding the twelve month period prescribed under section 153(3) of the Act, where it says that an order of fresh assessment in pursuance of an order under section 254 of the Act may be made at any time before the expiry of twelve months from the end of the financial year in which order under section 254 of the Act is received by the Commissioner, would not apply to a case where section 144C of the Act is applicable. It would also mean that the time prescribed in section 153(1) of the Act cannot apply where section 144C of the Act is applicable in the case of an eligible assessee. If Mr. Suresh Kumar was correct, then in our view, it would have been specifically so provided in section 153 of the Act. We would agree with Mr. Mistri that wherever the legislature intended extra time to be provided, it is expressly provided in section 153 of the Act. Sub-section (3) of section 153 of the Act also applies t....
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....y, it does not stand to reason that proceedings on remand to the AO may be done at leisure sans the imposition of any time limit at all. 27. Having considered the language of sections 144C and 153, we cannot accept that the provisions of section 153 are excluded to the operation of section 144C. 28. Mr. Mistri, therefore, is correct in his submissions that the time limit prescribed under section 153 of the Act would prevail over and above the assessment time limit prescribed under section 144C of the Act. This is because the Assessing Officer may follow the procedure prescribed under section 144C of the Act, if he deems fit necessary but then the entire procedure has to be commenced and concluded within the twelve months period provided under section 153 (3) of the Act. This is because, the procedure under section 141C(1) of the Act also has to be followed by the Assessing Officer only if he proposes to make any variation which is prejudicial to the interest of the eligible assessee. If the Assessing Officer did not wish to make any variation which is prejudicial to the interest of the eligible assessee, he need not go through the procedure prescribed under sectio....
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.... to pass an order in time. After 30th September 2021, the AO will have no authority to pass any final assessment order in this Case. 33. We cannot accept the submissions of Shri Suresh Kumar that passing of draft assessment order before 30th September 2021 would suffice. We find support for this view in Roca Bathroom (SB) (supra) and Roca Bathroom (DB) (supra). 34. In the circumstances, since no final assessment order can be passed in the present case as the same is time harred, the Return of Income as filed by Petitioner be accepted. This would however, not preclude the Revenue from taking any other steps in accordance with law. 11. Therefore, following the Judgments of Hon'ble Madras High Court as well as Hon'ble Bombay High Court cited (surpa), we hold that the assessment order passed by the Assessing Officer on 18.10.2024 is barred by limitation and consequently, the same is liable to be quashed. We order accordingly. 12. Since the issue is pending adjudication before the Hon'ble Supreme Court in the case of ACIT-(International Taxation] vs., Shelf Drilling Ron Tappmeyer Ltd., [2025] 177 taxmann.com 262 (SC) and the first attempt ....
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....ecision of this Court and which stands fortified by the decisions of the various other High Courts on the very same issue, the pendency of this High Court would further be burdened which otherwise can be decided and disposed of as a covered matter. 17. So far as the interest of the Revenue is concerned, we are of the considered opinion that the interest of the Revenue has already been considered and protected, as has been observed in paragraphs 36, 37 and 38 of the order which, for ready reference, is reproduced hereunder: "36. For all the aforesaid reasons, the impugned notices issued and the proceedings drawn by the respondent-Department is neither tenable, nor sustainable. The notices so issued and the procedure adopted being per se illegal, deserves to be and are accordingly set aside/quashed. As a consequence, all the impugned orders getting quashed, the consequential orders passed by the respondent- Department pursuant to the notices issued under Section 147 and 148 would also get quashed and it is ordered accordingly. The reason we are quashing the consequential order is on the principles that when the initiation of the proceedings itself was procedurally w....