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TMI Blog2023 (4) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... ation as prescribed under section 153 of the Act expires. How the period of 60 days prior to the date of TP order i.e. 31.03.2013 is to be computed? - Hon ble Madras High Court in case of M/s. Pfizer Healthcare India Pvt. Ltd. [ 2021 (2) TMI 1152 - MADRAS HIGH COURT ] while dealing with the issue held that for computing the period of 60 days, the last date as per section 153 should be excluded. Also see Honda Trading Corporation [ 2015 (9) TMI 846 - ITAT DELHI ] Computation period of 60 days given by the taxpayer cannot be faulted with on any ground because from 26.02.2022, the date of passing order of the AO, 60 days was to be computed by excluding the date of order i.e. 31.01.2021. So while excluding the date of passing assessment order i.e. 26.02.2022, the order was required to be passed by the Ld. TPO by 29.01.2021 whereas the impugned order has been passed on 31.01.2021 which is barred by limitation. Thus as per mandate of section 92CA (3) read with section 153 of the Act, impugned order passed by the ld. TPO is barred by limitation which was required to be passed by 29.01.2021 and as such is hereby quashed. Decided in favour of assessee. - SHRI BASKARAN BR, ACCOUNTANT MEMBE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act which are compulsory in the process of law, Hence, the entire proceedings are invalid and bad in law. 7. In view of the above grounds the entire proceedings are bad in law as the same are not in line with the provisions of the Act, hence the orders passed as bad in law, void and should be quashed. Without prejudice to the above grounds of objection on maintainability of order, we wish to raise the below grounds of objection: Transfer Pricing grounds Reference to the TPO 8. erred in making a reference of the Appellant's case to the TPO, without complying to provisions of Section 92CA, thereby making a transfer pricing (TP ) adjustment of Rs.7,36.21,080 in respect of the international transaction of provision of freight forwarding services, which is bad in law; Rejection of economic analysis undertaken by the Appellant 9. erred in rejecting the transfer pricing analysis undertaken by the Appellant for the international transaction of provision of freight forwarding services in accordance with the provisions of the Act read with the Rules and imputing a transfer pricing adjustment by modifying the economic analysis for determination of arm's length price: Rejection of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered as non-operating; 16 . without prejudice to the above , the learned AO/ TPO erred in passing rectification order under Section 154 of the Act for considering the issue of margin computation and treatment of items of income, without appreciating that the said issue is debatable in nature and cannot be rectified by passing order under section 154 of the Act, 17. erred in incorporating the rectification order dated 24 January 2022 passed by the learned TPO in the final assessment order dated 26 February 2022 passed pursuant to the DRP directions issued on 28 January 2022, whereas separate draft order was required to be passed, which makes enhancement made pursuant to rectification order as bad in law: Grant of economic adjustment 18. erred in not allowing Appellant the benefit of working capital adjustment which is required to be undertaken to account for the difference in working capital levels between the comparable companies and the Appellant; Incorrect consideration of losses to compute the revised assessed income. 19. has erred in considering an amount of Rs.3,14,21,871 (being book loss reported under Section 115JB of the Act as against Rs.11,70,61,334 (being net loss re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filing objections which have been disposed of partly in favour of the taxpayer. Feeling aggrieved with the impugned order passed by the Ld. DRP the taxpayer has come up before the Tribunal by way of filing present appeal. 5. We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto. 6. The taxpayer has come up by moving an application for raising additional ground of appeal as under :- Validity of TP order 18. Without prejudice to Ground Nos 1 to 17, the TP order passed under Section 92CA(3) is invalid and unsustainable in law since the same is passed on 31 January 2021 which is beyond the time limit available for completion of proceedings under Section 92CA(3A) of the Act. Validity of Assessment order 19. The learned AO has erred in law, in incorporating the TP adjustment proposed in the TP order which is invalid and bad in law into the Final Assessment order passed under Section 143(3) read with Section 144C(13) of the Act. on the grounds inter alia that the draft assessment order p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in this case well within time on 31.01.2021 i.e. within 2 months as prescribed under section 153 of the Act and the decisions relied upon by the Ld. A.R. for the taxpayer are not applicable to the facts and circumstances of the case. 12. In order to determine if the order dated 31.01.2021 passed by Ld. TPO is barred by limitation as contended by Ld. A.R. for the taxpayer we would advert to the provisions contained under section 92CA(3) read with section 153 of the Act. 13. Undisputedly, sub-section (3A) to section 92CA has been inserted w.e.f. 01.06.2007 providing time limit for the Transfer Pricing Officer to pass the order i.e. within a period of 60 days prior to the date of completion of assessment as per section 153. So, u/s 92CA (3A) read with section 153, TPO was required to pass the order within the period of 60 days prior to the date on which the period of limitation referred to in section 153 expires i.e. 21 months. 14. In the instant case undisputedly assessment order in this case was passed on 26.02.2022 and the Ld. TPO was required to pass the order within 60 days prior to the date on which period of limitation as prescribed under section 153 of the Act expires. 