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TMI Blog2017 (2) TMI 1318X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to the TPO after taking approval of the DIT (International Taxation). The assessee’s case is that there is no international transaction on the facts of his case. This aspect should have been adjudicated and approval taken from the appropriate authority. Thus, the mandate of the Section has not been followed by the Assessing Officer. Hence we have no other alternative but to hold that the reference to the TPO, u/s 92CA of the Act is bad in law. Assessing Officer is bound to pass an assessment order before 31st March, 2014 for the Assessment Year 2011-12. The extended time u/s 153(1) of the Act, does not come into play in the facts of this case. Hence in our considered view, the assessment is barred by limitation. - Decided in favour of assessee. - I.T.A. No. 196/Kol/2016 And I.T.A. No. 295/Kol/2016 - - - Dated:- 9-2-2017 - Sri J. Sudhakar Reddy Accountant Member And Sri Aby T. Varkey, Judicial Member For The Assessee : Shri Nageswar Rao, AR For The Revenue : Shri G. Mallikarjuna, CIT, DR ORDER Per J. Sudhakar Reddy :- The assessee has filed this appeal directed against the order of the Assessing Officer, passed u/S 143(3) r.w.s. 153(1) 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Main Plant Turnkey Package (SgMP-1) Units 1 2 (2X300 MW) alongwith some common facilities and (d) Letter of Award (LOA) dated July 27, 2004 issued by WBPDCL of Erection and Services of Main Plant Turnkey Package (SgMP-I) Units 1 2 (2X300 MW) alongwith some common facilities: As per the terms of the said contracts, the consideration to be received by the company from DPL in respect of the aforesaid activities will be as under: * USD 22,20,56,503 on account of offshore supply of equipment (including spare parts, tools and tackles) outside India and * IMR 4,59,33,77,323 and USD 1,62,75,326 for local suppliers, design, engineering and construction fabrication, erection, installation, testing and commissioning of thermal power unit in India. WBPDCL : (e) Contract No. DPL/Unit-7/DMP-1(supply)/2004-05/001 for supply of plant and equipment of thermal power plant alongwith some common facilities and (f) Contract No. DPL/Unit-7/DMP-1(SERVICES)/2004-05/002 for erection and services of thermal power plant alongwith some common facilities and (g) LOA dated July 27, 2004 issued by DPL for supply of plant equipments and erection and services of thermal plant alongwith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act plus surcharge cess as applicable) of 2.5% or @ 1.045%. * Local supply and services: A sum equivalent to 10% of gross receipts under this contract(s) was deemed to be income for the purpose of determination of rate of tax which was required to be deducted at source. Accordingly, rate of TDS was determined of 41.8% (the rate prescribed in the Finance Act plus surcharge cess as applicable) of 10% or @ 4.182%. Having been not satisfied with the above orders u/s 197, the assessee filed revision petition u/s 264 of the Act before the DIT (International Taxation), Kolkata on 25.04.2005. The Ld. DIT (International Taxation), Kolkata after taking into consideration the factual matrix of the case(s) and all applicable legal provisions passed separate orders u/s 264 for WBPDCL and DPL on 17.06.2005. Paragraph No. 8, which is the last paragraph of the order u/s 264 contains the summary which is identical in both the order. The summary is reproduced below for ready reference: To sum up a) Offshore Supply- 1. Profit from offshore supply of equipment/machinery is deemed to accrue or arise to the petitioner under Indian income tax Act, as it has arisen to the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (TPO)- Kolkata vide his order u/s 92CA(3) of the Act, dt. 30/01/2017, has determined that assessee company should have earned a profit ₹ 5,92,36,331/-, instead of Nil- return filed by the assessee. The DRP, partly upheld the order of the TPO. The Assessing Officer passed this final assessment order, in accordance with the directions of the DRP determining the total income of the assessee at ₹ 5,51,46,673/-, interalia considering the amount as the profit of the assessee from the project operations, on 30/12/2015. 3.1. Aggrieved the assessee is in appeal before us on the following grounds:- 1. On the facts and in the circumstances of the case, the DRP and consequentially the impugned order erred in rejecting the Appellant's claim that the reference made by the AO to Transfer Pricing Officer (TPO') is erroneous, bad in law and grossly violative of principles of natural justice. 