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TMI Blog2024 (3) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly, is quashed. If there is no TPO order consequently, the entire transfer pricing adjustment proposed by the ld. TPO and the international transaction becomes non-est which is also liable to be quashed. Whether once the ld. TPO order is held to be nullity of or barred by limitation then could AO have passed the draft order treating it to be as 'eligible assessee? - In the instant case, it will be apparent that there is no transfer pricing variation arising as a consequence of the order of the ld. TPO once the said transfer pricing order is held to be time-barred, non-est and void ab-inito from the very date of its existence and inception. The entire premise to adopt the special procedure under section 144C of the Act and treat the assessee an eligible assessee rests on the fact that the order passed under section 92CA(3) of the Act has resulted in transfer pricing variations prejudicial to the interest of the assessee. Accordingly, once the assessee becomes an ineligible assessee, the very foundation for proceeding to pass the draft assessment order does not survive, meaning thereby, that the draft assessment order passed in the instant case becomes legally invalid and hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26,48,940 3. Adjustment on account of IT management and related support services 1,14,44,925 4. Adjustment on account of import of finished goods 15,35,87,893 5. Alternate adjustment on account of AMP expenses (convention expenses) 44,62,88,562 5. Subsequently, the draft assessment order dated 17 December 2019 was passed by the Deputy Commissioner of Income-10(1)(1), (learned AO) proposing certain additions/ disallowances in addition to the above-mentioned transfer pricing adjustment as mentioned in point 5. Particulars Amount (in INR) Transfer pricing adjustments 1 Adjustment on account of alleged AMP expenses 1,08,99,66,623 2. Adjustment on account of reimbursement of expenses 6,26,48,940 3. Adjustment on account of IT management and related support services 1,14,44,925 4. Adjustment on account of import of finished goods 15,35,87,893 5. Alternate adjustment on account of AMP expenses (convention expenses) 44,62,88,562 Transfer pricing adjustment Total (A) 1,31,76,48,381 6. Disallowance of convention expenses 48,57,29,824 7. Disallowance of depreciation on building 61,468 CT adjustment Total (B) 48,57,91,292 6. The assessee filed objections before the ld. DRP against the said dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nate adjustment on account of AMP expenses (convention expenses) - - Alternate transfer pricing adjustment on account of convention expenses of INR 44,62,88,562 was reduced to INR -41,00,49,931 (after partial relief granted based on the ld.DRP directions wherein the ld. DRP reduced 8.12% of the expenses incurred by third party) Particulars Amount of adjustment as per draft AO Order (in INR) Amount of adjustment as per final AO order {in INR) Remarks Transfer pricing adjustment Total (A) 1,31,76,48,381 1,26,51,38,000 CT adjustment 1. Disallowance of convention expenses 48,57,29,824 41,00,49,931 Ld.DRP relied on its earlier year directions and held that the convention expenses incurred are in violation of MCI regulations. AO reduced convention expenses by 8.92% while passing the final order. 2. Disallowance of depreciation on building 61,468 61,468 Ld. DRP relying on its earlier year directions, dismissed the objection raised by the assessee. CT adjustment Total (B) 48,57,91,292 41,01,11,399 8. On the issue of time barring of the assessment order, it has been contended by the Ld. Counsel before us that the ld. TPO has passed an order on 01/11/2019 which is beyond the time limit provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering TP reference has been made) 31 December 2019 31 December 2019 Date on which limitation expires u/s 153 ie 31 December 1 day 1 day Less. Remaining days of December 30 days 30 days Less: Remaining days of November 30 days 30 days Due date for passing the TP Order u/s 92CA(3) i.e. 61st day from 31 December 31 October 2019 31 October 2019 Date TP order u/s. 92CA (3) 1 November 2019 1 November 201 9 10. Accordingly, it was submitted that the time limit for passing transfer pricing order u/s. 92CA (3A) of the Act was on or before 31/10/2019 and therefore, the order dated 01/11/2019 passed by ld. TPO is barred by limitation. Further, he submitted that this Tribunal in various judgments following the decision of Pfizer Healthcare India (P) Ltd. supra have quashed the orders passed u/s. 92CA(3) of the Act. For the sake of ready reference following decisions were referred:- Diageo India Pvt Ltd vs DCIT (ITA No. 1233/Mum/2021) dated 1 December 2023. Johnson Johnson Private Limited vs DCIT (ITA No. 3015/MUM/2015) dated 13 June 2023 Louis Dreyfus Commodities India Pvt Ltd vs. DCIT (ITA No 2381/Del/2014) dated 11 March 2021 DCIT vs. Tata Power Solar Systems Ltd (IT(TP)A No. 699/Bang/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21) dated 22 July 2023 (Refer pages 1342 to 1353 of the legal PB) Colgate-Palmolive (India) Limited v. ACIT (ITA No. 040/Mum/2021) dated 27 April 2023 Johnson Johnson Private Limited vs DCIT (ITA No 3016/MUM/2016) dated 13 June 2023 13. On the other hand ld. DR has filed written submissions, which for the sake of ready reference is reproduced hereunder:- The assessee, relying on the decision of Hon'ble Madras High Court in the case of Pfizer Healthcare India Pvt. Ltd. and Ors. Vs JCIT, raised the following ground: On the facts and in the circumstances of the case and in