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TMI Blog2022 (3) TMI 1510X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and revenue arises out of final assessment order dated 28.01.2016 passed by the Ld.DCIT, Circle -7 (1)(1), Bangalore for Assessment Year 2011-12 on following grounds of appeal: IT(TP)A No. 548/Bang/2016 (Revenue s appeal): 1. The directions of the Dispute Resolution Panel are opposed to law and facts of the case. 2. Whether the Ld. DRP has erred in directing to consider average of both the half year margins of the company, it will be a fair basis to neutralize the incidence of high RPT for AY:2010-11 arbitrarily without appreciating the facts of the case. 3. For these and other grounds that may be argued at the time of hearing, it is prayed that the directions of Dispute Resolution Panel in so far as it relates to the above grounds may be reversed. 4. The appellant craves leaves to add, alter, amend and /or delete any of the grounds mentioned above. IT(TP)A No. 699/Bang/2016 (Assessee s appeal): Revised grounds of appeal: The grounds mentioned herein by the Appellant are without prejudice to one another. 1. That on the facts and the circumstances of the case, the order the learned Deputy Commissioner of Income Tax, Cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'has erred in upholding the learned TPO's approach of upholding the arm's length value of the international transaction related to reimbursement of expenses as NIL; [corresponding to Ground 4 (b)] 10. That the learned AO/ learned Panel erred in bringing to tax the interest income of INR 32,496,741 as Income from Other Sources as against reducing the same from Capital Work in Progress ( CWIP ). [corresponding to Ground 5] 11. Without prejudice to the ground no. 10 above, the learned AO erred in not granting deprecation on the amount of the interest income not allowed to be setoff against CWIP, ignoring the fact that the net amount of CWIP was capitalised in the subsequent years when the relevant assets were put to use for the purpose of carrying the business. [corresponding to Ground 6 (a)] 12. Without prejudice to the ground no. 10 above, the learned AO erred in not granting deduction under section 57(iii) of the Act for the interest incurred and capitalised onto CWIP in respect of External Commercial Borrowing. [corresponding to Ground 6 (b)] 13. The learned AO erred in making an addition of INR 2,34,55,729 to the total income on account of un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee may be permitted to raise these additional grounds. He thus submitted that the admission of additional ground nos. 16 to 19 vide application dated 19.03.2021 be considered. Admission of Additional Ground Nos. 16 to 19: Additional grounds of appeal: Ground No. 16: On the facts and in the circumstances of the case and in law, the order dated 3o January 2015 passed by the Additional Commissioner of Income-tax (Transfer Pricing) 4(2) (Transfer Pricing Officer') under section 92CA of the Act is beyond the time limit prescribed under section 92CA(3A) r.w.s 153 of the Act thus making the transfer pricing order illegal, bad in law, null and void and liable to be quashed. Ground No. 17: On the facts and in the circumstances of the case and in law, the transfer pricing order being illegal and void on account of being barred by limitation in terms of section 92CA(3A) r.ws 1,53 of the Act, the action of the Assessing Officer in passing the draft assessment order dated 27 March 2015 by invoking section 144C of the Act is without jurisdiction and hence, the final assessment order dated 28 January 2016 and all proceedings consequent to the draft assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.2015 therefore, the order passed by the Ld.TPO is barred by the limitation. Ld. Counsel thus submitted that since the order of the Ld.TPO is barred by limitation, subsequent proceedings made pursuant to order u/s.92CA(3) does not survive. 9. He submitted that on identical facts, this issue has been decided in following case: Decision of Hon ble Delhi Tribunal in case of Honda Trading Corporation vs. DCIT reported in (2015) 61 taxmann.com 223 M/s. Asian Honda Motor Co. Ltd. vs. DCIT in ITA No. 6143/Del/2015, order dated 18.07.2016 M/s. Pfizer Healthcare India Pvt. Ltd. vs. JCIT in W.P. No. 32699 of 2019, judgment dated 07.09.2020, High Court of Madras The Ld.CIT.DR submitted that the order passed by the TPO is not barred by the limitation and submitted that such illegality is capable of being cured and it is merely a case of irregularity in assessment proceedings by the Ld.TPO. 10. The Ld.CIT.DR thus submitted that assuming there is a delay in passing order u/s. 92CA(3), at best, it would be a curable defect. We have perused submissions advanced by both sides in the light of records placed before us. Firstly we look at the various provisions which are cited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (3) of that section has not been made before such date; or (ii) is made on or after the 1st day of June, 2007, the provisions of clause (a) shall, notwithstanding anything contained in the first proviso, have effect as if for the words two years , the words thirty-three months had been substituted:] 42b[Provided also that in case the assessment year in which the income was first assessable is the assessment year commencing on the 1st day of April, 2009 or any subsequent assessment year and during the course of the proceeding for the assessment of total income, a reference under sub-section (1) of section 92CA-- (i) is made before the 1st day of July, 2012, but an order under sub-section (3) of that section has not been made before such date; or (ii) is made on or after the 1st day of July, 2012, the provisions of clause (a) shall, notwithstanding anything contained in the first proviso, have effect as if for the words two years , the words three years had been substituted.] [Extracted from taxmann.com as amended by the Finance Act 2012] Therefore accordingly the order u/s 143(3) for AY 2011-12 should have been passed by 31.03.2015. