2023 (8) TMI 668 - AT - Income Tax

Validity of proceedings u/s 92CA(3A) - period of limitation - Procedural irregularity and breach of time limit for completion of proceedings - TP order passed which is beyond the timeline for completion of proceedings u/s 92CA(3A) - HELD THAT - As for the assessment year 2016-17, the TPO has passed order u/s. 92CA of the Act, on 01.11.2019. As per provisions of section 153(1) 153(4) of the Act, the period of 60 days prior thereto would run till 01 st November, 2019 and any order passed prior to that date would mean 31 st October, 2019 or before. Since, the order was passed on 01.11.2019, the same would be barred by limitation, as held by the Hon ble Madras High Court in the case of M/s. Pfizer Healthcare 2021 (2) TMI 1152 - MADRAS HIGH COURT In this case, the TPO has passed their order on 01.11.2019 and assessment year involved is AY 2016-17. In our considered view, the case is squarely covered by the decision of ITAT Chennai Benches in the case of M/s. Verizon Data Services India Pvt. Ltd. 2023 (3) TMI 190 - ITAT CHENNAI Thus, we quashed order passed by the TPO and consequent draft assessment order passed by the AO, directions issued by the DRP and final assessment order passed by the AO. A similar view has been taken in the case of M/s. Verizon Data Services India Pvt Ltd. 2023 (3) TMI 190 - ITAT CHENNAI where the Tribunal by following the decision of Pfizer Healthcare India Pvt Ltd Ors. (Supra), held that final assessment order passed after 31 st October is beyond limitation as prescribed u/s. 153(4) of the Act. Thus the final assessment order passed by the AO u/s. 143(3) r.w.s. 143C(13) of the Act on 01.11.2019 is clearly bad by limitation and liable to the quashed and thus, we quashed final assessment order passed by the AO. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the final assessment order based on the limitation period under Section 153(1) & 153(4) of the Income-tax Act, 1961.
2. Transfer Pricing (TP) adjustments related to corporate support services.
3. Disallowance of management fees under Section 37(1) of the Act.
4. Set-off of brought forward business loss.
5. Short credit of taxes.
6. Levying of interest under Sections 234A, 234B, and 234C of the Act.

Summary:

1. Validity of Final Assessment Order:
The assessee contended that the final assessment order dated 01.11.2019 was beyond the limitation period prescribed under Sections 153(1) & 153(4) of the Act. The Tribunal, following the decision of the Hon'ble Madras High Court in the case of M/s. Pfizer Healthcare India Pvt Ltd, held that the order passed on 01.11.2019 was barred by limitation. The Tribunal concluded that the final assessment order should have been passed on or before 31.10.2019. Consequently, the final assessment order was quashed as it was beyond the statutory time limit.

2. Transfer Pricing Adjustments:
The assessee challenged the upward TP adjustment of INR 16,73,97,818 related to corporate support services (CSS), arguing that the adjustment was not at arm's length and that the ALP was erroneously determined as 'Nil'. The Tribunal found that the AO/DRP/TPO erred in rejecting the benchmarking analysis and methodology adopted by the assessee and in classifying the intra-group services as shareholder/duplicative services without proper appreciation of the evidence provided.

3. Disallowance of Management Fees:
The AO/DRP disallowed expenditure of INR 5,45,37,056 towards management fees paid to associated enterprises under Section 37(1) of the Act, alleging failure to establish receipt of services. The Tribunal noted that the AO/DRP did not adequately consider the evidence and submissions furnished by the assessee, which demonstrated that the expenditure was incurred wholly and exclusively for business purposes.

4. Set-off of Brought Forward Business Loss:
The assessee argued that the AO erred in not allowing the set-off of brought forward business loss from earlier assessment years. The Tribunal directed the AO to re-examine and allow the set-off as per the provisions of the Act.

5. Short Credit of Taxes:
The AO was found to have granted short credit of taxes while computing the tax demand for the assessment year. The Tribunal instructed the AO to rectify the computation and grant the correct credit of taxes.

6. Levying of Interest:
The Tribunal addressed the assessee's contention regarding the incorrect computation of interest under Sections 234A, 234B, and 234C of the Act. The AO was directed to recompute the interest in accordance with the law.

Conclusion:
The Tribunal allowed the appeal for AY 2016-17, quashing the final assessment order as barred by limitation. For AY 2012-13, the Tribunal admitted the additional grounds of appeal regarding the limitation period and remanded the matter to the AO for re-examination in light of the Hon'ble Madras High Court's decision. The appeal for AY 2012-13 was treated as allowed for statistical purposes.