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TMI Blog2021 (4) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... owed for statistical purposes. Assessment not completed within the period of limitation - AY 2012-13 - HELD THAT:- Admittedly the draft assessment order dated 10/3/2016 was received by assessee on 12/03/2016 as per the speed post tracking record of the postal department and the period of 30 days for filing Form 35 A in terms of section 144C (2) expired on 11/04/2016. Assessee in the present facts filed objections before DRP on 13/04/2016, thereby causing 2 days delay. The view taken by DRP that it has no power to condone the delay is inasmuch as such power is absent under section 144C of Income Tax (DRP) Rules 2009 cannot be found fault with. Hon ble Pune Tribunal in case of TDK Electronics AG vs ACIT [ 2020 (2) TMI 1277 - ITAT PUNE] as dealt in detail with the various provisions, Act, wherein, the legislature has conferred the power of condoning delay to various authorities under the Act. Thus we hold that impugned order passed dated 31/08/2016 u/s 144C(13) is beyond the limitation period and is ultra virus. We hold the returned income as the assessee income. - ITA(TP)A No.1715 & 692/Bang/2016 - - - Dated:- 8-3-2021 - Shri. Chandra Poojari, Accountant Member And Smt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The earned AO/TPO have erred in law and in facts, by not following the Hon'ble DRP direction of determining the ALP of payment towards Management fees ( ME ) and Global Sales and Marketing Activities Fees ( GSMAF ) based on the Hon'ble Bangalore TAT's decision in the assessee's own case for AY 2007-08, on the reasoning that a time limit of one month is not sufficient for passing the order giving effect (OGE ) to the DRP directions and thereby concluding that the directions are impossible to implement and bad in law. 6. The learned TPO has erred in law and in facts by providing contradictory statements in the TP order in relation to substantiation of actual receipt of services towards MF and the receipt of benefits thereof. 7. The learned AO/TPO have erred in law and in facts, by deviating from his own conclusion in relation to ME for AY 2011-12 vis- -vis AY 2010-11, wherein he had concluded that the assessee has proved and substantiated the receipt of service for which ME is paid and the benefits received thereof based on documentary evidences submitted and considered the payments towards ME as being at ALP. 8. The learned AO/TPO have erred, in facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble DRP's direction while assessing the Assessment Order without appreciating the fact that Section 1440(10) of the Act mandates every direction issued by the Hon'ble DRP is binding on the AO and hence, required to pass final assessment order giving effect to the directions. 16. The Learned AO has erred in law and in facts by not appreciating the fact that the Company has not incurred any interest expense during the year and there shall not be any disallowance under rule 8D(2)(ii). The Learned AO has erred in not accepting the claim of the Appellant that only ₹ 1,73,201/- has been incurred for earning the exempt income and hence the disallowance under Section 14A should be restricted to ₹ 1,73,201/-; 17. The Learned AO has erred in law and in facts by disallowing expenses of ₹ 50,00,000 on the basis that such expenditure is not laid out for the purpose of business under section 37 of the Act without appreciating that: - the Hon'ble DRP has directed to disallow expenses under Rule 8D(2)(ii) and - it has not upheld disallowance under section 37(1) of the Act as made in the draft assessment order; 18. The Learned AO has erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ('AE ) of the assessee. 5. Impugned order wrongly concludes on the nature and characterization of GSMAF contrary to evidence and proceeds on unsubstantiated presumptions to uphold Adjustment to Arm's Length Price ( ALP ). 6. Impugned order unlawfully disallows expenditure towards GSMAF purportedly by application of Comparable Uncontrolled Price ( CUP ) method claiming same to be sub- method of Transactional Net Margin Method ('TNNM ). 7. Impugned order inappropriately determines the ALP of payment of GSMAF by using the bright line test which is not a method recognized under the Act. 8. Impugned order erroneously makes contrary conclusions on the nature and characterization of GSMAF. 9. Impugned order erroneously proceeds on incorrect presumption that the services provided by the AE under internal coordination which is a sub-category service of GSMAF is duplicative in nature and has already been charged under Management Fees ( MF ). 10. Impugned order erroneously determines the arm's length nature of the international transactions of payment in relation to MF by not applying any of the methods specified under the Act r.w. the Income tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 14A amounting to₹ 1,73,201/- and a sum of ₹ 50 Lacs was disallowed as expenses, not laid out for purposes of business u/s 37(1) of the Act. 5. Against the draft assessment order, the assessee preferred objections before the DRP. The DRP vide order dated 17/11/2015 directed the Ld.TPO to determine arm s length price is of the international transactions by following the decision of coordinate bench of this Tribunal in assessee s own case for assessment year 2007-08 in ITA No.1329/B/2011. As regards corporate tax issues, the DRP directed the Ld.AO to disallow expenses under sub Rule 8D(2)(ii) and deleted the disallowance made under section 37(1) of the Act. 6. Upon receipt of the DRP directions, the Ld.AO failed to follow the directions in computing the transfer pricing adjustment, as well as the corporate tax additions. Instead of passing the final assessment as required by law, the Ld.AO passed impugned order dated 28/01/2016 identical to the draft assessment order passed on 23/02/2015. 