TaxTMI 
TaxTMI 
2026 (6) TMI 1168
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....ty Commissioner of Income Tax (herein after referred to as 'TPO') are bad both in the eye of law and on facts. 2. Invalid Draft Assessment Order as passed after Order giving Effect to Hon'ble ITAT Order has been passed. 2.1. The Ld. AO erred in passing the draft order dated 12.03.2024 by ignoring the fact that order giving effect to the Hon'ble ITAT Order has already been passed on 15.11.2022 on which assessee filed appeal before Hon'ble ITAT. Therefore, the order passed is erroneous and bad-in-law. 2.2. The Ld. AO ought to have appreciated the fact that only one distinct Consequential Order shall be passed on one ITAT Order. Therefore, the consequential draft assessment order passed u/s. 144C(1) rws 254 is void and bad in law. 2.3. The Ld. AO erred in passing the consequential order before making TPO reference which leads to violation of provision of the Act. Therefore, the consequential orders will automatically be invalid. 3. The Final assessment order passed u/s. 143(3) r.w.s. 144C(13) 153A is barred by limitation as per provisions of Sec. 153 of the Act. 4. Arm's Length Price Adjustment of Rs. 18,31,62,5....
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....ustment of Rs. 1,06,42,500/- guarantee provided to its AEs by charging a fee at 0.5% on the outstanding amount of corporate. 5.1. The AO/TPO erred in not appreciating the fact that the Corporate Guarantee is on account of commercial expediency and it does not have any bearing on the profits/income of the Appellant/AΕ. 5.2. The AO/TPO ought to have appreciated the fact that the issuance of Corporate Guarantee to banks on behalf of AE does not involve any cost to the assessee. 5.3. The AO/TPO erred in confirming the action of the AO/TPO and in not appreciating the fact that the AE has not received any benefit in the form of lower interest rate by virtue of the corporate guarantee given by the taxpayer. 5.4. The AO/TPO erred by not appreciating the fact that the Credit rating of the AE's and country of incorporation is much higher than the credit rating of the assessee and country of incorporation; the credit facilities are sanctioned by the banker based on the financial stability and credit rating of the associated enterprise. 5.5. The AO/TPO erred in not appreciating the fact that no comparison can be made between guarantee is....
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....ich notice u/s. 145 dated 07.04.2022 was issued. 3.3. The Ld. AO ought to have appreciated the fact that impugned assessment u/s. 147 was barred as on 31.03.2024 and merging the same with the final assessment order dated 06.12.2024 is invalid. 4. The AO has travelled beyond the directions given by the ITAT vide its order in ITA No. 186 to 189/Hyd/2021 dated 12.04.2022. 4.1. The Ld. AO ought to have appreciated that the AO has travelled beyond the directions given by the ITAT vide its order in ITA No. 186 to 189/Hyd/2021 dated 12.04.2022. 4.2. The Ld. AO ought to have appreciated that the proceedings u/s. 148 cannot be merged with the set aside proceedings and hence the proceedings are liable to be quashed. 4.3. The Ld AO ought to have appreciated impugned final assessment order dated 06.12.2024 must be confined to the directions of the Hon'ble ITAT and the Ld. AO cannot The Ld. AO ought to have appreciated impugned final make a new addition. 4.4. The Ld. AO ought to have appreciated that the impugned final assessment order dated 06.12.2024 is liable to be quashed as AO has travelled beyond the powers conferred to him. ....
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....e ITAT vide their order for the AY 2013-14 had already concluded that the advances given to the A.E's are for the purpose of equity investment. 7.10. Without prejudice to the above grounds, the AO erred in not adjudicating the grounds of objection regarding the issue of applying the domestic interest rate for computation of Arm's Length Price of Interest on the advances. 8. The AO/TPO erred in making an adjustment of Rs. 1,06,42,500/- by charging a fee at 0.5% on the outstanding amount of corporate guarantee provided to its AEs. 8.1. The AO/IPO erred in not appreciating the fact that the Corporate Guarantee is on account of commercial expediency and it does not have any bearing on the profits/income of the Appellant/AE. 8.2. The AO/TPO ought to have appreciated the fact that the issuance of Corporate Guarantee to banks on behalf of AE does not involve any cost to the assessee. 8.3. The AO/TPO erred in confirming the action of the AO/TPO and in not appreciating the fact that the AE has not received any benefit in the form of lower interest rate by virtue of the corporate guarantee given by the taxpayer. 8.4. The AO/TPO er....