law, the AO / Addl Commissioner of Income Tax (Transfer Pricing)-2(3)/Hon'ble DRP, in fact and in law erred in passing the order on 1 November 2019, given that Section 92CA(3A) of the Act requires the transfer pricing order to be passed at any time before sixty days prior to the timeline for the assessment order, it is implied that such order must precede 31st December by not less than sixty days, and accordingly, the order passed by learned The is time barred and bad in law and needs to be quashed; 3. The relevant portion of the decision of the Hon'ble Madras High Court in the case of Pfizer Healthcare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii. It is submitted that the Interpretation by the Hon'ble Court regarding the time limit in Sec.92CA (3A) is against the Provisions of the General Clauses Act and the settled principles of Interpretation of Laws. iii. It is submitted that the legislature uses different words such as from , to , before after , prior , within , not later than , not thereafter , not less than , at least for computation of days. The principle of excluding the date of starting day and the Inclusion of ending day are provided in Sec. 12 of the limitation Act and in Sec, 9 of the General Clauses Act and a provision cannot be interpreted ignoring the same. iv. As per Sec. 9 of the General Clauses Act, in computation of the time limit, the day referred to as from has to be excluded and the day referred to as to has to be Included. In the case on hand, the date of the order dated 01.11.2019 was taken as starting point of limitation and 60 days was computed from 01.11.2019 and rightly the same has to be excluded and the last day 31.12.2019 has to be included and thus the order dated 01.11.2019 is rightly passed as per See.91CA(3A). v. When the period is marked by terminus a quo and terminus ad quern, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or occasion to read the word may as shall . Sub-sections 3A and 4 were introduced in Sec. 92CA by the very same Finance Act, 2007 and the Legislature has consciously used the word may in Sec. 92CA (3A) while using, the word shall in Sec. 92CA (4). Hence, in view of the context and background of the provisions, the word may should not and cannot be read as shall. 5. In view of the foregoing facts, the judgement of Hon'ble Madras High Court in the case of Pfizer Healthcare Pvt Ltd (supra) is not acceptable and the reliance placed on said judgement by the assessee is not in order. Hence, contention of the assessee deserves to be rejected. 13. We have heard both the parties and also perused the relevant dates of the passing of the order and the judgments referred and relied upon by the assessee. For the sake of ready reference, chronologies of dates to adjudicate this issue are as under:- Particulars Dates Financial year 2015-16 Assessment year 2016-17 End of Assessment year 31 March 2017 Due date for completion of assessment under section 153(1) i.e. 21 months from the end of A.Y. (plus 12 months extension considering TP reference has been made) 31 December 2019 Date on which limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letion of assessment u/s. 153(1), i.e., 21 months from the end of the assessment year plus 12 months extension considering TP reference has been made was 31/12/2019. Thus, the final assessment order is clearly barred by limitation in view of the decision of the Hon ble Madras High Court in the case of Pfizer Healthcare India (P) Ltd (supra). Accordingly, we hold that the ld. TPO order is invalid and accordingly, is quashed. If there is no TPO order consequently, the entire transfer pricing adjustment proposed by the ld. TPO and the international transaction becomes non-est which is also liable to be quashed. 18. Now, coming to the issue is that once the ld. TPO order is held to be nullity of or barred by limitation then could AO have passed the draft order treating it to be as 'eligible assessee. Section 144C was brought on the statute as special scheme of assessment and to provide alternative dispute resolution scheme to certain categories of eligible assessee Section 144C provides that the AO has to pass and forward a draft assessment order in the case of eligible assessee if he proposes to make any variation which is prejudicial to the interest of such assessee, sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. In the present case, the assessee is an Indian company and, thus, a resident in India under section 6 of the Act. Thus, the second condition under section 144C (15)(b)(ii) of the Act for qualifying as an eligible assessee is not applicable. As regards the first condition under section 144C(15)(b)(i) of the Act, the same applies where there is a transfer pricing variation arising as a consequence of the order of the ld TPO under section 92CA(3) of the Act. In the instant case, it will be apparent that there is no transfer pricing variation arising as a consequence of the order of the ld. TPO once the said transfer pricing order is held to be time-barred, non-est and void ab-inito from the very date of its existence and inception. The entire premise to adopt the special procedure under section 144C of the Act and treat the assessee an eligible assessee rests on the fact that the order passed under section 92CA(3) of the Act has resulted in transfer pricing variations prejudicial to the interest of the assessee. However, once the transfer pricing order under section 92CA (3) of the Act, per-se, becomes a nullity, there remains no transfer pricing variation arising/ resulting or rem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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