2022 (11) TMI 874 - AT - Income Tax

Validity of the final assessment order due to non-service of the Dispute Resolution Panel s (DRP) directions - AR contended that the directions given by the DRP u/s.144C(5) was not served on the assessee - HELD THAT - Insofar as the assessee is concerned, the requirement is to give opportunity of hearing before issuing the direction and there is no further statutory requirement of communicating such direction to him. The AO is required to pass the final order in conformity with the direction. There is no specific legal recourse available to the assessee against the adverse direction of the DRP except for filing an appeal against the final assessment order giving effect to such direction. The service of the direction by the DRP on the assessee, in terms of Rule 11 of Income-tax (DRP) Rules, 2009, is only a procedural requirement put in place by delegated legislation, without any corresponding provision in the enactment. In that view of the matter, it cannot be said that non-service of the direction of the DRP to the assessee would vitiate the final assessment order itself. Notwithstanding the above position, AR candidly admitted before the Tribunal that, on the assessee writing to the DRP about non-communication of the direction, the DRP responded by mentioning that direction dated 11-03-2021 was promptly e-mailed to the assessee on that very date itself. No adverse contrary evidence has been brought to our notice on behalf of the assessee. Under such circumstances, we are satisfied that this ground is devoid of merit and hence deserves the fate of dismissal. We order accordingly. TP addition in the international transaction of Payment of Royalty for use of technology - HELD THAT - Following the view taken by the Tribunal for the A.Y. 2015- 16, we approve the segregation of payment of Royalty from other international transactions under the Manufacturing segment and send the matter to the DRP for disposing of the assessee s objections on the further segregation of Royalty payment on exports and domestic sales and the consequential transfer pricing adjustment in respect of export sales to the AEs. Non-granting of deduction u/s.80G - HELD THAT - AO did not dispute the deduction and adopted the total income offered by the assessee (after deduction u/s.80G) for making certain disallowances and computed the total income accordingly. This was done in the draft as well as the final assessment orders. However, in the Computation sheet, AO omitted to grant the deduction of Rs.6.00 crore, as is apparent from column no.12 showing the figure of zero against the total deduction against Chapter VI-A. Under such circumstances, we direct the AO to verify the assessee s contention and allow deduction of Rs.6.00 crore, if not earlier allowed, after due opportunity of hearing to the assessee. Income during the scrutiny assessment u/s.143(3) - HELD THAT - We direct the disposal of the application made by the assessee u/s.154 of the Act and then make suitable changes to the figure of income u/s.143(1) as the base figure for determining income u/s.143(3), if warranted.

Summary

Issues:
1. Validity of final assessment order due to non-service of DRP's directions.
2. Transfer pricing adjustment on payment of Royalty for use of technology.
3. Disallowance under section 14A of the Act.
4. Non-granting of deduction for Education Cess and Secondary higher education cess.
5. Non-granting of deduction under section 80G.
6. Short deduction of TDS credit.
7. Initiation of penalty proceedings under section 271(1)(c).
8. Procedure under section 144B of the Act.
9. Transfer pricing adjustment on payment of Royalty.
10. Consideration of returned income during scrutiny assessment under section 143(3).
11. Short granting of credit of TDS.
12. Levy of interest under section 234C.

Analysis:

Issue 1: Validity of final assessment order due to non-service of DRP's directions
The assessee contended that the final assessment order was invalid due to non-service of the DRP's directions. However, the Tribunal noted that the communication of direction to the assessee was not a statutory requirement. The Tribunal found that the direction was promptly e-mailed to the assessee, and hence, dismissed this ground as devoid of merit.

Issue 2: Transfer pricing adjustment on payment of Royalty for use of technology
The Transfer Pricing Officer (TPO) made adjustments in the Royalty payment transaction, leading to a transfer pricing adjustment. The Tribunal approved the segregation of Royalty payment from other transactions and directed the matter to the DRP for further consideration based on similar cases from previous years.

Issue 3: Disallowance under section 14A of the Act
The Tribunal remitted the matter to the Assessing Officer (AO) for fresh consideration based on directions from previous orders.

Issue 4: Non-granting of deduction for Education Cess and Secondary higher education cess
The Tribunal decided against the assessee based on precedents from previous cases.

Issue 5: Non-granting of deduction under section 80G
The Tribunal directed the AO to verify and allow the deduction of Rs.6.00 crore if not earlier allowed, after providing an opportunity of hearing to the assessee.

Issue 6: Short deduction of TDS credit
The AO was directed to verify the assessee's contention and allow the necessary credit if not earlier allowed.

Issue 7: Initiation of penalty proceedings under section 271(1)(c)
The Tribunal dismissed the ground as premature.

Issue 8: Procedure under section 144B of the Act
The ground became infructuous due to statutory amendments with retrospective effect.

Issue 9: Transfer pricing adjustment on payment of Royalty
The Tribunal followed previous orders and directed accordingly.

Issue 10: Consideration of returned income during scrutiny assessment under section 143(3)
The Tribunal directed the disposal of the application made by the assessee under section 154 and adjustments to the income figures if warranted.

Issue 11: Short granting of credit of TDS
The AO was directed to verify the assessee's contention and decide accordingly.

Issue 12: Levy of interest under section 234C
The Tribunal directed the AO to examine the computation of interest under section 234C.

In conclusion, the Tribunal partly allowed the appeals, remitting some issues for fresh consideration and directing adjustments or verifications for others. The grounds related to penalty proceedings were dismissed as premature.