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..... "On the facts and circumstances of the case, the Final assessment order ("FAO") dated 06.12.2024 is bad both in the eye of law and on facts. 2. Invalid Draft Assessment Order as passed after Order giving Effect to Hon'ble ITAT Order has been passed. 2.1. The Ld. AO erred in passing the draft order dated 12.03.2024 by ignoring the fact that order giving effect to the Hon'ble ITAT Order has already been passed on 15.11.2022 on which assessee filed appeal before Hon'ble ITAT. Therefore, the order passed is erroneous and bad-in-law. 2.2. The Ld. AO ought to have appreciated the fact that only one distinct Consequential Order shall be passed on one ITAT Order. Therefore, the consequential draft assessment order passed u/s. 144C(1) rws 254 is void and bad in law. 2.3. The Ld AO erred in passing the consequential before making TPO reference which leads to violation of provision of the Act. Therefore, the consequential orders will automatically be invalid. 3. The Final assessment order passed u/s. 143(3) r.w.s. 144C(13) 153A is barred by limitation as per provisions of Sec. 153 of the Act. 4. The AO erred in passing two as....
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....rantee instead of restricting the same to the extent of the withdrawal of guaranteed amount by the Associated Enterprises. 5.8. Without prejudice to other grounds, even if it is proposed to 5.8 make an adjustment towards fee on corporate guarantee, it has to be restricted to reasonable rate. 6. Erred in making adjustment of Arm's Length Price for Rs. 55,03,931/- towards international transaction of Interest on Receivables from the Associated Enterprises:- 6.1. The Ld.AO ought to have appreciated the fact that, the assessee has adopted TNMM method for determining the ALP of its transactions and the operating margin of the assessee is much higher than its comparables, hence any adjustment with regard to ALP affecting the operating margin would be unjustifiable and against the provisions of Section 92C of the Act. 6.2. The Ld.AO ought to have appreciated the fact that the assessee is following a policy of not charging interest on receivables irrespective of the fact whether the sales are made to AE or Non-Associated Enterprises. 6.3. The Ld. AO ought to have appreciated the fact that no ALP adjustment is required to be made in a case in....
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....nternatinoal India (P.) Ltd., vs. DCIT [2024] 159 taxmann.com 148 (Del.); iii. Judgment of Hon'ble Karnataka High Court in the case of M/s. Biesse India (P.) Ltd., vs., DCIT - Writ Appeal No. 1619 of 2024 (T-IT); iv. Order of ITAT, Delhi in the case of M/s. Hitachi Astemo Haryana (P.) Ltd., vs. ACIT in ITA. No. 3353/Del./2024; 5.1. Thus, he has submitted that the Orders passed by the Assessing Officer to give effect to the Order of this Tribunal are barred by limitation and therefore, the same are invalid and liable to be quashed. 5.2. The learned Authorised Representative of the Assessee has submitted that for the assessment year 2018-2019 the Assessing Officer passed the consequential Order dated 06.12.2024 giving effect to the Order of this Tribunal dated 30.01.2023. Therefore, this Order passed by the Assessing Officer is also barred by limitation as beyond 03 months from the end of the month in which the Tribunal has passed the impugned order. He has reiterated his contentions and relied upon the Judgments as referred above. 6. On the other hand, the learned DR has submitted that all theses cases involves transfer pricing and therefore, the limitatio....
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....st accrued during the year and hence determination of ALP is not warranted. AO noticed that assessee had not charged interest from it's A.E. though interest @ 6% was charged from Vivimed Hongkong in the earlier year, and also that there is no interest charged in this year. Therefore, he proposed to charge interest on the outstanding balances and the taxpayer was issued a letter accordingly. After considering the assessee's submissions at length, the AO held that the interest is chargeable on the interest free advances given by the assessee to its subsidiaries towards working capital advances. Thus, he charged 12.25% on the working capital advances as rate of interest and brought it to tax. 5.1. Further, he also treated corporate guarantee as an international transaction and proposed addition by charging corporate credit at 2% of the corporate guarantee given by assessee. In accordance with these findings of the TPO, the final assessment order was passed and the assessee has filed second appeal before the Tribunal. 5.2 The Ld. Counsel for the assessee submitted that though TPO has stated that these are working capital advances given to its subsidiaries, they are no....