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date prescribed under Section 153 Date on which limitation expires under section 153 i.e. 31-03-2021 1 day Less: Remaining days of March 30 days Less: Remaining days of February 28 days Less: Remaining days of January 2 days Due date for passing the TPO order under Section 92CA(3) i.e. 61 from 31 March 2021 29-01-2021 Date of passing the TP order under Section 92CA(3) 31-01-2021 18. Identical issue has also been dealt with by the coordinate Bench of the Tribunal in case of Honda Trading Corporation vs. DCIT in ITA No.1132/Del/2015 order dated 15.09.2015 by returning following findings :- 5.27. It is, therefore, summed up that the time limit for completion of assessment, or in other words, passing of the final assessment order pursuant to the order of the TPO, is contained in section 144C(4) and (13); the time limit given u/s 153 has no relation whatsoever with the passing of the draft order, which should be passed within a reasonable time; and the time limit given in section 153 is relevant for determining the time available with the TPO for passing order u/s 92CA(3). 5.28. Turning to the facts of the instant case, we find that the AO passed the final assessment order on 29.1.2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07, an order under sub-section (3) may be made at any time before 60 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 re-assessment, etc., expires. 6.4. The ld. DR vehemently contended that the use of the word `may' in this provision for the passing of the order by the TPO within a period of 60 days of the limitation set out in section 153 indicates that the adherence to this time limit is not mandatory. He contended that even if the order is passed after the period of 60 days from the period of limitation as given u/s 153, still it would be treated as having been passed within time. This argument was countered by the ld. AR. 6.5. There is no doubt that the legislature has used the word `may' in sub-section (3A) of section 92CA. There is further no doubt that the ambit of the word `may' is different from the word `shall'. Whereas, ordinarily the use of the word `shall' signifies mandatory compliance, the word 'may' signifies directory compliance. But at times, the word `may' can also be read as `shall' and vice versa. In fact, all de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the meaning of the word `may' used in section 16A in the context of making reference to the Valuation Officer. Settling the controversy, the Hon'ble High Court held that the word `may' used in section 16A(1)(b), should be read as `shall'. It held that if the legislative intent had been to accord total discretion to the WTO to make a reference to the Valuation Officer or not in cases which were covered by cls. (a) (b) of sub-s. (1) of s. 16A of the WT Act, then there was no necessity of providing the guidelines in cl. (a) or in sub-cls. (i) and (ii) of cl. (b) of sub-s. (1) of s. 16A. It was, therefore, held that the legislature by prescribing the contingencies, in which, by implication, it would not be necessary to make a reference, also again by necessary implication be taken to have intended that the reference to Valuation Officer was must if the given contingencies did not exist. In this regard, the Hon'ble High Court observed that : `There is no doubt about the fact that the use of expression may and shall to some extent serves an ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 required to be passed within a reasonable time and it has got no relation with the time limit given in section 153. When the position is such that the draft order has to be passed independent of the time limit given in section 153, there appears some logic in not continuing with the time limit for the passing of the order by the TPO tagged with the time limit given in section 153. It has led to incoherence in the provisions. This position can be set right only with a suitable legislative amendment. 6.10. Having held that the time limit given in sub-section (3A) of section 92CA is mandatory for the passing of the order by the TPO, let us find out the time available with the TPO for the passing of his order. It has been noticed above that the time limit as per section 153(1) read with the third proviso and clause (viii) of the Explanation to the section, comes at 7th June, 2014. Period of 60 days prior to such time limit coming as per section 153, available with the TPO for passing his order, comes to an end on 8th April, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd because from 26.02.2022, the date of passing order of the AO, 60 days was to be computed by excluding the date of order i.e. 31.01.2021. so while excluding the date of passing assessment order i.e. 26.02.2022, the order was required to be passed by the Ld. TPO by 29.01.2021 whereas the impugned order has been passed on 31.01.2021 which is barred by limitation. 20. In view of what has been discussed above and following the decision rendered by Hon ble Madras High Court and the order passed by the coordinate Bench of the Tribunal in cases of M/s. Pfizer Healthcare India Pvt. Ltd. and Honda Trading Corporation (supra) respectively and mandate of section 92CA (3) read with section 153 of the Act, impugned order passed by the ld. TPO is barred by limitation which was required to be passed by 29.01.2021 and as such is hereby quashed. 21. Consequently addition made on account of transfer pricing adjustment by way of determining the ALP of international transactions by the Ld. TPO are not sustainable in the eyes of law, the order of TPO (Supra) being barred by limitation. So the consequent assessment framed qua the determination of ALP of international transactions is also barred by lim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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