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnational transactions. No time limit was initially given for the passing of order by the TPO. It is only by the Finance Act, 2007, that sub-section (3A) was inserted providing time limit for the passing an order by the TPO. No amendment has been carried out in this provision thereafter. Subsection (3A) of section 92CA containing the relevant time limit for the passing of the order by the TPO, reads as under : - (3A) Where a reference was made under sub- section (1) before the 1st day of June, 2007 but the order under sub-section (3) has not been made by the Transfer Pricing Officer before the said date, or a reference under sub-section (1) is made on or after the 1st day of June, 2007, an order under sub-section (3) may be made at any time before sixty days prior to the date on which the period of limitation referred to in section 153, or as the case may be, in section 153B for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires.. 6.3. It transpires from a reading of the above provision that where a reference is made to the TPO after 1.6.2007, an order under sub-section (3) may be made at any time before 60 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s through subsection (1) that : `For the purpose of making an assessment (including an assessment in respect of any assessment year commencing before the date of coming into force of this section) under this Act, where under the provisions of section 7 read with the rules made under this Act or, as the case may be, the rules in Schedule III, the market value of any asset is to be taken into account in such assessment, the Assessing Officer may refer the valuation of any asset to a Valuation Officer- (a) in a case where the value of the asset as returned is in accordance with the estimate made by a registered valuer if the Assessing Officer is of opinion that the value so returned is less than its fair market value; (b) in any other case, if the Assessing Officer is of opinion- (i) that the fair market value or the asset exceeds the value of the asset as returned by more than such percentage of the value of the asset as returned or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do. In Raj Paul Oswal vs. CWT (1988) 171 ITR 489 (P H), there arose a quarrel as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at that time have frustrated the provisions of section 153 for the passing of the assessment order by the AO. Thus we have no hesitation in holding that the use of the word `may in sub-section (3A) of section 92CA is to be construed as `shall, thereby making this time limit as mandatory and not directory. As such, it is held that the TPO is bound by the given time limit for passing of his order. 6.9. Having held that the word `may in section 92CA(3A) should be read as `shall, we once again note that prior to the insertion of section 144C by the Finance Act, 2009, the time limit for completion of assessment was contained in section 153 and accordingly the time limit for the passing of the order by the TPO was also set out accordingly in section 92CA w.r.t. the time limit for the completion of assessment as per section 153. However, with the insertion of section 144C, the time limit for the completion of assessment, or in other words, for passing of the final assessment order, stood shifted to sub- sections (4) or (13) of section 144C and got detached from section 153. Along with this, passing of draft order also became mandatory, for which we have held above that the same is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e confronted with a situation in which the draft order has been passed in time but the lapse has come in the passing of the order by the TPO. The consequence of the above scenario is that the passing of a valid and properly timed draft order cannot lead to the setting aside of the final assessment order. However the passing of the time barred order by the TPO, which is again a mandatory procedure prescribed under the Act, would be a noncurable defect, having the consequence as if it was not passed. In such circumstances, though the final assessment order would be saved but the addition on account of transfer pricing adjustment arising from the determination of the ALP of the international transactions by the TPO as emanating from his time barred order, would be unsustainable. We hold accordingly and direct the deletion of addition on account of transfer pricing adjustment made in the final assessment order. 8. In view of our decision on the above legal ground, there remains no need to deal with the contentions raised before us on the merits of the addition on account of transfer pricing adjustment. 16. In the present facts, the Ld.CIT.DR has submitted that the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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