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2016 (7) TMI 1633 - AT - Income TaxValidity of proceedings u/s. 92CA(3) after expiry of limitation period - period of limitation - Time limit for completion of assessments - Whether the procedure order is passed beyond the limitation of time? - irregularity in the procedure - HELD THAT - Honda Trading Corporation 2015 (9) TMI 846 - ITAT DELHI wherein it has been held that the time limit specified u/s 92CA(3A) is mandatory and not directory and therefore the TPO is bound by the time limit for passing of the order u/s 92CA (3) of the act. Accordingly in that case time limit as per section 153(1) of the Act was up to 7.06.2014 and TPO passed his order on 31.05.2014 instead of on or before 08.04.2014 hence order passed by the TPO in that case was held to be time barred. The coordinate bench has further held that in such circumstances the final assessment order would be same but the addition on account of transfer pricing adjustment arising from the determination of the ALP of the international transaction by the TPO emanating from his time barred order is unsustainable and therefore the coordinate bench directed for deletion of addition on account of transfer pricing adjustment made in the final assessment order. Thus the order of the ld. TPO passed on 31.12.2014 is barred by limitation and liable to be quashed. Therefore consequently the addition on account of transfer pricing adjustment does not survive. In view of this ground No. 2 of the appeal of the assessee is allowed.
Issues Involved:
1. Assessment of income at ?104,113,380/- against returned income of ?20,698,486/-. 2. Time-barred order passed by the TPO under section 153 read with section 92CA(3A). 3. Existence of a Permanent Establishment (PE) in India. 4. Taxability of profits from offshore supplies due to PE in India. 5. Jurisdictional bar on adjustment made on account of interest. 6. Adjustment on sale of raw material meeting ALP test. 7. Jurisdiction to question commercial expediency of the transaction. 8. Risk/reward matrix and business expediency in charging interest on business credit. 9. Initiation of penalty under sections 271BA, 271AA, and 271G. 10. Application of Proviso to section 92C for downward variation of 5 percent in determining ALP. Detailed Analysis: Issue 1: Assessment of Income The assessee challenged the assessment of income at ?104,113,380/- against the returned income of ?20,698,486/-. This ground was general and no specific arguments were advanced, leading to its dismissal. Issue 2: Time-Barred Order The assessee contended that the order passed by the TPO was time-barred under section 153 read with section 92CA(3A). The reference to the TPO was received on 28.12.2011, and the order was passed on 31.12.2014, exceeding the limitation period. The Tribunal examined the provisions of section 92CA(3A) and section 153, concluding that the TPO's order should have been passed by 29.11.2014, making the order dated 31.12.2014 barred by limitation. The Tribunal relied on a similar case (Honda Trading Corporation Vs. DCIT) where the time limit specified under section 92CA(3A) was deemed mandatory. Consequently, the addition on account of transfer pricing adjustment amounting to ?83,414,899/- was quashed. Issue 3: Permanent Establishment (PE) The TPO concluded that the assessee had a PE in India, which was contested by the assessee. This issue was not specifically addressed due to the quashing of the TPO's order on the ground of being time-barred. Issue 4: Taxability of Offshore Supplies The TPO's conclusion that profits from offshore supplies were taxable in India due to the existence of a PE was also not addressed due to the quashing of the TPO's order. Issue 5: Jurisdictional Bar on Interest Adjustment The assessee argued that the adjustment on account of interest was barred by jurisdiction under section 92(3) and Circular 14 of 2001. This issue was rendered moot due to the quashing of the TPO's order. Issue 6: Adjustment on Sale of Raw Material The assessee contended that the transaction relating to the sale of raw material met the ALP test in the assessment of Indian associated enterprises. This issue was not addressed due to the quashing of the TPO's order. Issue 7: Jurisdiction to Question Commercial Expediency The assessee argued that the TPO/DRP had no jurisdiction to question the commercial expediency of the transaction where SIBOR was applied instead of LIBOR. This issue was not addressed due to the quashing of the TPO's order. Issue 8: Risk/Reward Matrix and Business Expediency The assessee contended that the TPO/DRP failed to appreciate the difference in the purpose of charging interest on business credit compared to typical financing transactions. This issue was not addressed due to the quashing of the TPO's order. Issue 9: Initiation of Penalty The assessee argued against the initiation of penalties under sections 271BA, 271AA, and 271G, stating that all necessary information was submitted. This issue was not addressed due to the quashing of the TPO's order. Issue 10: Application of Proviso to Section 92C The assessee contended that the TPO/DRP failed to allow the benefit of downward variation of 5 percent in determining the ALP. This issue was not addressed due to the quashing of the TPO's order. Conclusion The Tribunal quashed the TPO's order dated 31.12.2014 as time-barred under section 92CA(3A). Consequently, the addition on account of transfer pricing adjustment amounting to ?83,414,899/- was deleted. Other grounds of appeal were dismissed as infructuous due to the quashing of the TPO's order. The order was pronounced on 18/07/2016.
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