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2024 (3) TMI 720 - AT - Income TaxTransfer Pricing Adjustments - Validity of the order passed u/s. 92CA(3) - period of limitation - HELD THAT - TPO can pass an order u/s 92CA of the Act at any time before 60 days prior to the date on which period of limitation referred to u/s 153 expires. Thus, 60 days have to be counted prior to the date of last date of limitation u/s 153. Thus, the date for passing of ld. TPO s order was on or before 31/10/3019, because the completion of assessment u/s. 153(1), i.e., 21 months from the end of the assessment year plus 12 months extension considering TP reference has been made was 31/12/2019. Thus, the final assessment order is clearly barred by limitation in view of the decision of the Hon ble Madras High Court in the case of Pfizer Healthcare India (P) Ltd. 2022 (4) TMI 808 - MADRAS HIGH COURT Accordingly, we hold that the ld. TPO order is invalid and accordingly, is quashed. If there is no TPO order consequently, the entire transfer pricing adjustment proposed by the ld. TPO and the international transaction becomes non-est which is also liable to be quashed. Whether once the ld. TPO order is held to be nullity of or barred by limitation then could AO have passed the draft order treating it to be as 'eligible assessee? - In the instant case, it will be apparent that there is no transfer pricing variation arising as a consequence of the order of the ld. TPO once the said transfer pricing order is held to be time-barred, non-est and void ab-inito from the very date of its existence and inception. The entire premise to adopt the special procedure under section 144C of the Act and treat the assessee an eligible assessee rests on the fact that the order passed under section 92CA(3) of the Act has resulted in transfer pricing variations prejudicial to the interest of the assessee. Accordingly, once the assessee becomes an ineligible assessee, the very foundation for proceeding to pass the draft assessment order does not survive, meaning thereby, that the draft assessment order passed in the instant case becomes legally invalid and hence, al consequential proceedings on the basis of the said order fail In the instant case, a reference was made by the Ld. AO to TPO as per the provisions of section 92CA(1) of the Act an accordingly the timelines prescribed u/s 153 of the Act. Accordingly, the time limit to complete the assessment u/s. 143(3) expired on 31/12/2019 and accordingly, the whole assessment order is void ab initio being barred by limitation. Appeal of the assessee
Issues Involved:
1. Validity of Transfer Pricing Order and Assessment Order being barred by limitation. 2. Specific transfer pricing adjustments and disallowances. 3. Consequences of the transfer pricing order being time-barred on the draft and final assessment orders. Summary: Issue 1: Validity of Transfer Pricing Order and Assessment Order being barred by limitation The assessee challenged the validity of the transfer pricing order u/s 92CA(3) and the final assessment order, arguing they were barred by limitation. The assessee contended that the order dated 01/11/2019 by the TPO was beyond the permissible time limit, which should have been on or before 31/10/2019. The Tribunal referred to the judgment of the Hon'ble Madras High Court in the case of Pfizer Healthcare India (P) Ltd., which established that the period of 60 days should exclude the last day of the limitation period. Consequently, the TPO's order was held to be time-barred and invalid. Issue 2: Specific Transfer Pricing Adjustments and Disallowances The TPO proposed several adjustments, including: - AMP expenses: INR 1,08,99,66,623 - Reimbursement of expenses: INR 6,26,48,940 - IT management and related support services: INR 1,14,44,925 - Import of finished goods: INR 15,35,87,893 - AMP expenses (convention expenses): INR 44,62,88,562 The DRP provided partial relief, reducing some adjustments and confirming others. Final adjustments included: - AMP expenses: INR 1,08,99,66,623 - Reimbursement of expenses: reduced to INR 3,38,07,378 - IT management and related support services: deleted - Import of finished goods: reduced to INR 14,13,63,999 - AMP expenses (convention expenses): reduced by 8.12% Issue 3: Consequences of the Transfer Pricing Order being Time-Barred Given the TPO's order was deemed invalid, the Tribunal held that the entire transfer pricing adjustment and the draft assessment order were also invalid. The draft assessment order should not have been passed, and the final assessment order dated 25/05/2021 was barred by limitation. The Tribunal concluded that the assessee was not an "eligible assessee" under section 144C(15)(b) as the transfer pricing order was void ab initio, making the entire assessment process invalid. Conclusion: The appeal of the assessee was allowed on legal grounds, quashing the transfer pricing order and the final assessment order due to being barred by limitation. The Tribunal emphasized the importance of adhering to statutory timelines and the legal consequences of failing to do so.
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