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.... authorities have adopted consistency in making the impugned adjustment. We therefore adopt the foregoing detailed discussion mutatis mutandis to restore the assessee's instant first and foremost substantive grievance back to the TPO in all these four years in very terms. Ordered accordingly. This first issue is accepted for statistical purposes. 4. Next comes the 2nd common issue of corporate guarantee fees "ALP" adjustments of Rs .3,47,45,600/- Rs. 4,25,70,000/- Rs. 5,69,60,000/- and Rs. 4,35,40,000/-; assessment year wise; respectively. The assessee interalia submitted before us that a corporate guarantee does not form an international transactions as it does not result in any quantifiable benefits to the "AEs" being since it is a shareholding activity only than an international transaction falling under section 92B of the Act. Learned counsel further submitted that no comparison could be made between a corporate guarantee vis-a-vis bank guarantee. And that the learned lower authorities ought to have adopted a nominal commission rate as well. The Revenue has placed strong reliance on the impugned adjustment(s) made in the lower proceedings. 5. We have ....
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.... assessee or any other person or an opportunity being heard to be provided to the assessee in order to give effect to the said Order passed u/sec. 254 of the Act shall be made within the time specified under sub-sec.(3) of sec. 153 of the Act. Therefore, the limitation provided in sub-sec.(3) of sec. 153 of the Act will be applicable in this case. For ready reference, sub-sec.(3) of sec. 153 is reproduced as under: "(3) Notwithstanding anything contained in sub-sections (1), (1A)) and (2), an order of "fresh assessment [or fresh order under section 92CA, as the case may be] in pursuance of an order under [section 250 or] section 254 or section 263 or section 264, setting aside or cancelling an assessment, [or an order under section 92CA, as the case may be], may be made at any time before the expiry of nine months from the end of the financial year in which the order under [section 250 or] section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or ....
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....his discussion, it is clear that the term "assessment" is used in section 153(1) to mean the entire process of assessment; section 153(2) uses the words, 'assessment', 'reassessment' or 're-computation' but in respect of section 147 which deals with income escaping assessment; section 153(3) uses the term "fresh assessment" in pursuance of the orders passed setting aside or cancelling an assessment; therefore, this term "fresh assessment", though not defined, contemplates a new assessment consequent to the higher authorities cancelling or setting aside the assessment; section 153(5), talks of giving effect to an order passed by the higher authorities, wholly or partly, otherwise than by making a fresh assessment or reassessment. The words "wholly or partly" obviously pertain to giving effect to the order of the higher authorities which would be done by the lower authority either in part or in whole depending on the issues that are settled by the higher authorities. However, such an exercise cannot be done within the time limits specified in section 153(5), where there is a fresh assessment or reassessment and in such cases the longer time limits specified in....
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....-sec.(4) will be applicable in the case because the issue was set aside and remanded to the record of the Assessing Officer/TPO which falls in the ambit of sub-sec.(3) of sec. 153 of the Act and not under sub-sec.(4) of the Act. Even the amendment vide Finance Act, 2022 is also prior to the Orders of this Tribunal. 8. The next issue which was considered by the Tribunal is regarding the ALP of corporate guarantee commission for the guarantee provided to its AE. 9. The Tribunal has given a finding on the ALP of corporate guarantee commission @ 0.5% and therefore, that issue was decided conclusively by the Tribunal and the Assessing Officer/TPO was required to only give effect to the findings of the Tribunal. Hence, the limitation provided in sub-sec.(5) of sec. 153 is applicable for passing the Order to give effect to the findings of the Tribunal. It is clear that the Assessing Officer/TPO was not required to verify or examine any record or any contention but was to just give the effect to the Order of the Tribunal. Therefore, the Order passed by the Assessing Officer dated 06.12.2024 in pursuance to the Order of this Tribunal dated 12.04.2022 is barred by limitation as provide....
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....ee's corporate guarantee actually utilized. The grounds raised by the assessee on this issue are accordingly allowed for statistical purposes. 9. In Ground of appeal No. 3 to 3.1.5 the assessee has challenged the order of the Assessing Officer in making addition of Rs. 55,03,931/- on account of interest on outstanding receivables. 9.1. The learned Counsel for the assessee at the outset drew the attention of the Bench to the order of the DRP at Para 2.3.22 wherein it has been held as under: "2.3.22. In view of the above, considering the objections of the assessee, the TPO is directed to impute interest on receivables after netting off payables following credit period mentioned in the intercompany agreement with AEs or as per the invoice period date applying the SBI short term deposit rate". 9.2. He submitted that since the Assessing Officer in the final order has not followed the directions of the DRP, therefore, he has no objection if the matter is restored to the file of the Assessing Officer with a direction to compute the interest on receivables after netting off payables. 9.3. The learned DR has no objection for the same. 9.....