2023 (8) TMI 629 - AT - Income Tax

Validity of the order passed u/s. 92CA(3) - period of limitation - HELD THAT - As the time limit for passing of the order by the Ld.TPO under section 92CA(3A) is linked with the time limit, as mentioned in section 153(1) of the Act. We find that, the Finance Act, 2007 inserted sub-section (3A) carrying the time limit of sixty days for passing of the order by the Ld.TPO before the expiry of time limit for completion of assessment by the Ld.AO u/s.153. The word may used in section 92CA(3A), might connote merely an enabling or permissive power in the sense of the usual phrase, but it is also capable of being construed as referring to a compellable duty, particularly when it refers to a power conferred on a court or an authority. Therefore despite the use of the word 'may', in section 92CA (3A), the time limit for passing the order by the Ld. TPO is mandatory. TPO is bound by the time limit for passing of his order. Thus the time limit given in sub-section (3A) of section 92CA is mandatory for the passing of the order u/s. 92CA(3) by the Ld. TPO. Based on the interpretation by PFIZER HEALTHCARE INDIA (P.) 2021 (2) TMI 1152 - MADRAS HIGH COURT the period of 60 days prior to the time limit as per section 153(1), available with the Ld. TPO, for passing his order u/s. 92CA(3), for the years under consideration is to be calculated accordingly. TPO admittedly has passed the order u/s. 92CA(3) on 30.01.2014 and 30.01.2015, which is beyond the period of limitation and therefore deserves to be quashed. We therefore allow the Ground no. 1 raised by the assessee.

Summary

Issues Involved:

1. Validity of the order passed under Section 92CA(3) by the Transfer Pricing Officer (TPO) on grounds of being time-barred.
2. The impact of quashing the TPO's order on other merits of the case.

Summary:

1. Validity of the Order under Section 92CA(3):

The primary issue was whether the orders passed by the TPO under Section 92CA(3) for the Assessment Years (A.Y.) 2010-11 and 2011-12 were time-barred. The assessee argued that the TPO's orders dated 30.01.2014 and 30.01.2015 were beyond the prescribed time limit as per Section 92CA(3A), which mandates that the TPO's order must be passed "before sixty days prior to the date on which the period of limitation referred to in section 153 expires."

The Tribunal referenced the decisions of the Hon'ble Madras High Court in Pfizer Healthcare India Pvt. Ltd. vs. JCIT and DCIT vs. Saint Gobain India Pvt. Ltd., which clarified that the period of 60 days should be calculated excluding the last date of the limitation period under Section 153. Thus, the TPO's orders should have been passed by 29.01.2014 and 29.01.2015 for A.Ys. 2010-11 and 2011-12, respectively. Since the orders were passed on 30.01.2014 and 30.01.2015, they were deemed to be time-barred by one day.

The Tribunal held that the use of the word "may" in Section 92CA(3A) should be construed as "shall," making the time limit mandatory. Consequently, the orders passed by the TPO were quashed as they were beyond the prescribed time limit.

2. Impact on Other Merits:

Given that the TPO's orders were quashed on the grounds of being time-barred, the Tribunal refrained from adjudicating the other grounds raised by the assessee on merits. The issues on merits became academic and were not considered further.

Conclusion:

The appeals filed by the assessee for A.Ys. 2010-11 and 2011-12 were allowed on the legal issue of the TPO's orders being time-barred. The Tribunal's order was pronounced in the open court on 19th June 2023.