2. On the facts and in the circumstances of the case and in law, determination of existence of specific international transaction being an exercise within exclusive jurisdiction of the AO before making any reference to the TPO, determination of existence of international tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t office and the Head Office in China are Associated Enterprise; (ii) domestic activities carried out by the Project Office are international transactions within the meaning of section 928 of the Act; and (iii)the project office is a sub-contractor of the Head Office in China and should be remunerated by the Head Office on an arm's length basis. 9. On the facts and in the circumstances of the case, the AO/ TPO/ DRP vide impugned order have erred in law and on the facts and circumstances of the case in making an adjustment of ₹ 55,146,673 by applying Transfer Pricing provisions and thereby rejecting the book results of the Project Office which were arrived at in consonance with Article 7(1) of Double Taxation Avoidance Agreement between India and China read with Article 5 thereof. 10. Without prejudice to the above grounds, DRP erred in routinely upholding the FAR analysis and transfer pricing adjustment made by the TPO. 11. Without prejudice to the above grounds, the adjustment of ₹ 55,146,673 made by the AO/TPO/ DRP vide impugned order is bad in law and on the facts and circumstances of the case as the same has been made: (i) By ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. On the facts and in the circumstances of the case, the AO in the impugned order has erred in adding back the refund issued of ₹ 3,692,930, when in fact no refund has been granted to the appellant. 17. On the facts and in the circumstances of the case, the AO in the impugned order has erred in levying interest under section 2348 and 234D of the Act of ₹ 9,521,808 and ₹ 720,121 respectively. 18. On the facts and in the circumstances of the case, the AO in the impugned order has erred in adding back the TDS credit of ₹ 3,451,340 claimed by the appellant. 19. On the facts and circumstances of the case and in law, the AO has erred in initiating penalty proceedings under sections 271 (1 )(c) of the Act. 20. The above grounds are independent and without prejudice to each other. The appellant craves leave to add, amend, withdraw or vary any grounds of appeal in the interest of natural justice either before or at the time of hearing of appeal proceedings. 3.2. The revenue filed the cross-appeal on the following grounds:- 1) Whether on facts and circumstances of the case, the Hon ble DRP erred in rejecting the comparable M/s C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. He filed written submissions in support of the contention that, M/s. Dongfang Electric, Kolkata, project office in this case has to be considered as an Associate Enterprise of the parent company located in the Republic of China and consequently all the transactions between them are international transactions which are subject to scrutiny by the TPO. 4.2. On the issue as to which is the Most Appropriate Method, i.e., CUP or TNMM, the ld. D/R, relied on the order of the Assessing Officer as well as the Ld. DRP and supported the same. On the issue of comparables, he relied on the order of the ld. TPO. 5. In reply, the ld. Counsel for the assessee submitted that the language of the Act is clear and what has to be referred to by the Assessing Officer to the TPO is only an international transaction, for determination of ALP. Referring to the letter dt. 14/03/2014, he submitted that this is not a valid reference by the Assessing Officer to the TPO and it is a communication by an officer in the office of the DDIT(IT)-11, Kolkata, to the TPO-1, Kolkata. He submitted that no letter, whatsoever, written by the Assessing Officer to the TPO, referring the international transactions for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r referring M/s. Dongfang Electric, Kolkata Project Office to the TPO and not any international transactions. The TPO, in this case tried to identify the international transactions that the assessee has entered into and then proceeded to determine the ALP. No international transaction was identified by the Assessing Officer and referred to the TPO after taking approval of the DIT (International Taxation). The assessee s case is that there is no international transaction on the facts of his case. This aspect should have been adjudicated and approval taken from the appropriate authority. Thus, the mandate of the Section has not been followed by the Assessing Officer. Hence we have no other alternative but to hold that the reference to the TPO, u/s 92CA of the Act is bad in law. 6.2.1. Once the reference in question is bad in law, the Assessing Officer is bound to pass an assessment order before 31st March, 2014 for the Assessment Year 2011-12. The extended time u/s 153(1) of the Act, does not come into play in the facts of this case. Hence in our considered view, the assessment is barred by limitation. Accordingly, the assessment order is quashed on the ground of limitation. 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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