7. Aggrieved by the final assessment order passed, the assessee is in appeal before us now. 8. In Ground No.5 assessee raises the issue regarding validity of final asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed u/s 144C(13) of the Act. We find that instead of passing the final order of assessment as required by law, the AO passed the impugned final order of assessment dated 17/1/2014 u/s 143(3) r.w.s 92CA of the Act; which, as contended by the id AR, is identical to the draft order of assessment passed on 14/3/2013 by only incorporating this TPOs proposals and , thereby evidently giving the DRPs mandatory directions issued u/s 144C(5) of the Act a complete go-by. In our view, it is factually established that the AO in the final order of assessment dated 17/1/2014 has not given effect to or carried out the binding directions of the DRP as required u/s 144C(10) within the time specified u/s 144C(13) of the Act; which is a clear violation of the binding provisions of sec. 144C(10) and (13) of the Act. Therefore, in our considered opinion, the conduct of the AO/TPO in passing the impugned final order of assessment dated 17/1/2014 is a clear case of defiance and disregard to the binding directions of the higher authorities, i.e, the DRP in the case on hand. In fact, in the impugned order dated 17/1/2014 there is not even a single reference to the DRPs directions issued us! 144C(5) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Evoke Technologies Limited in the list of comparables and similarly the DRP excluded ICRA Techno Analytics Limited from the list of comparables. The ALP Adjustment made by the TPO has been changed on account of these two directions of DRP, however, the Assessing Officer retained the original Transfer Pricing adjustment at ₹ 8,67,23,600 in the final assessment order as made in the draft assessment order. Being so, we are not in a position to uphold the order of the Assessing Officer on this count. As provided in the Section 144C(13) of the Act, the final order of the Assessing Officer should be in conformity with the directions given by the DRP. In the present case, while working out the ALP adjustment, he has not followed the direction of the DRP, consequently, the assessment order is bad in law as held by coordinate Bench in the case cited above. Accordingly, the assessment framed in this case is quashed and set aside. However we make it clear that, this order would not, in any way, stop the revenue from taking such steps as are available to it in law and the assessee also from contesting the action of the revenue in accordance with the law, if it so desires. 6. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one the delay in filing objections by assessee and since assessee filed its objection beyond the specified time period of 30 days, application was not accepted. The DRP accordingly rejected the objections filed by assessee. The DRP passed order on 24/08/2016. 15. The Ld.AO, subsequently passed the impugned order on 31/08/2016. 16. It has submitted by the Ld.AR that, the impugned order passed by the Ld.AO is beyond the period of limitation, as the Ld.AO should have completed the assessment based on the draft assessment order dated 10/03/2016. He placed reliance on the decision of Hon ble Pune Tribunal dated 26/02/2020 in case of TDK Electronics AG vs ACIT in ITA No. 1810/PON/2019 in support of his contention 17. On the contrary the Ld.CIT.DR placed reliance on orders passed by authorities below. 18. We have perused submissions advanced by both sides in the light of records placed before us. 19. In Ground No.2 assessee raises the issue regarding validity of final assessment order dated 31/08/2016 passed u/s 143(3) r.w.s 144C of the Act. The Ld.AR submitted that the impugned order is passed beyond the due date prescribed u/s 144C of the Act. The relevant dates to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e end of the month in which such a direction is received. At this juncture, it is significant to have a glance at the mandate of sub-section (3) of section 144C, which runs as under :- 'The Assessing Officer shall complete the assessment on the basis of the draft order, if- (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub-section (2).' 16. The crux of section 144C(3) in so far as clause (a) is concerned is that if an assessee accepts the variation as per the draft order, then there is no need to sail through the DRP or the appellate route. In that scenario, the AO, in terms of section 144C(4)(a), will be required to complete the assessment on the basis of the draft order within a period of one month from the end of the month in which the acceptance is received. Clause (b) of section 144C(3) deals with a situation of completing the assessment on the basis of the draft order in a case in which no objections are received within the period specified in sub-section (2). In the latter situation, clause (b) of section 144C(4) provides that the AO will pass t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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