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TMI Blog2018 (5) TMI 1266X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015. Since the petitioner had entered into certain specified domestic transactions and was desirous of opting for safe harbour, the petitioner applied for such purpose in a prescribed format duly certified by the Chartered Accountant. Such application was filed along with the return itself. 3. Case of the petitioner is and to which no dispute is raised by the Revenue that the Assessing Officer did not raise any objection to the petitioner's application for safe harbour nor passed any order declaring that the petitioner had not validly opted for safe harbour. 4. The return of income filed by the petitioner was taken in scrutiny by the Assessing Officer. He issued a notice under section 143(2) of the Income Tax Act("the Act" for short) on 28.8.2015. In the course of such scrutiny assessment, the petitioner received various notices from the Assessing Officer and replied to the same. As per the normal assessment procedure, the last date for completing the assessment in case of the petitioner for the said assessment year 2014-2015 would be 31.12.2016. 5. On 8.12.2016, the petitioner wrote to the Assessing Officer and preempted any attempt on his part of making reference to the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above. It was pointed out that at the fag end of the period for framing the assessment, the Assessing Officer had made the reference to the TPO on 13.12.2016 totally unknown to the petitioner. This was despite the petitioner's objection to any such reference raised in the petitioner's letter dated 8.12.2016. Under the circumstances, according to the petitioner, even when the TPO has not suggested any upward adjustment in price of the petitioner's specified domestic transactions, the order of the TPO is required to be quashed, failing which, the Assessing Officer could claim extended limitation for completing the assessment which has otherwise become timebarred. 12. On the other hand, learned counsel for the department opposed the petition contending that the Assessing Officer had acted on the CBDT circular no.3/2016 dated 10.3.2016 under which the Assessing Officer was required to make reference to the TPO under certain circumstances. Since the petitioner's case was covered by the said circular, reference was made. Counsel further submitted that the TPO has not made any upward adjustment of the price of the petitioner's specified domestic transactions. The orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an 'eligible assessee' as under : "10THA The "eligible assessee" means a person who has exercised a valid option for application of safe harbour rules in accordance with the provisions of rule 10THC, and (i) is a Government company engaged in the business of generation, supply, transmission or distribution of electricity; or (ii) is a cooperative society engaged in the business of procuring and marketing milk and milk products." 18. Rule 10THB pertains to eligible specified domestic transaction and reads as under : "10THB The "eligible specified domestic transaction" means a specified domestic transaction undertaken by an eligible assessee and which comprises of : (i) supply of electricity; or (ii) transmission of electricity; or (iii) wheeling of electricity; or (iv) purchase of milk or milk products by a cooperative society from its members." 19. Rule 10THC pertains to safe harbour and reads as under : 10THC (1) Where an eligible assessee has entered into an eligible specified domestic transaction in any previous years relevant to an assessment year and the option exercised by the said assessee is treated to be validly exercised under rule 10TH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant assessment year: Provided that the return of income for the relevant assessment year is furnished by the assessee on or before the date of furnishing of Form 3CEFB: Provided further that in respect of eligible specified domestic transactions, other than the transaction referred to in clause (Iv) of rule 10THB, undertaken during the previous year relevant to the assessment year beginning on the 1st day of April, 2013 or beginning on the 1st day of April, 2014 or beginning on the 1st day of April, 2015, Form 3CEFB may be furnished by the assessee on or before the 3lst day of March, 2016: Provided also that in respect of eligible specified domestic transactions, referred to in clause (iv) of rule 10THB, undertaken during the previous year relevant to the assessment year beginning on the lst day of April, 2013 or beginning on the lst day of April, 2014 or beginning on the lst day of April, 2015, Form 3CEFB may be furnished by the assessee on or before the 3lst day of December, 2015. (2) On receipt of Form 3CEFB, the Assessing Officer shall verify whether (i) the assessee exercising the option is an eligible assessee; and (ii) the transaction in respect of which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived by him; (ii) the order under subrule (6) shall be passed by the Principal Commissioner or Commissioner or Principal Director or Director, as the case may be, within a period of two months from the end of the month in which the objection filed by the assessee under sub11 17 rule (5) is received by him. (8) If the Assessing Officer or the Principal Commissioner or the Commissioner or the Principal Director or the Director, as the case may be, does not pass an order within the time specified in subrule (7), then the option for safe harbour exercised by the assessee shall be treated as valid." 22. Rule 10THD of the said Rules lays down the procedure 21. From the above statutory scheme, it can be seen that in order to avoid the number of transfer pricing audits and prolonged disputes, section 92CB was inserted to the Act providing for Safe Harbour Rules. Entire mechanism of safe harbour is prescribed in part DC to ChapterII of the said Rules. Rule 10THA specifies the eligible assessee. As per this rule, the eligible assessee would mean a person who has exercised a valid option for application of safe harbour rules and who is either a Government company engaged in the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g important, we have reproduced the said rule in entirety in this judgment. Under subrule( 1) of rule 10THD, an eligible assessee desiring to opt for safe harbour would furnish application in prescribed form to the Assessing Officer on or before the due date for furnishing the return. Under subrule( 2), on receipt of such an application, the the Assessing Officer would verify whether the assessee is an eligible assessee and the transaction in respect of which the option is exercised is an eligible specified domestic transaction before the option for safe harbour by the assessee can be treated to be validly exercised. Under subrule( 3), if the Assessing Officer has any doubt about the valid exercise of the option for the safe harbour by an assessee, he would require the assessee to furnish the information within the specified time. Under subrule (4), if the assessee does not furnish such information or the Assessing Officer finds that the assessee is not an eligible assessee or the specified domestic transaction is not an eligible transaction or the tariff is not in accordance with the circumstances specified in sub rule (2) of rule lOTHC, the Assessing Officer shall, by order in wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of any order passed by the Assessing Officer under subrule( 4) declaring the option exercised by an assessee as invalid, same shall be treated as valid. In fact, even if the Assessing Officer has passed such an order under subrule( 4) and the assessee objected to such order before the concerned authority within the time permitted and such authority fails to dispose of such objection within the time specified in clause(ii) of subrule( 7) of Rule 10THD, in such a case, the option exercised by the assessee shall be treated as valid. 25. In the present case, admittedly, after the petitioner exercised such an option, the Assessing Officer passed no order under subrule( 4) of rule 10THD declaring that the exercising of option was invalid. In terms of subrule( 7) and subrule( 8) of the said rule, therefore, the option exercised by the assessee would be treated as valid. 26. Once this conclusion is reached, it follows as a natural and necessary corollary that the Transfer Pricing regime would not apply. That being the case, the Assessing Officer had no authority to make any reference to the TPO to ascertain the arm's length price of the petitioner's specified domestic transac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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